Good morning, ladies and gentlemen. Thank you for waiting and welcome to this Good morning, ladies and gentlemen. Thank you for waiting and welcome to this Royal Vogue Pack Conference Call. At this time, all participants are in a listen only mode. After the presentation, there will be an opportunity to ask questions.
I would now like to hand the conference over to the Chairman, Mr. Jack DeCraig, Vice Chairman and CFO of Royal Vopak. Go ahead please, sir.
Very good morning, ladies and gentlemen, and thank you for your participation in this Q1 twenty fifteen trading update
conference call.
As a matter of logistics, as you know, we have organized our AGM today. That means that we have a hard close for this conference call at 09:40. I will take care that we have sufficient time for questions and answers. And I will give a quick explanation about the Q1 trading results by referring to the presentation, which is on our website. And I will refer to the pages where we are when we are talking about the business development.
Starting with Page two, the forward looking statement. I assume that you are familiar with that, that in a very complex business environment, there are always assumptions and uncertainties that is explained in this paragraph. If we then go to page four, then the key topics I would like to address in this call is that, one, we have been able to deliver very good results against a very volatile background of geopolitical developments, of economic growth, which is relatively disappointing compared to earlier periods in our economy and a very dynamic business environment with volatile oil prices. In line with our previous outlook, as a result of that, we have come to the conclusion that we are well positioned to exceed the earlier indication of $7.68, which was the EBITDA result we generated in the year 2012 and we will absolutely be well positioned to exceed that in the year 2015. And we are on track in executing our updated strategy as announced on 07/02/2014.
In the remainder of the presentation, I will provide you a bit more details and explanation on individual developments. But of course, as said, we will leave plenty of time for any questions you may have and clarifications you would appreciate with respect to the trading update. When we go to page five, you will immediately see that the increase of occupancy rate from 89% in 2013 to 88% in 2014 has now exceeded the 90% level. That doesn't mean and that is the first warning, that doesn't mean that this is already a structural change of which you could conclude that we will now be operating in the 90% to 95% playing field. That is too much uncertain if I look at the demand drivers.
But of course, we are well positioned to benefit from these demand drivers also in the short term. This has fueled both a positive EBIT development and EBITDA development and we can report a 15% increase of our EBITDA compared to the lowest quarter, and I have to emphasize that, the lowest quarter in the year 2014. We also have benefited from some foreign currency translations and this time in a positive way. But despite that, the positive business developments in the Q1 period are the increased occupancy rate in certain regions and secondly, that we have been able to sustain the EBITDA margins and thirdly, we have been growing the EBITDA development in line with our ambitions. The net profit as a result of that has benefited disproportionately, of course, which we have not been able to report in the previous year.
And so we are very pleased that also this indicator is going in the right direction. As said on July 2, our whole philosophy is on trying to improve the risk return profile of our portfolio. This has to do with the existing business. We try to derisk existing terminals by concluding different type of contracts, by providing different type of services. That is not something we can accomplish from one quarter to the other, but that is the strategic focus we are executing in the coming years.
Secondly, of course, we are looking very carefully to our free cash flow generation by managing our sustaining and improvement CapEx and our cost levels. And thirdly, on top of that, we continue identifying selective growth opportunities on hub terminals, on industrial terminals, on countries with structural deficits and gaseous products. And the trading update, I would say perfectly fits and perfectly matches this journey, which is of course longer than just one quarter. Going to page six, talking about cash
flow
development. As you can see that we have been able since the focus on cash flow generation and that started already at the early stage of 2003 that we have been able to improve the cash flow development. If you look at the Q1 period and the Q1 period 2015, then it looks like that it's almost equal, the cash flow development despite the EBITDA growth. That is right because components like dividend distribution of joint ventures and working capital changes have also an impact on this cash flow calculation. This is truly an integrated cash flow approach where we are eliminating any accounting number.
So that's the reason why it could be that even if an EBITDA growth is reported that the cash flow component is almost equal lower or even disproportionately higher. That's the reason why we follow that in very much detail. Looking at page seven, it gives I think a very good reflection of the magnitude of volatility. The magnitude of volatility, which we have been able to address in previous meetings where we said, look, if you look at our portfolio of terminals, the majority, the core of the core is fixed and focused on physical transportation of energy products, on chemical products, industrial terminals and LNG, where oil prices have no impact on, because the main driver of the functionality of our incremental additional value we provide with our service is the ability and capability to provide storage and transshipment services for those products, which need to be physically transported from one region to the other or within any region. But as explained in our previous meetings, we also have certain locations where capacity is rented, for instance by traders or other parties, where oil prices might play a role in their decision making to take a position.
