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Edited Transcript of SNI.OL earnings conference call or presentation 6-Apr-17 1:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Stolt-Nielsen Ltd Earnings Call

Oslo Apr 6, 2017 (Thomson StreetEvents) -- Edited Transcript of Stolt-Nielsen Ltd earnings conference call or presentation Thursday, April 6, 2017 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jan Chr. Engelhardtsen

Stolt-Nielsen Limited - CFO

* Niels G. Stolt-Nielsen

Stolt-Nielsen Limited - CEO and Director

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Presentation

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Operator [1]

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Good day, and welcome to the Stolt-Nielsen Limited First Quarter 2017 Results Presentation and Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Niels Stolt-Nielsen. Please go ahead, sir.

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Niels G. Stolt-Nielsen, Stolt-Nielsen Limited - CEO and Director [2]

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Thank you. Good afternoon, and thank you for joining us for our first quarter 2017 results presentation. I will be referring to the presentation, which is also available on our website.

If we go to Page 3, together with me, here in Oslo, is Jan Engelhardtsen, CFO of Stolt-Nielsen.

Page 4, the agenda, we will go through the highlights for the first quarter. I will go through each of the businesses, Jan will take you through the financials, and then we will open up for question and answers.

If we then go to Page 5. Tankers operating profit was $28.5 million, and that's down from $30.4 million, reflecting a continued softness in the chemical tanker market, also higher bunker fuel costs and a loss on the ship that we recycled -- recycling that was brought forward. That was partially offset by the positive impact of the Jo acquisition.

Stolthaven Terminals, a positive operating profit, positive development, $16.7 million compared to $14 million last quarter. And that is mainly reflected from the improvement that we have done at Stolthaven Terminals, but also some improvement in the market at Stolthaven Singapore, and also increased income from our joint ventures. I will go through each of the businesses, as always, more in detail later.

Tank Containers operating profit $9 million, that down from $15 million, reflecting seasonality, but also continued strong competition. Also the fourth quarter here was positively impacted by one-offs, which we didn't have in the first quarter.

Stolt Sea Farm's operating profit before the fair value adjustment of inventories was $2.2 million, and that's marginally up from $2.1 million. We saw in the first quarter a strong wild catch due to very good weather, which increased competition and also put a downward trend on the prices.

Corporate and Other. A loss of $4.6 million compared to $10 million previous quarter, reflecting legal costs related to the Jo acquisition and also a provision towards doubtful account in the Stolt Bitumen Service. That gave us an operating profit of $48.4 million versus $52.1 million, and a net profit of $15.2 million in the first quarter versus a $22.8 million profit in the fourth quarter of last year.

If we go to Page 6, which is the net profit variance between the fourth quarter of last year and the first quarter of this year, we see a $1.9 million lower tanker operating profit. Higher terminal profit of $2.7 million, and lower tank container profit of $6.1 million, and lower sea farm profit of $3.9 million compared to last quarter because of the fair value adjustment. The one-off Jo costs -- of acquisition related costs and the doubtful accounts receivable in Bitumen, which we had in the fourth quarter, we didn't have in the first of $4.9 million, lower Corporate and Others $0.7 million. And then higher finance costs because of the debt that we took on the Jo acquisition of $5.1 million. Lower tax expenses of $1.5 million brings it to $15.2 million net profit for the first quarter of '17.

Moving on then to Stolt Tankers on Page 7. The operating revenue increased 9.2% from the previous quarter, and that is mainly because of the larger fleet that we got out of the Jo acquisition, which helped push operating days up by 15.4% and volume up by 17.3%, but that was offset by a softer market condition and increased bunker costs.

So you actually can see here that the operating days was up 15.4%, but the volume was up 17.3%. So the volume is there. Actually, we had a better utilization as a result. Comparing like-for-like, excluding the Jo -- impact of the Jo, the COA rates were down 3.6%, while the spot rates dropped 8.9%; although the Jo ships contributed positively to net profit, their trade routes were typically shorter, and contributing to a drop in overall COA rates. So if you take the merged company, the COA -- our COA rates that we booked for the quarter was down 5.4% and spot rates down by 12%.

