Ladies and gentlemen, thank you for holding, and welcome to the Vopak Q3 twenty sixteen Interim Update Webcast and Event Call. At this moment, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. I would like to hand over the conference to Mr. Jack DeCroy, Vice Chairman of the Executive Board and CFO.
Go ahead, please.
Ladies and gentlemen, very good morning, and welcome to the Q3 interim update. What we would like to do in the next, let's say, twenty minutes is give you a bit of a clarification about the financial developments in the Q3 and year to date period. I will flip pages on the presentation as published on our website. And by making a reference to the number of the page, I sincerely hope it will facilitate an easy engagement on this presentation. Looking at Page two, you are familiar with the forward looking statements.
So at this stage, I will not repeat the contents other than that, of course, any event in the future can have an impact on the guidance and outlook we have provided. If we look at the topics we would like to address in this interim update, we will quickly go through the year to date Q3 twenty sixteen business highlights, the key figures, but also provide you with an update on the status of the projects and the financial year 2016 outlook as published in our press release this morning. I'm now referring to Page four. On Page four, we have summarized a few critical metrics in looking at our total company. Of course, the terminal network is critical.
Occupancy rate is a very relevant KPI in our business model. And derived from both metrics, we look at revenues and EBITDA. The terminal network is more or less stable compared to last year, while taking into account, of course, that the total capacity has been affected by realized divestments in different countries of the world like The U. K, The U. S, Finland and Sweden, while at the same time expanding new capacity in other regions.
The occupancy rate compared to last year is in line with our full year outlook, where we indicated at the start of the year that the playing field for our total global network would be above 90%. And as you are aware, the 90% to 95% range is what we would call a healthy playing field, enabling us to leverage on the utilization of our assets to an optimal level. That has supported us in growing our EBITDA with another 4% compared to the year to date figures, while not taking into account, of course, the adverse implications of any divestments as a result of which we are missing the corresponding EBITDAs in the current reporting period. And that's the reason why we have added a column just for indication purposes what the EBITDA increase would have been if we would not have divested the terminals involved in that global network, and that would have resulted in an increase of 8%. The same applies to the revenues.
Total revenues around €1,000,000,000 but dependent on including or excluding divestments, we talk about a minus 3% drop or a plus 4% increase. So overall, occupancy fully aligned with the guidance we have provided at the beginning of the year, resulting in solid financial results with explanations due to divestments when we look in more detail to certain reported numbers. Looking at Page five, it gives a bit more total overview of the occupancy rate development since the year 02/2004. As you can see that the majority of this period, we have been able to utilize our assets in the 90% to 95% range. We have gone through certain periods like in 2013 and 2014, where we were operating between 8590%.
And as we have guided you in the course of this year, we have operated in the 90%, 95% at the high end of the range with a Q3 of 93%, slightly below the Q2 utilization rate. Looking at Page six, the same numbers in comparison with 2014, but also including the net profit development, which shows an increase of 10%. The reason that EBITDA is 4% and net profit is 10% is most of the time the consequence of a different mix between the contribution of group company, which, of course, still where the income is still subject to taxation. Whereas if on a relative basis, the EBITDA reflected by results from joint ventures and associates after taxation is relatively increasing, that is already including the taxation as a result of which this mix is resulting in a net profit increase of 10%. Looking at Page seven.
We were talking about divestment. And just to provide you with the total overview of all the, I would say, rationalizations we have been able to execute since our announcements in 2014 is that we have been divesting 17 terminals. That means that the original program of divesting relatively smaller terminals in order to sharpen our global network has been successfully completed. The total storage capacity covered by these divestments is 2,600,000 cubic meters. And the total cash proceeds, and we will come back on that later, was around €750,000,000 positively contributing, of course, to the net debt to EBITDA development, which is now around two.
Looking at the EBITDA and revenues, adjusted for divestments, again, we demonstrate an 8% growth in EBITDA and 4% in revenues. I'm now on Page eight to give you a bit of an analysis about the difference between the year to date Q3 numbers in 2015 and the year to date Q3 numbers 2016, where we have reported a 4% increase. If we nail that 4% down and we adjust it for the previously mentioned divestment implications and the foreign currency implications, the adjusted Q3 twenty fifteen EBITDA would amount to €570,000,000 And then the positive news is that based on our outlook of high occupancy rates, we see that every region has positively contributed to that development without any exception. So the overall conclusion is, is we not only have operated in the 90% to 95% utilization range, but also at the higher end of that range, contributing positively to the individual EBITDA development of all individual geographical segments, contributing to the development of a year to date Q3 twenty sixteen EBITDA of €624,700,000 On Page nine, we have summarized the key figures, but then not on a year to date basis, but on a Q3 basis. And of course, there, the impact on specific divestments is quite significant if you want to compare from quarter to quarter.