And if you are operating at a level between 8590% of occupancy rates, then it makes absolutely clear that the upside, if there is hardly any economic growth, if there is hardly any growth in the volumes to be transported on a worldwide scale, that the upscaling of your utilization should come from other demand drivers where oil prices could play a role. And I think this picture perfectly reflects the type of volatility and swing factor you could have from one quarter to the other, but you could also conclude the other side and that is that we are operating in a certain bandwidth. And the bottom of this bandwidth is supported by long term contracts by transportation of products, which are completely independent of oil price developments. And so the only factor which is uncertain is how large is the bandwidth, how large is that volatility within that bandwidth. And that is something which we are exploring ourselves as well going forward.
But a long story short, if you look at those two years, it gives a bit of an indication that we have apparently been operating between €180,000,000 to 106,000,000 Of course, for a thorough analysis, we should normalize that for FX developments. We should normalize that for maybe capacity expansions. But it gives a bit of an indication of the swing factor And that's the reason why I emphasize this because going forward, in the remainder of the year, we have to take into account a certain swing factor, which we find difficult to assess at this stage because we have to make an assessment that if certain spot business contracts will expire in the next three to six months, we have to assume again whether or not they will be immediately renewed or whether it takes some more time, what are the conditions under which they will be renewed. And that's the reason why we have reiterated our previous outlook that we are extremely strongly positioned to exceed the €768,000,000 at this date, we don't want to make any, I would say, almost academic accurate assessment in which range we might end up. That is in fact the message we try to link, first of all, the quarterly development with the outlook later on.
Looking at page eight, you see quite a bridge statement of the EBITDA development in Q1 twenty fifteen, where I would like to emphasize the foreign currency effect and then the positive business effects, where indeed The Netherlands is quite positive because of the increased occupancy rate, because of the opportunity we have been able to capture to store more crude oil products and gas oil products than the year before. And that has everything to do with the positive developments in the oil markets and the corresponding oil prices, let's say, enabling traders to take profitable positions. If we look at page nine, then we see that the total EBITDA contribution, a growth of 50%, is fueled by positive developments in all the regions with one remark, and we come back on that later, that specifically in Asia, the positive FX translation has contributed a lot to this growth, whereas the decrease in occupancy rate has absolutely, let's say, put some pressure on the further growth of our EBITDA in Asia at this particular moment. If we then go to page 10 and we look at the joint ventures, then of course the growth in Asia is fueled by, for instance, the acquisition that we have done of our 30% stake in Haiteng and also the global LNG because of the expansion of our stake in previous periods.
Looking at page 11, referring to my initial comment, we are still operating in the 85%, 90% playing field, whereas we are now, let's say, moving towards the 90% to 95% playing field. But I find it much too early to say that this is absolutely already a structural step we are going to take. The positive news is that with our focus on our strategic agenda, with our focus on improving the risk return profile that we have been able to improve our utilization since the crisis period, but that there was no indication yet that this is a structural improvement we can easily maintain for the longer term. I find it much too early to say that, but it's looking very encouraging. We are well underway.
I see opportunities, but it will take time, but I don't want to give the impression that this is the first step to even higher occupancy rates in the periods to come. Page 12. If you look at the occupancy rate per division, we see indeed that The Netherlands has reported quite an increase because of the increased demand for crude oil storage capacity in Rotterdam. And also we have been successful at the renewal of contracts in Amsterdam. The EMEA improvement is primarily due to the significant increased occupancy in Sweden.
As you might recall, Sweden was hampered by quite some available capacity in the backwardation situation. Now we have quite for a long time a contango situation. We also see an increased interest in using this storage facility as a result of which EMEA is able to report an increased occupancy rate. The decrease in Americas is primarily in Latin America, so not in North America. Canada and our Houston terminals are very well positioned.