The reason that the COA rates and the spot rates were negatively impacted by the Jo acquisition is not that they were that much lower, but it was because their trade lanes were much very shorter and the shorter trade lanes have traditionally a lower freight rate than [ph] the long-haul. So they operate a large part of the Trans-Atlantic. We are in U.S. Gulf and the Far East and longer distances, and so there, traditionally, the rates are higher.

The COA renewals during the quarter were on average down 6.1%, and that's quite significant. So you can see that there is downward pressure in the market.

So off the contracts that we did renew in the first quarter, on average, they were valued at 6.1% down.

So if we move to Page 8. Fourth quarter operating profit versus first quarter 2017 operating profit. A positive impact from the Jo acquisition of 8 -- $6.1 million, lower trading results because of a weaker market of $1.8 million. The higher bunker costs net of bunker surcharges of $1.7 million. Lower gain on the bunker hedges of $1.4 million compared to the previous quarter. Lower owning expenses had a positive contribution of $1.4 million. And then we have this -- the recycling of a ship -- an early recycling of a ship had a negative impact of $2.2 million. Higher A&G due to one-off pension credit that we took in the fourth quarter of $1.4 million. And lower equity income from our joint venture of $1.1 million brought it down to $28.5 million operating profit for the quarter versus $30.4 million in the previous quarter.

The bunker costs on Page 9. The bunker costs net of bunker surcharge, but excluding bunker hedges, increased by $7.9 million from the fourth quarter. The average IFO consumed increased to $306 in the quarter from $261 in the fourth quarter. So that what we consumed, $306 versus $261. The average price that we bought during the quarter was $328 versus previous quarter of $273. So you can see that's our -- that's the increased bunker cost.

The COA bunker surcharge clauses covered on the average 69.1% that used to be higher, but because of the Jo, we're the -- which didn't have as much bunker clause coverage. It is now at just under 70%.

You see the bunker hedges, we have some paper hedges in place, out of which we realized $2.01 million in the first quarter. And we also have an unrealized write-up of the hedges that we have in place, also, of $30,000 for the quarter.

Moving then on to STJS Sailed-in Time-Charter Index. On Page 10, you can see a dramatic drop, that is really not one -- that is over several quarters. But the peak is from the second quarter of 2016, and then you have seen a drop in the Sailed-in since reflecting again a weaker market.

On Page 11, deep sea market spot rate development. The commodity rates recovered by 12% in the first quarter of '17, but that was following a drop of a total of 32% in 2016. Specialty rates, the small chemical partials that we focus on, remained flat quarter-on-quarter, which is down 19% from the peak in 2016. What we've seen is that the MR market, the ships that usually have a tendency when there is a weak MR market, these flexible ships coming through our segment. We saw that the MR market has recovered, as European refinery margins and ship delays in the West Africa combined to cause steep increases, in some cases above chemical earnings. We haven't really seen the effect of it yet, but we expect as we see when it's a weak MR market, these ships come into our segment and put pressure on the commodity side of the chemical space. So even though we haven't seen the positive impact of it, we expect that as the MR market has improved, we will see less of this swing tonnage coming in. How long it will last? We don't know. But we haven't seen the effects, so I think in the second quarter, we will see a positive impact from it.

Spot freight rates appear to have bottomed out but the significant chemical order book and the uncertainty around the MR market presents challenges for a recovery in 2017.

If you go to Page 12. Our 71% COA coverage protects us from the impact of short-term swings in spot rates. Low spot ratio allows us to be more selective on spot cargoes, so that we are quite heavily contracted, the contract rates usually don't react as quickly and as dramatically as the spot rates. So even though the spot rates, we see double-digit reductions there, you can see that the COA rates are more modest. COA coverage decreased to 71% from 77% in the fourth quarter. And this again is due to the addition of the Jo, which has a slightly lower COA coverage. The first quarter of '17 was impacted mostly by Jo ships' short-haul repositioning fixtures at lower spot rates.

Spot market weakness does impact COA rates negotiations but the change in COA rates is typically less than the change in spot rates, as evidenced by the decrease of 6.1% on the COA rate during the quarter.