Looking at Q3 EBITDA, it shows a 5% increase compared to the Q3 period in 2015. And the net profit shows a 16% increase and the revenues are 2% down. As said, the main reasons, one is FX is one of those elements. But firstly, the most important factor is that all the geographical segments reflected by our divisions 2016 and contributing positively to the EBITDA and net profit development. Page 10.
You are aware that we announced that we were considering to build out our facility in Houston. We call that the Deer Park Brownfields capacity expansion of 139,000 cubic meters. And this is progressing properly well. The contracting is ongoing, and we expect at this stage to be able to start construction end twenty sixteen, early twenty seventeen. But more important, of course, is when we expect the commissioning and that, at this stage, is planned for Q4 twenty eighteen, meaning that, let's say, a reasonable contribution to the results can only be expected somewhere in 2019 and not just in the 2018.
Then on Panama, we already started the operatorship of the Chevron assets after our announcements, and that was in 09/01/2016. Evaluating and also looking at many contracts in order to ensure that we can start the construction of the greenfield capacity. And also there, we do not expect this to be completed before the 2018. And that means from a guidance point of view with respect to EBITDA development that it is only to be expected to contribute positively to our EBITDA development in the year 2019. Looking at Page 11, that is the closing, in fact, of the clarification session before we allow any questions.
That is the outlook. Taking into account the divestments, which, if you look at it on a full year basis, has an impact of around €35,000,000 negative and the negative FX results of 10,000,000 We have taken into account the current Q4 potential conversions of certain commercial contracts, the year to date results in EBITDA. We have come to the conclusion that it's absolutely well positioned to exceed the twenty fifteen EBITDA of €812,000,000 And that means that we have been able, with the earlier explained positive developments in all the different geographical segments of our divisions, that we have been able not only to compensate the adverse impact of the divestments and the foreign currency results, but on top of that, we likely are going to contribute something in addition above the current twenty fifteen level of €812,000,000 So with that, I would like to refer to the moderator in order to allow any questions you may have.
The first question is from Mr. David Kersten, Jefferies. Go ahead please.
Hi, good morning, Jack. I have a question regarding your performance in Asia. If you strip out the joint venture results, you're showing a 6% increase of the subsidiaries. Does that imply that your Chinese import business is starting to improve compared to the first half of the year? And secondly, on the joint ventures up 43%, do you now see a much larger what's your view on the recent M and A in the industry with the sale stakes in Universal and CTTI?
Does that change your competitive landscape? And what are the from the mid teens to your U. K. Assets? Yes.
Yes, looking at Asia, it's not only the, let's say, the stability in China, which is contributing slightly positive indeed to the demand of specifically chemical storage in Singapore. It is more that also additional, let's say, capacity has been added to our Asian operation in VTS Singapore, like for instance, the LPG storage, that is an explanation. So it's more that you have to think about the positive development of occupancy rate, which might slightly come from the stability in the China region, but also the additional capacity expansions, for instance, in LPG and other small positive developments. So it's not one factor. It's a combination of all those small factors.
But it would be wrong to say that it would only be the result of some stability and positive developments in China. Then with respect to your question about what's happening in the industry, it's a very broad question. It's a very broad question. And the reason being is that you know that there is a has been an increasing interest from a financial investment perspective for infrastructure like activities, with stable cash flows. And as a result of that, we have seen increasing interest from infrastructure funds.
We have seen increasing interest indeed from the areas you were mentioning. And that has supported, of course, in an efficient capital market, has supported, I would say, fair market value based valuations. And why do I mean fair market value based is because that if you are operating in an industry where you are able to position yourself in a value chain where you can add so much stability and value that there is hardly any significant volatility in utilization rates while you are still adding value to your customers, that at a certain point should is going to be reflected in this type of transactions. Does this mean that the competitive landscape is going to change? I don't think so because at the end of the day, it's only about one thing, and that is what is the truly added value from an infrastructure services point of view, what you can contribute to the success of your customers, and that is almost independent of the owner.