And in Asia, we report a lower occupancy rate and it has everything to do with a phenomenon we have been discussing during our Capital Markets Day that in the world of storage facilities, the matching of expansions and economic growth and increased volumes might temporarily be imbalanced. And that is the case in, let's say, Singapore. In that region, we have an expansion of new capacity, which is absolutely matching the future needs, but might be temporarily, of course, being a mismatch between the current short term needs, and that is reflected in my view with this occupancy rate reported. But as said, we are a strong believer in the positive developments in the Asian region. We are extremely excited about our expansion in Pengerang in order to support our strategic hub, a Southeast Asia service function.
But in the short term, it could be that we have to deal with the relatively lower occupancy rate between 9095% or even between 8590%. That is something which is too early to say, but it's absolutely from a strategic point of view not an issue at all. Looking at page 13. As we have shared in previous meetings, despite, let's say, all kind of IFRS reporting, this is the straightforward non IFRS proportional information and we see the same developments with all KPIs. Also with respect to the occupancy rate, we see that we report a 90% occupancy rate if we take the group companies and the joint ventures together because in the earlier indicator, we only report the group companies as an indication for revenue development from an IFRS reporting point of view.
And what we also could see is that we have been able to balance the cash flow return on gross assets based on our strong focus on free cash flow improvement besides only EBITDA growth. Looking at the divisions, page 15. A long story short, increased results, higher occupancy rates and some expansions which we have been able to put in the market in The Netherlands so far so good. But as said, from a strategic point of view, the contributors to the improvement are not yet structural contributors. So we continue focusing on what we could do both from a free cash flow improvement, both from a cost management point of view, but what we can do to derisk, what we can do to improve our service proposition in this highly competitive market that remains top on our agenda for The Netherlands.
On EMEA, an improvement primarily because of the Sweden activity where we have done quite a good quarter resulting from the increased demand and as a result of that higher occupancy rate. If we look at Asia, in fact, we have already covered that topic on page 17, where we have experienced a decreased occupancy rate, specifically in the oil storage. We have opened up Pangarang on the one hand, and we see that the occupancy rate on Banyan and on Sbarrokh has slightly decreased in line with our expectations. It's a timing difference. The only thing is how long will be the timing difference.
That is what we are investigating. But it's absolutely encouraging that we can see that we have been able to maintain quite high EBITDA levels. So we are able to maintain based on our excellent service levels, can provide good pricing, good EBITDA margin. Then going to The Americas. As said, the main reason of the occupancy rate lies more in Latin America than in North America.
And I would say the remainder of Americas, very well positioned, still going strong, nothing special to report. Going to selective growth, as said, on our strategic agenda, selective growth in the one of the four markets remain an extremely important area of tension. We look at hub terminals. We look at countries with structural deficits. We look at industrial terminal opportunities.
We look at gaseous products. But as said, we do this in a very capital disciplined manner, taking into account the limited economic growth, the uncertainties in volumes in the world, while continuing improving our position of the existing terminals in our network. Looking at page 20. We are operating now 33,800,000 cubic meter. In 2019, we might operate 39,800,000.
And just one small note, this still includes the announced but not yet completed divestments. So the €38,000,000 will be lower once we have been able to complete those divestments and we can announce them. So that is the only, I would say, side remark I would like to make on this overview. On page 21, you are familiar with that. We have been able to divest in Q1 some smaller terminals on the East Coast Of The U.
S. And a plot of land in The U. S. We started our operations in Pengerang. We also announced quite a huge project, the Pengerang Industrial Terminal, and we expanded our activities in Europoort where we have specialized storage facilities for jet fuel.
What does it mean? Page 22. For the development of our storage capacity, You are familiar with this. You see that in the year 2014 up to 2019, we not only grow with 5,800,000 cubic meter of capacity, but that the majority of this capacity growth will be materialized in joint ventures. And that of course has an impact on the level of EBITDA growth from an IFRS point of view we could further develop.
Looking at page 23, how are we funding the whole selective growth? We are still well below the maximum covenants. The positive cash flow developments, the completed divestments on the one hand have a negative impact, of course, because we have lower EBITDA going forward. On the other hand, it has a short term positive cash impact, but we are still well below the covenants. So we are well positioned to execute our current projects under construction by funding it with our operational free cash flow and the available headroom.
Page 24, no changes in the capital structure. We keep on focusing on the capital discipline growth. Up to now the source of growth funding is operational free cash flow. The second source is using the headroom and we have no indication in the short term that we have to use any of the other sources for being successful in realizing our growth ambitions. Looking ahead, page 26.