The order book on Page 13. Again, this is -- these are the 19 operators that we compare ourselves to. It has gone, I think, we said, it was 22% last time, it's now down to 17.8%. But again, the blue is what is on order and what is to be delivered. So you can see there's a significant amount of tonnage coming in, in '17 and also some in '18. So we continue to say that '17 will be a challenging year for Tankers because of the new tonnage coming in. We are seeing that the volumes, both on the COA side and on the spot side are relatively healthy. So the pressure on the market is not really because there's less trade or less nominations on the COAs, it is because there is new tonnage and more ships coming in and competing for the business.

New building delivery schedule. The left-hand side, is the huge [ph], long ships that we ordered sometime back. We have received 3 and another 3 to go. And then, you have the joint venture that we had with -- we have with Jo, 8 ships, where we have 4 ships are delivered and 4 to be delivered.

Moving then on to Stolthaven Terminals on Page 15. Revenue decreased slightly in the first quarter with slightly lower throughput revenue offset by higher utility revenue. The lease capacity was unchanged, while utilization dropped slightly from 91.8% to 91.1% due to a 1% increase in overall capacity. The cost saving initiatives are slowly starting to have a positive impact at [ph] cost per cubic meter.

If we look on Page 16, the variance analysis on the operating profit between the 2 quarters. We had $14 million operating profit last quarter. $2.3 million one-off pension and medical credits that we had last quarter, not -- which we didn't have this quarter. Then we have higher gross operating margin of $0.4 million. Lower depreciation due to one-offs that we had in fourth quarter, higher equity income from our joint venture, and lower A&G expenses of $0.8 million, and others of $0.4 million brings us to $16.7 million.

Page 17, Stolthaven owned terminals key initiatives. As we have spoken about earlier, we are modernizing our Houston terminal, particularly, with the latest technology in order to optimize operational performance, while improving safety and efficiency. The best investments that we can do in Stolthaven Terminals, and of course, really for the group, is to continue to seek organic growth at our current facilities in order to leverage the existing infrastructure and fully utilize the land available for expansion. Really, Stolthaven Terminals, we don't need to buy more terminals for the time being. There is a lot of growth opportunity at our existing terminals, and that we are -- what we're focusing on to get the full utilization at existing terminals. We are also focusing on developing long-term contracts with potential pipeline-connected industrial customers in order to improve throughput, utilization and revenue.

We continue to focus on Ship-to-Shore interface to create the synergies between tankers and terminals, including the construction of a new ship dock in Houston to start in the mid -- to be started in the mid of this year. And that is to reduce the waiting times and turnaround, while increasing tons per hour and terminal throughput volumes.

These actions will take time but will gradually positively impact the financial performance of Stolthaven Terminals. And I think you will continue to see a gradual improvement from the Stolthaven Terminals, even though it will take time.

The Board approved the building of Jetty 11 at the east -- what we called the east property. And I'm sorry for the telephone calls here, but on the right side of the slide of the picture, where there is 2 yellow squares, that is what -- this whole area is what we call the east property. So this is the west property, the west terminal, the existing terminal and the area is the east property. This is prime location in the Houston ship channel, large location. Here, we have now approved, we got the permission and the board approved for us to construct a new jetty, which will, of course, be connected to the existing terminal and to the existing -- the 2 jetties we have here. But it will then increase -- reduce the waiting time for the ships and also give us the opportunity to pursue new business on the east property. And as you reflected [ph], there is lot of activity and a lot of growth of chemical production in the U.S. Gulf, and this is really in the middle of it. So we will then have 50-plus acres available for land, land for expansion opportunities for over 2 million barrels of storage capacity with the additional jetties and railcar and truck racks.

Moving then on to Stolt Tank Containers. Revenue was down 2.3% in the first quarter, that's consistent with the seasonality that we have seen over the years. The transportation revenue was up 2.2% due to the increase in number of shipments, which was offset by lower prices and lower demurrage revenue. Lower prices and lower demurrage revenue reflects the increased competition that we see in this segment. The lower prices, of course, is the freight rates that you charge, but also the customers are becoming better at negotiating terms and conditions. So demurrage, they are getting more free days to keep the container, and therefore, also that's why we're getting a lower demurrage revenue.