And we feel that being, let's say, a corporate specialized infrastructure service provider for the last four hundred years, that we are well positioned in order to support those developments from a customer perspective and that we don't see from a competition and a competitive edge point of view that suddenly those new owners would be able to change and disrupt that significantly. At the same time, if you have transactions at appropriate fair market values, it's also securing that there would not be an incentive, of course, by starting to offer services at below fair market value rates. So long story short, I understand the development from a financial market perspective. From a competitive landscape, I don't see any significant changes resulting from those transactions.
Next question is from Mr. Yaroslav Rumanshev, Credit Suisse. Go ahead please.
Could you please give us your thoughts regarding the recent IMO decision to implement a sulfur cap of 0.5% in 2020? What are the implications for global imbalances of diesel and fuel oil? And longer term, what do you think is an impact on LNG market? Thank you. Okay.
That's quite a broad question. Indeed, it's in fact, you could say, what is the impact of the change of a specification of a certain product? And indeed, you have two elements in it: one, in the energy mix, which is used in that sector and secondly, on the imbalances. I will try to answer that as broadly as possible, but it almost warrants a separate meeting on this specific topic. Starting with LNG, as you know that because of this rule, it means that the shipping transportation business is looking for alternatives in order to be able to comply with this new guidance and standard.
And there are different solutions. You could use scrubbers, you could use LNG, you could use more, let's say, marine diesel with this lower specification, which might be more expensive. So the question is, at a certain point, what is the best fit for purpose economic solution for that particular shipping company? Some shipping companies are going through a stage of development where additional investments might not always be most easy way. And so the question is, is the conversion to LNG the most appropriate one?
Or is the investment in a scrubber the more appropriate one? What we are doing, of course, as a business is ensuring that we facilitate both developments. So we have taken care by our investments in what we would call the small Break facility, which we have added to our LNG terminal in Gate. We facilitate the accelerated use of LNG, which is going to be distributed to different stations by one of our customers. So it's too early to say whether this acceleration, how that will materialize in such a short period as the four years.
So for the time being, we are looking at two developments, investments in scrubbers, what does it mean for the storage of those products secondly, what does it mean for the LNG development. And then looking at your question, does this have a significant impact on global imbalances? At the end of the day, if you look at, let's say, if you take another ten or twenty years, we absolutely are of the opinion that LNG is going to develop as quite a significant volume in the total energy mix, where the supply and demand imbalances between the regions will drive the need for additional infrastructure. There, the answer is absolutely yes. What does it mean for those products, which have are not, let's say, meeting the standards of this new European regulation, then you have a number of options.
Of course, you could try to limit the sulfur levels by going through a desulfurization unit or there might be still an economic rationale for those areas in the world where this product can be legitimately used to transport the product. So there will be different, let's say, consequences of this legislation. It will not be one dimensional. It could be even an increase of certain flows to other regions. And at the same time, we expect, but not immediately accelerated in the twelve or twenty four months period, we will see an accelerated development of the LNG flows on a global basis.
Thank you.
The next question is from Mr. Dominic Edwards, UBS. Go ahead please.
Yes. Hello there. Two questions for myself. Firstly, just with regard to guidance, both in terms of thinking about Q4 'sixteen and also into 'seventeen. What are the key variables you would be flagging up, Jack, in terms of things that either go slightly better or slightly worse?
I know that you've talked about FX and some of the divested share effects, but what other issues are there out there that you would say are the key sort of variables? And then secondly, I suppose just going back to the point about the recent transactions in the sector, etcetera. The fact that I mean, when you look at your own pipeline, do you think you're being held back by the fact that prices are so high for assets out there and for new projects? And can you just maybe give us an update on your thoughts on how the pipeline could shape up over the next couple of years? Thanks so much.
Maybe starting with the last question and then maybe referring to our capital markets update we provided in July 2016. In July 2016, we have tried to summarize what we see as the main driver for potential incremental infrastructure service needs in the different product market segments, LNG, chemicals and oil. In July, we concluded that if you look and you take different scenarios, on the one hand, with demographic developments, you look at economic growth on a worldwide basis, you look at the energy use, then in general, we have come to the conclusion that the drivers for potential additional infrastructure are positive in the next decade. However, we had one small warning, and that we said is that the pace in which those factors are developing is relatively, I would say, not disruptive but slow, meaning that it's not apparent when you have to make those investment decisions. So that remains the same at this stage.