Looking at subsequent events, we have now a 50 stake in Gate. That means that when we started this project together with our strategic partner Gazuni that both partners have now 50% and that all the minority shareholders have decided in fact to offer their shares to us. We are very pleased with that because it provides us a very stable basis for executing our LNG growth strategy. You might be aware that on April 6, there was an unfortunate incident with one of our main customers of our Vopak terminal Haiteng. This means that although it's located on quite a distance from our terminal that the activities have been shut down for inspection by the government.
We don't know when and in which format these activities will be continued. So at this moment, there is hardly any activity at our terminal as well. On April 7, we received an ultimatum from the labor unions, as you might recall. And we have been informed by the unions that they have suspended their actions in anticipation of consulting their members in the coming periods. Looking at page 27.
As always, we always take a look at our contract portfolio. We look at the different product market segments. If you look at the Q1 results, they in fact reconfirm the trend we have been experiencing in 2014 instead of having a downward trend. We seem to be bottoming out. The bandwidth in which we are able to operate seem to be narrowing down, and that is in fact the starting point for defining our outlook for the year 2015.
And from a demand driver point of view, we don't see any significant differences between 2015 and 2014 other than in the short term, we seem to be well positioned to benefit from the additional demand resulting from the oil price developments. And other than that, we haven't seen any significant changes. If we translate that to page 21 and try to make an assessment of the year 2015, That means that if we look at the performance of the year 2014, which was CHF $763,000,000, if we look at the highest performance in the last few years of 2012, which was CHF $768,000,000, we strongly believe that based on the current contracts, based on our assessment of renewals, based on our opportunities of pricing, cost management and all other relevant factors summarized here in this graph that we are well positioned to finalize the year 2015 in excess of the CHF $768,000,000. That means that I have ended my short clarification and explanation, and it means that we have 30 left for any questions you may have. And I would request the moderator to open up for the question and answer session.
Thank you very much, sir. Ladies and gentlemen, we are now starting the question and answer session. Okay. We have quite a few questions. The first question is from Mr.
Bjorn Kruk from Avian Amro. Go ahead please sir.
Good morning, Jack.
A couple of questions. I'll try to limit myself to two as requested. On Asia, I understand the point you make about the short term mismatch about new capacity coming on stream and short term demand. But in the press release you mentioned a more competitive and dynamic spot market and changes in the product mix. Could you just shed a bit more light on what you mean with that?
What is the cause of that? Is there perhaps also an impact of the capitalized costs unwinding with new capacity coming on? Has there been a negative impact from Pengerang? Just a bit more clarification on the situation in Asia. And then on the net debt CapEx kind of cash flow situation, if I look at the CapEx, it's down quite steeply from Q1 twenty fourteen into Q1 twenty fifteen.
But I do see the net debt moving up despite the M and A proceeds what I said lower CapEx, good cash flow. So is that only currencies? Or am I missing something there?
No. Good morning, Bjorn. No indeed you are not missing anything with respect to the letter. It's primarily the currencies which have an impact on those comparisons. Could you
quantify the impact of currencies on net debt?
Oh, I don't have it on the top of my head. But if you look at the enormous volatility in the U. S. Dollar rate, you can imagine that if I have to recalculate my U. S.
Debt at 1.33 or 1.09, there's a significant impact on that And so the difference between the average rate you use for EBITDA and let's say a fixed rate you use for the net debt calculation that is normally let's say a source for quite some differences. So all the other are no reasons for any difference. So it's only debt factor. It's only primarily debt factor.
Okay. And the massive step down in CapEx is the result of the what's causing that?
That is indeed that is a result of the program and the timing difference. So you should not, let's say, extrapolate it as an indication for the remainder of the year. So it's partly timing difference and partly indeed you are now seeing the impact of our strategic agenda where we said, as from July 2014, we would like to reduce the total program of around estimated CHF 800,000,000 for sustaining and improvement CapEx to end up in for that period in CHF 700,000,000. And you see slightly now the results and consequences of that program, but on top of that a timing difference that certain, let's say, expenditures
will
take in other parts of the year than Q1.
Okay. Thank you.
And then Asia, a very short answer to your question. Indeed, of course, Pengerang has an impact, but I don't want to give that as a clarification because if Pengerang would be, let's say, the only factor then we would not have to report a decrease in our occupancy rate from the group companies. So the main factor is indeed that we experienced specifically in Banyan and specifically in Sbarro where we also had capacity rented out to traders where spot business was in place and where the traders have multiple opportunities to store that not all contracts have been, let's say, renewed or have been renewed at the same stage. So that is absolutely the main root cause. So I would not although Pengerang is could be a part clarification, is not the root cause of this difference.