Depreciation was up as the residual value of tanks was adjusted down in line with the falling steel prices. This is something that we do each year, once a year. And A&G, administrative and general expenses, up in the first quarter due to the one-off adjustment related to pension and post-retirement medical plans that we had in the fourth quarter of 2016.

So if we go to Page 20 and compare STC fourth quarter to first quarter operating profit, we had a higher transportation revenue due to increased number of shipments of $1.9 million. Lower demurrage and other revenue, as I explained. Higher operating costs because of the higher transportation revenue, high depreciation due to lower residual value because of the steel prices, higher A&G due to one-off costs, reduction initiatives in the fourth quarter brings us to $9 million for the quarter.

Stole Tank Container key initiatives on Page 21. Strong demand for shipment, but competition is driving the margins down. Continued to remain aggressive on pricing to improve utilization and increase turns per tank. We are continuing to focus on the system development and the implementation of global platforms to reduce expenses and to increase scale, the efficiency of operations and effectiveness of sales. We continue to develop our depot network around the world, in order to support our global operations. And going forward, once we need more tanks, once we get the utilization up, we will pursue that by, most likely, leasing tanks. Margin deterioration has slowed and may have bottomed out, and I think so. We are actually -- since the end of the first quarter, we have seen quite a bit of activity increased, utilization has picked up significantly. And we're also seeing -- actually, we're able to pass through higher rate. So it's also as you might know the container lines have consolidated. The groupings of the alliances have reduced capacity out there. And as a result, we're seeing the container lines are pushing up rate. And when they push-up rate that's a passthrough cost for us, both the container lines and the trucks. So when the container lines are able to push through rate increases, we also traditionally are able to push through increases on our rates, and that's what we're seeing. So I think, we will actually start to see, I'm hoping, cautiously optimistic that we will start to see some improvements from the tanker (inaudible). First quarter is a combination, of course, competition. So you haven't seen the pickup from the activity yet. But also because of the short month and also the Lunar New Year, the Chinese New Year, et cetera.

Stolt Sea Farm on Page 22. Volume of turbot was up 12%, but prices were down 5% due to significant wild catch. I told you that I didn’t [ph] think that these turbot prices were going to go down. But actually in the first quarter, there were no storms in Europe, there were no winter storms, so the fishing was phenomenal. So the wild fish catch, not only of turbot but all fishing, put enormous pressure on the prices. The sole prices were down due to increased wild catch as above. The caviar, the volume was down during the quarter, which typically is the peak season, prices in first quarter increased by 29% due to higher portion of direct sales and better margins.

I'm going to skip the variance allowance for the Stolt Sea Farm. Stolt-Nielsen Gas. Again, we have a stake in Avance Gas. We have a stake in Golar. And then we're trying to develop the small scale LNG. And you can see a new name here, we called Avenir LNG. And Avenir LNG is now today 100% owned by Stolt-Nielsen, and all the small-scale LNG investments will be done through this company.

Again, we will be focusing on small ships and terminal, small terminal, serving remote customer -- stranded customers and stranded demand. We are continuing to work on both offtake agreements for the -- and also contracts for the ships. We, as it stands, haven't yet -- still not yet ordered or confirmed the ships that we have on subjects [ph].

And that concludes the -- my part of the presentation. Now I'll give it to Jan for the financials.

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Jan Chr. Engelhardtsen, Stolt-Nielsen Limited - CFO [3]

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Thank you very much, Niels. Good afternoon and good morning to also you on the phone. We're going to go to Slide 26. This is the net profit and as before, I will give some comments to the financial results that we have released this morning, and all of these -- the -- this presentation plus the press release plus -- also the interim results that we have filed for the quarter ending February 28, '17, you can find on our website. And we filed the interim with the Oslo Stock Exchange this afternoon.

