Welcome to the Stolt-Nielsen second quarter 2019 results presentation. Today's presentation is recorded. Please let me hand the presentation over to Mr. Niels Stolt-Nielsen, Chief Executive Officer. Please go ahead, sir.
Thank you. Good afternoon. Good morning. Thank you for joining us, for our second quarter 2019 earnings results. I'll be referring to a presentation which is on our website. The agenda: I'll go through the second quarter highlights, then I'll go through each of the businesses. Jens will take you through the financials, then we'll open up for question and answers at the end. If we move to page four, the operating profit in Stolt Tankers of $12.8 million, that's down from $14.3 million. That was mainly due to an estimated $5 million impact on the fire that we saw in Houston, at ITC Houston Terminal. If you actually take away that $5 million, the underlying there was a slight improvement in the earnings in Stolt Tankers. Stolthaven Terminals steady, operating profit of $19.7 million.
That's up from $18 million, partly due to $0.7 million gain on sale of the rail transportation business that we had. Stolt Tank Containers, the operating profit for the quarter was $12.6 million, that's down from $15.7 million, as shipment-related operating expenses increased and margins narrowed. However, the number of shipments increased by 12.7%. I will, of course, talk more in detail in each of the sections. Stolt Sea Farm, the operating profit before fair value adjustments of inventory was $2 million, that's up from $1 million in the seasonally strong first quarter. That quarter included a $1.7 million one-time write-off of inventory. Stolt-Nielsen Gas, the operating loss for our investments there is $1.4 million. That's up from $500,000 in the prior quarter. That is what we call the development expenses, primarily driven by Avenir LNG.
Corporate and others, an operating loss of $2.1 million compared to $3.7 million in the previous quarter, mainly reflecting the lower profit-sharing accruals that we need to do due to the lower earnings. That brings the total operating revenue of $42.4 million compared to $42.8 million in the previous quarter, or net profit of $3.6 million versus $7.9 million in the first quarter of 2019. Moving on to page five, which is the net profit variance analysis. The previous quarter of $7.9 million, we had a lower $1.5 million operating profit in Stolt Tankers, again, mainly driven by the fire in Houston. Increase of $1.7 million operating profit in Terminals, lower operating profit of $3.1 million in Tank Containers, higher operating profit in Sea Farm before fair value, Stolt-Nielsen Gas an operating loss of $0.9 million, higher than previous quarter, corporate and others of $1.6 million.
The finance expenses is $1.4 million positive, mainly due to lower interest rates on our facilities. We have the FX loss of $2.3 million, other non-corporate income of $0.9 million, and also higher taxes charged of $0.9 million. The higher tax charge is really driven by higher profits in the terminals. Others of $1.3 million bring us down to a meager $3.6 million profit for the quarter. Moving on to page six, which is Stolt Tankers. Again, the fire cost approximately $5 million, it's difficult to see. And of course, we are trying to get that money back, but it's too early to say how much we will be getting back. But the cost at this time is approximately $5 million because of that fire.
The second quarter revenue increased by 2.1%, that was due to increased demurrage of $2.3 million, higher bunker surcharge of $1.8 million. The deep-sea rates increased marginally, but volumes were down 3% compared to previous quarter. Also a positive development in the regional fleet, especially in Europe. We saw an increase, a revenue of 8.4%, mainly driven by the European inter-European business that we are engaged in. The bunker cost net of bunker hedge results decreased by 1% compared to the previous quarter. The COA freight rates renewals in the quarter were 2.5% down compared with a decrease of 0.3% in the previous quarter. This is a seasonally slow time of the year. I would dare say that the 2.5% on average that we saw was driven by one contract that we did renew.
That contract, I dare say were healthy freight rates, so we were willing to, you know, give a decrease so that we would maintain that contract. Turnaround in the market, well, at least the second quarter, we unfortunately weren't able to get a positive, on average COA increase. If you move to page seven, the revenues, the gross profit, operating profit in operating days, well, it speaks for itself. The revenue was $293 million, the gross profit of $32.7 million, and operating profit of $12.8 million as we reported. Operating days were slightly down from previous quarter, mainly due to dry docking. Moving to page eight, which is the variance analysis on the operating profits, in Stolt Tankers from first quarter to second quarter.