Yes. But are they moving from Banyan and Sbarroch to Pengerang? Or is there
Also to other, let's say, service providers or let's say decide to stop the trading or whatever. That is the volatile part of it.
Okay. And the part on the capitalized costs?
That is always the difference. So capitalized cost and pre operating expenses is always an explanation of, let's say, if you look at a yearly basis, what I've seen in the last few years, it could be a difference between 5,000,000 and €10,000,000 on a yearly basis. But it's not something which I feel is the overriding factor. The main message from a business point of view, although Pengerang plays a role, although pre operating expenses play a role, the main factor is the drop of the occupancy rate.
Okay. Cool. I will go back in the queue. Thanks, Jack. See this afternoon.
Thank you. The next question is from Mr. Luke van Beek from Petercam. Go ahead sir.
Yes. Basically two questions regarding Asia. First on Hainan. I understand that there's still no commercial contracts. Can you give any indications if you'd expect a significant pre operating expenses in Q2 and significant start up losses from Q3 on?
And second, the drivers that you mentioned a mismatch between the timing of capacity expansion. Can you give any indication to what extent this is exacerbated by increasing competing capacity? And is that something that can continue in the next couple of years? Or is it really a very short term impact?
Luke, starting with the last question. If you, let's say, take a time frame of the last five or ten years, the total capacity in that market has almost tripled. If you take a shorter time frame that also since 02/2008, we have seen expansions in Singapore, in Indonesia. That's what we are referring to. So you are not you are talking about a couple of million cubic meters.
I don't know the exact numbers in which time frame on the top of my head, but you are talking about quite some expansions. And then that means that taking into account, of course, the expected increase in volumes over the longer term that this capacity is absolutely well matched with that scenario, but that in the short term you see that it is not easy to continue operating at 95% occupancy rates. And so that's the reason why we flagged this as an attention point that going forward we are well positioned to continue operating at very high levels. But also taking into account these developments, I'm not sure whether we can easily go back from one quarter to the other at again 95% occupancy rate. We really have to see that in the coming months.
Looking at Hainan, as indicated in our previous meetings, indeed we said the terminal will be commissioned most likely just at the end of Q2 or at the beginning of Q3 Based on the current inquiries we see, which have not been translated in formal legal contracts, you should assume that in the Q in the second half of this year that indeed from an IFRS accounting point of view that Hainan will contribute negatively to our result development. Because if you start with a relatively low occupancy rate at that particular stage, while you have to recognize all the depreciation and all the interest costs from day one that will automatically result in a negative, let's say, contribution. But of course, that factor is not new. We have already included that in our outlook of previous year. We have emphasized that.
And we have reiterated that in our outlook for the year 2015. So it's not a surprise. And we are continuously looking of course at the developments over there.
Okay. And as per your operating expenses in Q2, is that significant?
Depends if you say are they more significant than Q1, then that's not the case compared in 2015. But as I said, from one year to the other, sometimes you have changes between 5,000,000 to €10,000,000 in pre operating expenses dependent on the nature of the projects.
Okay. Thank you. That's clear.
The following question is from Mr. Micheal Alpert from Rabobank. Go ahead sir.
Hi. Good morning, gentlemen. I have a short question about your outlook. Did you include the assessment program into your outlook?
Yes. What we have tried to do, what we said is, okay, if we have to divest or will be successful in divesting smaller terminals, we take that factor into account. We also take into account that the point just raised by Luc that he said, Luc, if I understand well your Hanyan operations might contribute negatively, that's absolutely right. We have taken into account all these factors in reiterating our outlook.
But did you so basically the plan is to divest something like 4% of EBITDA. So you assume the complete execution of this divestment program in full year 2015?
What we said is in July, the likelihood that we might complete it before the 2016 is quite high, but we have never referred to that we would complete it in 2015.
So to some extent it's included in your outlook?
We have taken it into account. Otherwise it becomes so complicated indeed that you have to give an outlook including excluding divestments. So what we did is we started the program. You know that we are talking about 15 smaller terminals. We divested already in Q1 the three U.