If we look at the net profit and this is before the one-offs, $55 million was it in the fourth quarter so it's down to $51.8 million. And as you saw from Niels' slides, the positive impact from the Jo acquisition is overshadowed by the weakening of the freight market for tankers. The increasing bunker prices and also the pressure and squeeze on the margins in STC. And on top of that, we also had to take a markdown of the inventory of the fish and, if you will, alone that was the difference between the 2 quarters is $4.1 million. So it explains almost entirely the difference in itself.

If we look at the one-offs, we talked about -- Niels mentioned the Stolt Hill, which is a ship that we sold for recycling. Originally, it was supposed to be done later in the year, but we brought it up for various reasons. And of course, then we have to write-off any difference between the sales price and the book value, but that is primarily caused by the fact that we brought the recycling forward.

If you look at the interest, yes, the interest is up now, reflecting the full impact of the additional debt we took on in connection with the JOT acquisition. And it also reflects the fact that we took delivery of 2 of the ships, the C38s, in China. Taxes are also a little bit down. We had some tax rebates in Santos. We had a tax audit adjustment positive in Singapore. And we also had, as you saw, a lower-profit, if you will, taxable profit on STC, which all has contributed to bring the taxes down in the quarter.

So it brought us down to $15.2 million profit against $22.8 million.

Slide 27. Shareholders equity, $1.42 billion that is down from -- that's up from $1.38 billion. The -- of course, we had the profits that improved the situation, but we also gave out dividends in the period of $24 million, but there's still -- the reason why it's still positive is the fact that we have translational gains, et cetera, tied to the OCI in the balance sheet. So the OCI actually is showing a gain for the quarter.

Debt, $2.5 billion, that's up from $2.4 billion and I'll come in to the components of that a little bit later. Debt-to-tangible net worth 1.55:1. We have said previously that we tried to be below 1.5:1. But if you take out the cash, which -- so on the net cash basis, it is actually 1.48:1. EBITDA to interest expense 3.51:1, and this is down from 4.08.

Cash $108 million at the end of the quarter, $268 million in liquidity on our revolver. And we also have $81 million of uncommitted lines that we can use, which in total then brings the liquidity up to $457 million.

You can also see here that going forward this [ph] always talk about the interest -- the U.S. dollar interest rates going up, and it will. But we are actually 60% fixed and 40%, if you will, floating. And as such, at the average of the first quarter, the interest rate is -- that we're paying is 4.4%. So we're very happy with that.

And we expect that the interest expense for the next -- for the coming quarter will be $31 million in the next quarter.

Next is this Slide 28. If we look at the cash flow, you can see here that it's down -- cash from operations is down from $71 million in the fourth quarter, down to $57 million in the first quarter. And we had some issues dealing with a buildup of working capital during the quarter. We were working very hard to integrate the Jo acquisition; we did that the last few days in the fourth quarter. So we really got the full impact of this integration starting in the first quarter. So it took little bit longer to get the things up and running. So we are now in control of the buildup, with late billings and various other things that brought the working capital up. But as we go into the second quarter, this has been sorted out. And I think its -- our guys have done a very good job.

If we look at capital expenditures. I said, we took delivery of 2 of the ships in -- from China, the C38s, Sincerity and -- Stolt Sincerity and Stolt Integrity. Then we also had some capital expenditures in the terminal -- on the terminal side. And also for STC, we're working on building 2 deep-hulls [ph], one in China that needed more cash and also one in Italy in Vardø to support the business that we do down there for Infineum.

When you look at the -- on the financial side, we did, during the quarter, draw down $150 million on a line that we put in place to acquire the Jo fleet and the company. It's secured against the -- those ships. And we drew down $150 million. And the proceeds we used to repay the debt that we took over when we acquired Jo. In addition, we also drew down on the KEXIM financing that we had with the Chinese for the 2 new buildings was about $105 million.

And you could also see that I've mentioned the dividend paid out was $24 million.

So that left us at the end with $108 million in cash, which is more cash than we actually would like to hold because normally we just bring it in under the control of treasury, and then we use it to pay down on the revolver.