The second quarter we reported a $14.3 million operating profit, lower trading results, again, because mainly driven by the fires, lower bunker cost net of bunker surcharge of $4.6 million positive, and reduced bunker hedge results. We had a $3.4 million gain in the previous quarter and a $700,000 loss in this quarter. That's the variance that you see as a result of the paper hedge that we have on our bunkers. Higher depreciation of $1.2 million, slightly higher equity income, and others bringing the operating profit to $12.8 million for the quarter. The bunker cost, the average price for IFO. I'm on page nine. The average price for IFO consumed decreased to $417 per ton in the second quarter from $422 per ton in the first quarter. Through our bunker COA clauses, we are 65% covered through our bunker clauses in our COAs.
As I said in previous, it was $0.7 million loss for this quarter on our paper hedges compared to a gain of $3.4 million in the previous quarter. We still have 32,000 tons of bunkers hedged for the remainder of 2019, which has an average fair market value of $334.5, average of $334 per ton. Moving on to page 10, the sales in time charter index and sensitivities, as you can see here. We are at a record low in the market, no significant decrease from first to second quarter. As I stated in the earnings release is that we haven't started to see a turnaround yet in this market. Moving to page 11, the order book stands at 7.2%. Again, this is what we call, our competitive fleet.
New building deliveries of 1.3 million deadweight or 45 ships still expected in the third quarter, from the third quarter of 2019 until 2021. There's still ships coming out in 2019 and in 2020. As long as there are no new ships being ordered and we have a positive global economic growth in the economy, there will eventually be a balance in this market. Even though we don't see it in the market short term right now, there are some positive signs, I would think. If you look at page 12, product tanker supply demand balance, and this, you know, influences our market. The swing tonnage comes into this market when the product tanker market is weak and the forecasted seaborne refined product export going forward and the supply of new ships coming into the segment.
There is the opinion from Quincannon and Clarksons and, you know, all of these brokers that there's going to be a strengthening in that market. That will, of course, have a positive impact in our segment too. With a combination of a lower product tanker supply of new ships coming in and a strengthened demand there, and also a slowing of supply of new ships coming into our segment, and if we continue to believe that the demand growth will remain at 3.5%, we will eventually have a balanced market, and we should be able then to start pushing or getting higher rates, at least to a sustainable level. Trade tensions are impacting trade flows between China and the U.S., but Stolt Tankers overall volume has remained stable.
What we're seeing is that the trade flows may change, but we haven't seen any major impact in the tons carried. Even though the order book will be coming off in this year and next year, the question is, you know, how to what extent is there oversupply amongst in the floating, you know, floating ships out there? There will, you know, it's not only the slowdown of new ships coming in, but also the absorption of the existing fleet that needs to be happening. Again, as long as we don't hear any announcement of new buildings being ordered and there's a slowdown of delivery and we believe that there will be continued a positive global GDP, there will be a balance.
We can still say that all of the IMO 2020 in regard to IMO 2020, all of the contracts that we have extended beyond December 31st, 2019, have a bunker clause which passes through the full cost to the customers. We also still have some customers that are reluctant to agree on a full pass-through at this time. If we don't come to an agreement in October with them, it is open for either party to leave. Moving on to Terminals. On page 14, we sold the rail transportation business. We saw it as non-strategic. We got a profit of $0.7 million. Excluding that sale, revenue was up by $1 million while expenses increased slightly by $300,000 resulting in a $700,000 increase in the gross operating margin. Equity income from our joint ventures decreased by 5% to $5.4 million.
That was due to lower utilization at our joint venture terminal in Antwerp. The utilization of our wholly-owned terminals decreased rapidly from 90% to 91%, down from 92.3% in previous quarter. The total product that we handle increased by
[audio distortion]
0.6%. As of the end of May, Stolthaven Santos commissioned six new tanks with a total of 15,000 cbm ,
[audio distortion]
a capacity of increase of 12%.