So long story short, positive direction of additional incremental needs for infrastructure services in the selected product market segments in which we are operating. The timing is maybe not as apparent as five or ten years ago, but the fact that we have announced Panama, the fact that we have announced Deer Park in Houston, the fact that we are exploring different opportunities in those product market segments give you a bit of an indication in which direction we are looking at to expand intelligently and in a very disciplined way our total network. Looking at the variables of the Q4, which I would say are the normal variables. The normal variables are if, let's say, a contract with a duration of less than one year expires in, let's say, the coming weeks. The question is, will there be immediately a renewal?
Could that be a small timing difference of three or four weeks as a result of which the renewal will materialize in 2017? So that would be the variable on the top line. The second variable is also a natural variable. And that is sometimes in certain periods, if we exceed certain throughputs, we are allowed to our contract to charge that additional, let's say, premium for our services. You never know whether or not you are going to achieve that and there are differences between quarter to quarter.
We are not talking about tens of millions, but at a certain point, if you want to have an explanation of a range which is so small, then you get all these, let's say, small natural clarifications. And on the cost side, as you know, we are exploring business opportunities. You can imagine that if you are doing that, that the pre operating expenses, which cannot be capitalized if you have not made a significant decision, then it means that it could have a negative impact on your Q4. And thirdly, we have started quite some innovation initiatives on what we would call the alignment between the digitization in the world on the one hand, customer needs, operational automation. And also there, we are spending some money.
So long story short, we are not talking about swings of tens of millions. But the combination, of course, could have either slightly a pressure impact and could have slightly a positive impact. But at least at the end of the day, if we take it all together, we are very confident that at the end of the day, we will end up in 2016, higher than the year 2015, where we have, one, positively compensated the implications of the divestments, positively compensated the FX effects. And maybe on top of that, we are able to generate something in addition as a result of which the 2016 to be reported EBITDA might come higher than the year 2015. I hope that this covers your questions.
Yes. Thank you very much, Jack.
Next question is from Mr. Andre Mulder, Kepler Go ahead please.
What's your view on the capacity expansion in the industry? For example, Hess is developing this terminal. We got rid of the restaurants, but now Hess is returning there. What do you see happening in your other main hubs in terms of capacity development? Yes, Andre.
We have been discussing this topic, I think, since 02/2008. Since 02/2008, we have seen that in this industry, sometimes more proactively capacity expansions have materialized. At a certain point, we saw in 2012 a slowdown of new initiatives. All those capacities have been added to the market and have been successfully utilized. And what we see again, of course, is that indeed specific parties are looking at specific product market combinations.
So it's a generic development. On the one hand, not surprisingly. On the other hand, sometimes, as part of our disciplined capital investment strategy, we sometimes take different decisions. And that is all I wanted to say instead of commenting, let's say, individually on the individual plans of our competitors. Can you also make a statement on the development regarding the FSRU of Exmar.
Why Exmar? What are the different options? There are other parties in the market there. Yes. You can imagine that if we evaluate strategic options, we look at all kind of alternatives, and we never disclose, of course, our thinking process in that respect because that would mean that we would share business intelligence with our competitors.
So we have explained in our Capital Markets Day why we think that it's an area of as a use, which we should look at as an adjacent activity to our land based logistics. And whether or not that will materialize, we will see. At this moment, we have no comments or whatever on this specific business development activity.
The next question is from Mr. Karim Mulder, ING. Go ahead please.
One moment.
Mister Decree, I've lost mister Noether.
Yes, I don't hear him either. I know he's calling from different location, so that might be the reason.
Okay. Please continue, sir. There are no more questions at this time.
There are no more questions. So then I invite if Krioren hears me instead of waiting at this moment that he could contact us personally. We were more than pleased to answer his questions. I take this opportunity to thank you all for participating in this interim update and to invite you, if you have any follow-up questions, to touch base with our Investor Relations department. And I would like now to ask the moderator to close off this interim update call.
Ladies and gentlemen, this concludes the webcast and event call of Roperk. You may disconnect your lines.