S. East Coast terminals and a plot of land. So we know exactly what the impact is of the lower EBITDA from those divestments. Then we have to assess, okay, could we complete some other divestments in the remainder of the year? So we have made a likelihood assessment of that, but you should not take into account a scenario where we are on a program where we try to complete everything in the year 2015.
That has never been the intention. And it's also not currently the actual case. What we have tried to do is give a strategic direction and execute the divestments at the right natural fit for purpose moment.
Okay. Yes, because I'm still struggling a little bit with your outlook. If you make $2.00 6,000,000 in the first quarter and your total divestments is €30,000,000 then you easily arrive at around 800,000,000 So I'm
just wondering why you're so cautious.
Because we are not in the business of providing narrow accurate outlooks. We are giving direction and we are not cautious. We are realistic that we say look we know where we are. We have a few swing factors positively and negatively. We have to try to assess them all independently.
Will we be able to increase the occupancy rate further or will there be quite a drop? Secondly, will we yes or no, we be able to complete the divestments? What is the assumption we have to take into account for Hanyan? That's a mixed bag of swing factors. And the only thing what we say now at the beginning of the year, we reconfirm that we are well positioned to exceed the seven sixty eight euros Where we will end up, we will probably have a better view in the coming months.
Okay. Clear. Thank you so much.
The next question is from Mr. Derek Verbesev from KBC Securities. Go ahead please.
Yes. Good morning gentlemen. A question on the earnings momentum in The Netherlands. Can you maybe shed some light on the take up of the new capacity impact of utilization increase and top line improvement as well? And how that came through to EBITDA with regard of the let's say on a run rate basis into the quarter?
Have we has that contribution from improved utilization been significant already from the start? Or has that materialized towards the end of Q1? That's my first question. Second on the Haiteng and the impact of that on earnings and the uncertainty you're currently facing there. Would you take that as a one off or an exceptional item in your results this year?
Or is that just an operational risk that you're bearing? And then on the cash flow, if I may on cash flow from operations, I appreciate the comments, but can you shed some light on the actual impact of working capital and the contributions from dividends from JV? Because year on year there's still some open ends I think looking at the earnings profile and then the cash flow from operations which was down a bit year on year. Thanks for that.
Okay. And that's all in the light of a trading update. I may understand that. Yes. Just to put it in a balanced perspective.
Try to cover The Netherlands. If I understand your question well and please interrupt if I have completely wrongly interpreted it. If you look carefully on page 15 of the total presentation, I think that partly answers your question because you see that in Q4, we reported an EBITDA of CHF 61,000,000 and now in Q1 of €68,200,000 And that means that a combination of factors have fueled this positive development. One is indeed that in Q4 twenty fifteen, we had some contracts being expiring at certain locations which were not immediately renewed. And then of course they were renewed in the course of 2015.
That was the positive contribution. And we had some contracts which started only in December. So you see indeed that the turning point has been from Q4 to Q1, if that answers your question with respect to the earnings momentum of The Netherlands. You can also see that back in the appendix of the press release where you see page 10. If you look at the revenues, we reported about a seven percent increase in revenues from Q1 to Q1 twenty fifteen.
So the Q1 period twenty fifteen twenty fourteen where we reported €60,900,000 EBITDA and now €60,800,000 EBITDA in Q1 twenty fifteen. That's a difference of almost €7,000,000 That means that almost the full revenue we have been able to capture in our EBITDA development and that's a result of course of the cost management focus and also the free cash flow focus. So I hope that answers a bit of your question. Haiteng, it's too early to say anything. It's just that we felt that if something important happens with one of our main customers without us knowing yet the impact.
So you asked me to all kind of scenarios. At this stage, we have just a take or pay contract. So in fact, what you could argue is independent of the activities, the customer of course just has to pay on a monthly basis. So I think this is a topic I'm better positioned to address at the half year report.
Okay. Yes. If I may on Netherlands, on the revenues, but if you compare it yes, you can compare it year on year, but if you compare it to Q3 twenty fourteen, where you also had a €68,000,000 EBITDA, that was on a somewhat lower revenues base. So that's why I asked the timing of the capacity and that's Yes. Background of my
Sorry. On the Q3, because that's the reason why I didn't include it in that exception. So the Q1 the Q4 and the Q1, you can compare apple for apple the Q3. At that period, we had some additional throughputs, which were not linked of course to occupancy rate, but were fueling the revenues.