[audio distortion]
You think we would see coming through, in the coming months going forward. After the quarter ends, Stolthaven signed the documentation for the sale of one of our terminals in Australia, the Altona, with a production gain of $600,000. The sale is expected to be closed by July of 2019. Again, a non-strategic terminal. The acquisition of the terminal company in
[audio distortion]
[crosstalk] driven or was driven by the Newcastle terminal. All the other terminals [crosstalk]
[Non-English content]
We intend on [crosstalk]
[Non-English content]
[Non-English content]
Lower equity income from our joint venture primarily driven by our joint venture in Antwerp. Gain on sale of assets of $700,000 and others of $0.8 million, which bring the operating profit of $19.7 million in the Terminal division. The Stolthaven Terminal market development on page 17, the U.S. market remains stable to positive, allowing for rate escalation at both Houston and the New Orleans terminal. Both currently are close to fully utilized. The U.S. market is relatively strong, and what we've been focusing on there since we are not expanding further at this stage is really to replace the lower margin business with higher margin business. When the contracts comes up for renewal, we have a further opportunity to further increase the rates. A strong market both in Houston and in New Orleans.
The Singapore market remains challenging, currently working on multiple opportunities. The China market shows the effect of the U.S. trade sanctions, also the slow growth in the economy in China. Brazil remains stable with strong demand for chemical and CPP storage. Utilization at Santos is currently at 96%. New Zealand and Australia are stable for chemicals, working on opportunities to increase utilization both in Newcastle and in New Zealand. The capacity expansion project in New Orleans, Mount Maunganui in New Zealand, Westport and Ulsan remain on schedule. There are further capacity expansion that has previously been approved that still will be coming through at these terminals going forward.
I do expect that we will continue to see improved earnings coming out of the Terminal division, both from the new capacity coming online, also by getting higher margin business on existing tanks. Stolt Tank Containers highlights the revenue increase to 12.2% in the quarter, that was driven by 12.7% increased number of shipments. That was offset by pricing pressure and increased competition. The increase in operating expenses reflecting higher shipment volumes, higher ocean and inland freight, and repositioning expenses. The transportation margin per shipment decreased 14.7%. The utilization increased to 68.9% from 66.3% in the first quarter. Utilization continues to recover with the market activity picking up slightly thus far in the third quarter.
What we really have seen here is that we have been able to, you know, increase utilization, do more shipments, but under heavier, which is really nothing new. What has happened is that the cost of moving these containers, either by truck or by the container line, have increased the cost. There's a lag of being able to pass that cost increase onto the customers. We actually do believe that as time goes by, those increases that we see in the transportation from the container lines and the truckers, we will, and this is what we've historically been able to do, pass that on. It's all we're just seeing a lag right now.
I'm still optimistic, and I'm still I don't think we'll be able to catch up to the same level as we had last year, but I'm still optimistic about this market and that the fundamentals there are still strong even though there's increased competition. Because of the transportation cost of through containers and trucks went up, that will be passed on to our customer, and we will see an improvement in the margins. On page 19, higher volume but margins squeezed. Reflecting, you can see that the revenue went up to $135 million from $124 million. The op gross profit went down and so did the operating profit while the shipments went up because we aggressively pursued to get our utilization up. If you move to page 20, the first quarter versus the second quarter operating profit variance. The first quarter was $15.7 million.
We had higher revenue of $11.7 million, higher freight cost of $7 million, higher cleaning and survey cost of $2 million. That's primarily driven by third-party cleaning because, you know, as you know, we have our 20-some depots ourselves. Higher move-related and repositioning costs. That's the ocean liners and also the truckers. Higher other operating expenses of $1.7 million and lower equity income from the joint ventures of $0.6 million, bringing it down to $12.6 million for the quarter. I do expect that this market will pick up again and that we will see an improvement in margins in the quarters to come. The market on page 21, the market outlook remains promising. We'll pick up inactivity seen in multiple markets. Volumes are beginning to recover after the softening of the third quarter, or that started in the third quarter of 2018.