Next Slide 29, the EBITDA. And let me just remind you here that we take out from here, the -- any gain or sale of assets, and of course, any noise that comes with the fair value of the fish farm inventory. And you can see here, for Tankers, you clearly see the contribution for the quarter from the JOT acquisition. Terminals also -- slightly improvement, as Niels mentioned. Tank Containers really back to where we were in '16 and -- in the first quarter '16 and second quarter '16, but we are down from the good quarter that we had in -- at the end of the last quarter. But, again, for the company as a whole, we were up to $120 million in EBITDA for the quarter.

Next, this is Page 30. A&G, administrative and general expenses, $51.7 million up from $49.9 million. I have to admit here that when we guided last time, I think, we said $56.5 million. So we came in significantly below that guidance, but again, part of that increase that we saw was really due to the expenses that we had expected in connection with the JOT acquisition.

So now, when we look forward into the next quarter, we say $53.1 million is how we are guiding.

Depreciation, this is Slide 31, $64.9 million, up from $58 million, most of that increase relates to the Jo acquisition and also the 2 Chinese ships that we took delivery of. And of course, as we go into the next quarter, the second quarter, we will have the full impact on those 2 ships that we delivered during the first quarter and also we're taking delivery, as you saw from an earlier slide, of 2 additional ships so that's why we bring the terminal -- sorry, the tanker depreciation up to $44 million.

Stolthaven Terminals were slightly down, but that was because we did a write-off of some tanks in the fourth quarter that we didn't have to do in the first quarter '17. And we also wrote off some old operating computer systems that we are going to replace. We did that in the first -- in the fourth quarter.

So from $64.9 million, we are guiding for the next quarter $67.7 million.

JVs and taxes, $4 million for the quarter, down from $5.5 million, part of that drop obviously was the weaker tanker market. And we also -- in the corporate, where we actually keep track of Avance Gas and Golar, those investments were also down at $2.5 million instead of around $1 million loss in the previous quarter. But we do see an improvement as we go into the next quarter, and guiding at $6.5 million.

Taxes, I already mentioned, some improvements due to price adjustment in Santos and in Singapore.

Next, this is the capital expenditure table. Slide 33. We were at $129 million during the quarter. For the remaining 3 quarters, we are at the $278 million. But -- no, I'm sorry, we're at -- yes, $278 million. And you can see that the total, these are committed capital expenditures. It's what we -- what the board has approved and projected, we are currently working on.

So you can see for the rest of this year plus the rest of the 5-year plan, is at $520 million, half of that will actually be spent during the next 3 quarters of this year, the remaining quarters of this year. And when you look at it further, out of what we're going to spend for the rest of this year, half of it is in tankers, and $112 million is on the terminals side. And on the terminals side, it's really various expansions, it's jetties and some upgrades. For Tank Containers, it's mostly towards the deep-hulls [ph].

But what you will obviously see is that the committed CapEx have come down quite dramatically as we go into '18 and '19. Just one comment, and that is, out of the $520 million we have almost $120 million left on the financing in China. And we also have financing for the jetty, another $35 million, $40 million of the jetty in Newcastle in Australia.

Debt maturity profile, I think, you recognize this slide from previously. The green are the balloon payments; the blue is just the regular amortization of bank debt. The balloon payment that you see here in '17 relates to the terminal in Singapore, towards it's -- it is maturing at the end of the -- this year. We have gotten the credit approval for a renewal. And we expect, we're in -- right now, we're in the documentation phase, and we expect to have this solved and closed by -- basically by the end of the second quarter. And that will -- the facility is SGD 280 million, the outstanding amount is SGD 180 million. And then -- so that will net SGD 100 million. And then, we will use the -- what's left to pay down -- repay, if you will, one of the facilities that we also got -- the short-term facility that we put in place when we acquired the Jo fleet.

And then, I think, that's back to you, Niels.

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Niels G. Stolt-Nielsen, Stolt-Nielsen Limited - CEO and Director [4]

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Thank you, Jan. Just some takeaways. The integration of Jo progressing as planned. We'll focus on realizing the synergies and improving operations for the benefit of all of our stakeholders. We have announced that we have started the project of separating out Stolt Tankers as a stand-alone company. And I just have to manage expectations, because I think some of the analysts are running, as usual, too fast here. We -- the company has -- the board has approved that we make a clean Stolt Tanker structure, so that all of the Stolt Tanker assets is under Stolt Tankers, all the employees, we are creating our own balance sheet and a stand-alone structure. Still 100% owned by Stolt-Nielsen, still the same debt structure in the group. But this gives us the opportunity to look for further consolidation opportunities in the chemical tanker segment.

