Stolt-Nielsen’s 2Q (March-May) figures were higher QoQ, following the seasonally worst and harsh-winter-conditions-impacted first quarter and in line with our and consensus expectations. A recovery from the worldwide economic downturn expected in the next 12-18 months should lead to improved fundamentals in the chemical tanker market. Terminals and Tank Containers not only outperformed Tankers during 2Q, but have a solid outlook, as well as the Sea Farm. We made limited changes to our estimates after the report and reiterate Buy recommendation for the share with an unchanged NOK 155/sh Target Price.
Some negative impact from 1Q21 caught up
Stolt-Nielsen reported stronger figures QoQ, in line with our and consensus estimates. For the Stolt Tankers, the increase in overall volume was seen following the delivery of five CTG ships, but the higher bunker prices led to almost the same EBIT QoQ of USD 12.6m (USD 12.9m in 1Q21). Notably, some reduction in contract volumes resulting from the Houston freeze in February required the company to fill capacity with lower spot market, which resulted in a slightly lower time-charter equivalent. However, both the Terminals and Tank Containers showed a solid improvement QoQ due to a continued strong increase in utilization and shipments, respectively.
Ready for a recovery
For the next 12 to 18 months, Stolt Tankers expects a slow recovery from the worldwide economic downturn caused by Covid-19. The outlook remains cautiously optimistic, as there is an expectation of an improvement in the MR market during late 2021 into 2022. At Stolthaven Terminals utilization was communicated to improve steadily over the recent months, with an expectation that rates will follow, meanwhile Stolt-Nielsen made solid preparations of expanding the capacity in New Orleans and Korea. Stolt Tank Containers continue to set new monthly shipment records driven by strong demand across several regions and the higher shipment levels are expected to keep up in most regions. To benefit from this, the company decided to widen the segment and after the recent lease of 2,600 tank containers, placed an order to purchase 1,000 more for USD 18m. Those will be delivered later in 2021 and into 2022. As for Stolt Sea Farm, the reduced restrictions through different countries by the end of May quickly impacted the demand positively and 2H21 should be much stronger. Also, the new Cervo and Tocha farms started operations and the growth is stronger than firstly anticipated.
We made limited changes to our estimates following the in-line results and positive outlook. Even though Tankers struggle somewhat, this is offset by the solid improvement in other segments. We reiterate Buy recommendation for the stock at an unchanged NOK 155/sh Target Price.
Source: Norne Research