Margin pressure remained due to the oversupply of tanks and the slowdown in the global trade. Ocean freight rates are expected to increase due to the ocean carriers consolidation and also the IMO 2020. Again, these are costs that we expect them to be able to pass on. Tighter ocean freight capacity in certain markets. Trade tensions are affecting trade flows, but not volume, same as I said in tankers. This one here, you can see clearly China to U.S. shipments are down 61% compared with the second quarter of 2018. Here you really see impact. Again, the total volume what is what we're seeing is there's just change in how the products are flowing. U.S. to China shipments are down 9%.
Stolt Sea Farm, the turbot revenue on page 22, the turbot revenue remained flat, driven by the 4.2% increase in volume sold, offset by slightly lower, average price. The sole revenue was up 27.2%, driven by a 26.2% increase in volume sold while prices increased 3.3%. A positive development there. The fair value adjustment had a negative impact of $1.2 million in the quarter compared with a negative impact of $2.1 million in the previous quarter. The new state of the art sole farm under construction in Spain and Portugal using Stolt Sea Farm's recirculation technology. Production at Cervo is expected to commence at the end of 2019 in Spain, followed by Portugal in 2020. This is really just, gonna remind you that the turbot business makes us around $10 million- $12 million net profit per year, but that is being used to finance the development of sole.
That's why you haven't seen these numbers from Stolt Sea Farm. Now, we're getting to, a very exciting phase for Stolt Sea Farm when these two, the investments that we have been able to do to get the sole to breed and to grow in captivity. And with this technology, we think that we will succeed in increasing our production. And again, what I've said here before, with this land-based recirculation technology, it is quite interesting to see where we can place these farms going forward, closer to the market. It needs to be very patient, but I think we're getting there now. So I'm very excited to see the development in 2019 and 2020 when these farms come on site.
And if this recirculation technology works, it works at one farm which has been researched. But if it works big scale like we're doing here now, we can start building these farms basically everywhere closer to the market. Quickly through the revenue, the revenue remains the same. The operating profit up from $2.5 million to $4.2 million in the second quarter and the operating, sorry, the gross profit from $2.5 million to $4.2 million and the gross operating profit, sorry, the operating profit from $1 million up to $2.2 million in the second quarter. I'm just gonna jump the variance analysis. Going to page 25, Avenir. As you may remember, in November 2018, Avenir raised $110 million through a combination of equity in kind and new cash, followed by the registration on the Norwegian OTC.
Today, we are building an LNG receiving terminal in Sardinia, which Avenir owns 80%. We have four 7,500 cbm LNG ships and two 20,000 LNG ships being built, all with bunkering capacity. A further $72 million of prior placement is expected to be completed, complete the equity funding of the initial asset portfolio with the remaining CapEx to be financed by debt. The first ship of, the strategy in Avenir is really not to be a shipping company. It's to be able to supply small-scale LNG to stranded customers, to remote communities. And that's what we're focusing on. It's not really to be a tonnage provider.
However, since the Sardinia project, the terminal is not going to be ready in time for the first ship, we might or we are considering doing a time charter of the first ship. We are very fortunate with the timing of the first ship because there is big interest. We will look at maybe a three-year time charter for the first ship at very, very healthy levels. Then, of course, going forward, the intention then is to for the second ship or the third ship is to supply LNG to Sardinia, to the terminal and to the customers that we are building up there and also other projects that we are working on. Pictures of the new buildings being built, and it is expected to be delivered at the end of 2019, beginning of 2020.
That completes my part of the pre-presentation. Jens will take you through the financial, then I'll return to start the question and answers.
Okay. Thank you, Niels. Good afternoon to everyone here in Oslo, and good morning to those of you who are calling in from the United States. As before, I'll provide the details on the financials as they were released today for the second quarter of 2019. I'll also give you some further guidance as I normally do on certain P&L items. I want to remind you that we have also filed the press release and the interim financial statements with the Oslo Stock Exchange. You will also find those on the company's website as well as this presentation. That's www.stolt-nielsen.com.
Moving on to the net profit, operating profit before the one-offs, you will see $41.5 million in the second quarter, which is slightly down from the $44.6 million that we reported in the previous quarter. Keep in mind, as Niels mentioned, we estimate an impact of the ITC fire of about $5 million, which is pushing that number down. Excluding that, we would have probably been around $46.5 million. We had a gain on the sale of the rail transportation business, and some other minor stuff that was done in the second quarter. If you look then at the net operating profit as it was reported, was then at $42.4 million. That's in line really with what we had in the first quarter. Moving down, the net interest expense for the quarter was $32.8 million.