So the purpose of this is not run and do an IPO, but the purpose of this is, if we see opportunities to do further consolidation, that Stolt-Nielsen doesn't have to use all the cash, like we did for Jo, but can offer a share. We believe that there are quite a few investors that will be interested in participating or receiving shares in return for us doing an IPO. So if we are able to find a -- the right acquisition target. And this can't be anyone, it needs to be tonnage that we need and that fits into our fleet. It's not only tonnage but it's also a platform. So we're looking for other operators to join us, so we can pull out the synergies.

We're not really after that much tonnage, we're after less operator platforms. If we are not successful in finding another partner to join with, then it's not taken that we will do an IPO. We might as we are, but that's not given. So the focus that we're doing in the group right now is really to separate out Stolt Tankers as stand-alone, so that we have a piece of paper available. And then it's to find a company for further consolidation and there are quite a few opportunities out there.

As a company, as a whole, Stolt-Nielsen, as Jan showed you, we have a debt-to-tangible net worth. If you look at the net debt to tangible net worth, it's just under 1.5:1. So we've kind of reached our self-imposed limit when it comes to debt. So we need to -- we are managing our balance sheet, making certain that we are careful in what we are investing or how much additional debt we take on. As you have seen from the presentation, the Tanker market is under pressure. We think, it has flattened out. We don't see that -- we see the volumes, denominations are healthy, relatively healthy. And I hope that it won't fall further because of the additional ships coming into the market.

So to jump to the conclusion that we believe we have reached the bottom of the cycle or bottom of -- it's very careful how you express yourself. We are cautiously optimistic, as you say. So as long as our debt level is where it is, as long as the tanker market has hopefully reached the bottom, the Tank Container market has hopefully reached the bottom, we continue to see improvements in terminals and I also think we will see improvement in Stolt Sea Farm. Until we have seen a clear recovery both for earnings improvement in both Tankers and Tank Containers, we will remain careful in how we commit to additional debt. We have -- one after one, we have good cash liquidity so I'm not worried, but I'm just being cautious.

Yes, that's it. We will open up for questions. We'll start here in Oslo. And I will try to remember to repeat the questions so that people on the phone will hear. So any questions here in Oslo?

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Questions and Answers

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Niels G. Stolt-Nielsen, Stolt-Nielsen Limited - CEO and Director [1]

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Yes.

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Unidentified Analyst, [2]

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(inaudible)

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Niels G. Stolt-Nielsen, Stolt-Nielsen Limited - CEO and Director [3]

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So the question was on the capital expenditure slide on Page 33. On the previous presentation we showed -- I don't know we showed but we said that some of the committed capital expenditure may be canceled or delayed.

The answer to that is, I don't think we wrote down a specific number, but what we have said is that of this capital expenditure not everything is committed to third party. So this is the list of capital expenditures, which the board has approved, which we intend to do, but which is not everything is committed to third party. So if something should happen, if the market should go bad or get worse, there are things of the capital expenditure where we can hold back on. Now that the jetty was approved, the jetty is around $45 million, that was something that we had in our capital expenditure plan, but it wasn't committed to it. Now that it's committed, so what is not committed have actually been decreased by $45 million. So they are in both Tank Containers and in both -- in Stolt Sea Farm and some investments in terminals, there are things that we can hold back on, if we have to. Any other questions? Okay, operator, we're going to see if there is anybody on the phone that would like to ask a question.

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Operator [4]

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(Operator Instructions)

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Niels G. Stolt-Nielsen, Stolt-Nielsen Limited - CEO and Director [5]

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Any other questions in Oslo? Thank you very much and I wish you all a Happy Easter. Thank you.

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Unidentified Company Representative, [6]

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Thank you, operator, that concludes the presentation.

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Operator [7]

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Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.