Okay. And
so we were benefiting from some throughput revenues in that particular quarter. So if you focus on an apple by apple basis, Q1, Q4 and Q1 twenty fifteen is the best analysis you can make.
Yes. Okay. That's clear.
The cash flow from operations, the swing factor you talk about for instance is because it's such a short period, a quarter, if you talk about results from participations and dividend distributions, it makes a huge difference of course if you declare difference the dividends in the Q1 period, the Q2 period or the Q4 period. So that is business as usual. So you say shine a light on those difference. I would propose since this is a trading update that we spend a bit more time on this topic at the half year numbers. So then we have half a year of dividend flows.
Also the working capital developments is not linked to one quarter or the other, but you can give it a more flavor on the whole picture. And that fits more in a more comprehensive reporting style as we do on the half year numbers.
Okay. Thank you. Thank you.
The next question is from Mr. David Kerstens from Jefferies International. Go ahead sir.
Good morning, Jack. You recently commissioned Pengerang 1C, which I understood was mainly crude capacity and almost full on the day of commissioning. Can you give an indication on the overall occupancy rate development for Pengerang? I think when you commissioned 1A you said occupancy initially was at about 40%. Is it now at better occupancy levels than you had previously assumed?
And does this reduce your expected start up loss for Pengerang and Hainan of €10,000,000 for 2015? And then my second question is regarding the performance in Estonia. In the first quarter, the net profit from EMEA was stable from the joint venture line, but it's up substantially compared to Q3 and Q4 last year. Are flows coming back? And what are the further plans with this terminal?
Thanks very much.
Starting with the last question David. If you look at Estonia, you know the principal business model was focused on physical transportation of fuel oil flows out of Russia. That part of the business is hardly existing at this particular situation. And so what has Vopak U. S.
Done? They have looked at other type of product market segments in which they could provide any additional value. The difference between these new Boson business models is that they are not as much throughput focused as the original fuel oil business. The fuel oil business was high throughputs in order to facilitate huge volumes in a very short time frame, adding the highest value to our customers who wanted to export fuel oil flows out of Russia. In the new business model, it's just traditional storage contracts, but it has become relatively stable as you noted.
So the good news is we have found other business opportunities in more white products, complete different business model with much lower throughputs. And as a result of that much lower revenues. And going forward that is in fact the area of focus we have. But it means also that as you noted, we can also report quite a stable situation in that part of our network. If you look at Pengerang, the answer is it will be a step by step approach.
Specifically, you look at such a short period of only eight months or nine months left that it's very difficult to assess when inquiries will be converted in new contracts. So you should assume indeed that the percentage you were referring to that that has been the starting point. But how fast we will be able to increase the occupancy levels in Pengerang in the remainder of the year is at this stage an uncertain factor on which I do not want to provide any specific detailed indication other than that we have absolutely promising inquiries. We also see that the role from a strategic point of view of Pengerang as absolutely an expansion of the Southeast Asia hub function is recognized by the market. You also have seen the announcement of Platts, which is reconfirming that.
But that's a further translation from a timing point of view in a short time frame, I find at this stage very difficult to do in an accurate way. And that's the reason why we do not try to do this. So on the whole, we still take into account a negative contribution in combination of Hainan and Pengerang for the remainder of the year, maybe lower than you just mentioned in total, but still negative.
The next question is from Mr. Quirijn Mulder from ING. Go ahead sir.
Yeah. Good morning, Jack. Quirijn Mulder from ING. On the balance sheet, your interest bearing debt was €2,400,000,000 almost. And you already received this I think your €160,000,000 from the divestments as I understand.
Is that correct? So the remainder is of course currency effect on your U. S. Private loans to give some feeling on this balance sheet. Okay.
The €2,400,000,000 of course is also a translation FX. We have quite some U. S. Debt, that's one factor in euros. The receipt of, let's say, the divestment was indeed just at let me see, just at the end of the quarter.
So that has positively affected indeed the cash flow. On the other hand, we also made investments in the Pengerang facilities going on and also in the preparations of the industrial terminal. So that are the factors. FX is an important factor. Indeed, the divestment proceeds were positively on that number, but we also made quite some investments in the further expansion of Pengerang and the industrial terminal.
Okay. And then with regard to China, you mentioned also China which was down, but that is let me say probably not related to a dynamic spot market given the fact that it's only chemicals thus far. So maybe you can elaborate on that. Is it purely economic situation there? Yes absolutely.