That's slightly down from the $34.2 million we had in the second quarter. This is due to lower rates on new financings. You will recall we mentioned at the first quarter earnings release that we've done a Japanese operating lease secured for a number of ships. It's the lower rates of that transaction that is coming through as well as lower floating rates. We also had some FX losses of about $1.8 million versus gain of a $500,000 in the prior quarter. This is driven really by losses taken on maturities of forwards and swaps, also unrealized losses on some of the intercompany loans that we have. Income taxes were higher due to a mix of the profits that we had between the businesses. Net profit therefore came in at $3.5 m illion, net minority interest with EBITDA of $105 million approximately.
Note that the EBITDA that we report here is before the fair value of the biological assets, insurance reimbursements, and other one-time non-cash items. Moving on to the balance sheet, our total debt is unchanged from the previous quarter, at just over $2.4 billion. However, our liquidity position has improved. If you look at the net debt, that's actually down for the quarter compared to last quarter, as our liquidity position improved about $45 million-$50 million. Current maturities of our debt that you see there is quite a sizable amount of $510 million. That includes our bonds maturing in September this year, in April of 2020, for a total of $308 million, some financing secured by the Australia terminal as well as some ship financings. I'll come back in more detail about this later.
These refinancings have been covered already with the financings that we reported on earlier today. Tangible net worth was down marginally at just under $1.6 billion. Most of that really reflects the dividend payment that we made on May 9th. That was at $0.25 per share. As a consequence of that, the debt to tangible net worth ratio increased slightly from 1.50 reported prior quarter to 1.52 this quarter. If you look at the other ratios that we have in our covenants, you have the EBITDA to interest expense. That's at 3.2, slightly down from the 3.38 reported last quarter. Also the net debt to EBITDA is at 5.22, and that's up from what we reported. Most of this is driven really by having the lower EBITDA that we've seen of $105 million.
Also, since this is looking at a 12-month rolling basis, we've had a high EBITDA quarter from 2018 drop-off. It's not really a change in the underlying market. It is the effect of the 12-month rolling effect. Now the net debt to EBITDA drives the pricing in some of our loan facilities. Being above 5 : 1 means that also the margin goes up on some of these, particularly the revolving credit line that we have. There's a 25 basis point increase. However, we expect with the new financing we've done to have most of that paid off. It should not have a significant dollar impact, if any at all. Just as a guidance on the next quarter's interest expense, because of these refinancings, we're paying off facilities early. That will cause us to write off debt issuance costs on our books.
That will be shown in the interest line. You will see a jump in the interest expense for the third quarter. It should be probably in the region of $6 million or thereabouts. That's a non-cash item. Moving on to the cash flow. Cash flow from operations was $48.5 million, as you see. That's down from $75.5 million in the previous quarter. Of this swing, it's notable that $20 million is due to timing of when we actually make interest payments. As under some of the loan agreements that we have, we pay interest semi-annually. In addition, we spent $8 million on insurance premiums cash out, which is then amortized over the year. We also had $7 million that related to the timing on voyage-related expenses.
During the quarter, we also spent cash on some capital expenditures. This reflected terminal investments of just over $18 million. We had about $6.5 million spent on dry dockings of ships. It was a hefty dry docking quarter. $9 million in regulatory tanker CapEx and about $5 million on Stolt Sea Farm expenditures. That's related to the ongoing expansions in Cervo towards that Niels talked about. Total cash flow for the quarter was a + $9 million, resulting in a cash balance at the quarter end of $134 million. Subsequent to the quarter end, as Niels explained, we reached agreement on the sale of the Altona terminal in Australia. That will produce a gain of approximately $600,000, give and take. The proceeds, the cash proceeds are about $7 million. That will be shown in the third quarter.