You are spot on. As you know we are not having any oil storage yet in China. We have one well performing industrial terminal that's in Caojing. We have also a distribution terminal in Zhangjiagan. And the majority of the explanation, I think, you could say could refer to the operations in Zhangjiagan, which is a very important strategic location.
But because of the slowdown of the economic growth and also the expansions of terminal capacity in that region, we have seen that also part of our capacity was not only on the physical distribution in the supply chain of the chemical production, but also some spot business on certain chemical products. And that means that in with respect to that terminal, we have also experienced some volatility with the occupancy rate. So that's primarily if you look at the group companies, that's primarily the terminal in Saint Jager. Okay. Yes.
That's for the first time I think in the No. That's step by step. It has been developing step by step. So what we have seen since the start up of Saint Giacan, of course, that was a terminal which was ahead of all the developments. As a result of which, we have been able to operate that terminal at the highest level of occupancy rates.
And we have been able to expand that terminal in three, four, five phases. So the payback of our investments from a cash flow point of view has been extremely successfully. But now in this period with hardly any economic growth, slowdown in the economy and also increased expansion of capacity in that particular period, we have experienced step by step a reduction in the occupancy rate of that particular product market segment. Okay. Thank you.
You're welcome.
We have another question from Mr. Bjorn Krug from ABN AMRO. Go ahead sir.
Yes. Thank you. It's regarding The Netherlands. And it's the occupancy rates I'm not really getting. So you had 88% occupancy rate in Q3 for a €68,000,000 group EBITDA and now we're at 92% occupancy rate and we're still at 68 Is that solely explained by the higher throughputs you saw in Westport?
Because I have really trouble in getting those numbers together in terms of operational leverage that you would see from higher demand for storage.
It is indeed a combination. First of all, you have to look also at the total capacity. So the total capacity has increased. So that is of course the first revenue driver. And then on top of that, we have higher occupancy rates.
That's the second revenue driver. And on top of that, you might have slight throughput revenues if you compare one quarter to the other.
Okay. But I'm not sure what I'm talking which is the four percentage point step up in occupancy rate on flat EBITDA. Is that that could also be a product mix for instance if more crude No, no.
If you compare because oh, I'm terribly sorry. If you compare Q3, the comment I made earlier, be careful with Q3 because that included throughput revenues. So if you adjust for the throughput revenues, which were a couple of millions, then you have a normalized picture again. And then the primary demand drivers and value drivers are again available capacity rented out and increased occupancy rate.
Okay. And that's so the increased capacity is in there as well so the MEDEX, the jet You fuel in
can see that on page 15. Then you see let's say in Q1 twenty fourteen, we had 9,500,000 cubic meter. And then you see in Q1 twenty fifteen nine point nine million and the difference is the Medix expansion of 400,000 cubic meters.
Yes. All right. I'll make some calculation. I'll get back to you. Thank you.
That means with three minutes to go or five minutes to go that we have maybe opportunity for the last two questions.
The next question is from Mr. Derik Verbijk from KBC Securities again.
Yes. One question. Maybe if you can give your view on how spot market trading has materialized into Q2, if possible to say at this stage? Because if you look at the curve of oil, it's been flattening a bit. So I'm happy to hear your comments on the recent inquiries in this respect.
Of course, the focus in this call is on the Q1 reporting. But if indeed if you take the current flattening of the curve then the good news of course is that because of the low oil price, the total investments to be made by the traders is relatively lower. Shipping costs are still manageable and financing costs are still attractive. So it depends on the size of the margin whether you still could see continued interest in trading. And we answering your question differently, in the Q4 and Q1 period, we have absolutely experienced intensified, let's say, interest in, let's say, the storage activities from a trading point of view.
The start of Q2 is only now two point five weeks. I find that a period which is so short that I would prefer not to comment on whether we have seen any activity in the last two point five weeks.
Okay. Thanks.
That means our last question, moderator.
We have no further questions, sir.
Okay. That means that I all would like to thank you for the participation in this call. And as said in previous calls, if there are any other clarifications you would like, although Gjel will not be easily reachable during the AGM, we are available this afternoon for any questions you might have. And we thank you for your attention.
Ladies and gentlemen, this concludes this telephone conference on behalf of Royal Valparque. Thank you for attending. You can disconnect your line now.