In addition, we also reached agreement to sell a bitumen ship, the Stolt Kilauea. That will produce a gain of just in excess of $1 million, taken in the third quarter. Both of these are expected to close during July. Again, I remind you all that our main objective is really to continue to increase free cash flow, reduce debt, and maintain strong liquidity for the group. Moving on to the EBITDA slide. Again, as I said, this is excluding fair value adjustments of Stolt Sea Farm's inventory, gain and losses on sale of assets and other non-cash items. Tankers' EBITDA was flat. That was really because of the impact of the ITC fire pushed it down.
Some of that was made up by improvements in the regional fleets, particularly in Europe, which recovered after a tough sort of winter months in the first quarter. Terminals' EBITDA was also flat, as in the first quarter, with the cold weather that was in Houston, we had higher services revenues, which now fell away. This was offset by the decrease in the equity income from the joint ventures. STC's EBITDA decreased due to the tightening of the margin, as Niels discussed. As a result, we saw that the SNL EBITDA ended up at $105 million, slightly down from the first quarter, but relatively flat really for over the last three quarters. Going on to capital expenditures. During the quarter, we spent $33 million, primarily driven by $16 million in terminal expansions, $9 million in tankers for the regulatory CapEx, as mentioned.
Year to date, we have spent $60 million. For those of you that had a sharp eye, you would have seen that cash-wise, we spent $72 million on the cash flow slide. The difference between the $60 million here and the $72 million there is the $12 million spent on dry dockings, as this slide excludes dry dockings. As of May 31st, the remaining capital expenditures that we had for 2019 was $211 million. We have a further $194 million or almost $200 million for the years 2020 through to 2023. It's a lot to squeeze in $211 million in six months. Expectations from our side are that some of that could be potentially pushed out to 2020. That will, of course, also help the year-end covenants. What we have included is ballast water treatment systems for tankers. That's in excess of $20 million.
For terminals, we have $27 million for the Houston terminal. We also have ongoing expansions in New Zealand, as Niels mentioned. For tank containers, we are refurbishing one of our wastewater treatments in Houston, spending some $5 million on that. At Sea Farm, we have $13 million relating to Cervo and Tocha, still to be spent. Then you have the $36 million for Stolt-Nielsen Gas. If you recall, the three founding shareholders have committed to inject further equity. We are showing that as $36 million in 2019, as our share. Moving on to the debt maturity profile. I will pause a little bit here because of the refinancings that we have done. This shows the maturity profile through 2024. You will notice the black at the bottom is the regular principal payments that we have.
The light blue are balloon payments on secure debt facilities. The gray boxes are the bonds that we have, with the first and the second representing the September 2019 maturity and the April 2020 maturity. As mentioned, we did in February, March timeframe, a $242 million Japanese operating lease. That paid off the last remaining debt taken on as part of the Jo Tankers acquisition, and also reduced the drawdown on our revolving credit line. As we mentioned in the press release today, subsequent to the quarter end, we obtained credit-approved commitment on a $420 million transaction, which is using 21 ships, most of which are currently in the revolving credit line as collateral.
In addition to that, earlier this week, with the support of Pareto Securities, we did a U.S. private placement, where we received final commitment this week on $200 million. This is secured by the New Orleans terminal. It is a 10-year facility at attractive terms. The private placement has the notes on the private placement obtained an investment-grade rating of BBB-. We are very pleased to be able to announce this as a very attractive option for the company. There is minimal amortization of this. It is cash flow benign. We expect to close and drawdown on both of these facilities during the third quarter of this year. With these two new facilities, we will repay the $148 million bond in cash. If you look really at the bottom half of the screen, you have the debt maturity following these refinancings.
The $148 million bond will go away. The $160 million bond maturing in April will be repaid in cash. We are also now in a position to repay the $59 million Australia secure the facilities secured by the Australia terminals. We also have some other ship maturities. However, you will see that the regular principal payments will increase somewhat going forward. This puts us in a very good liquidity position. Also, what is worth mentioning is that with these refinancings that we have done, we will probably see a reduction in our interest expense in the region of sort of $5 million to $6 million a year. Moving on, taking a look at the consolidated financial key metrics, the objective here is really to give you a bit of the history and the development of these indices.
The debt to tangible net worth, which is in the top left quadrant, has remained stable at the quarter. You know, we expect that to remain stable at around 1.5: 1 until we get into 2020. EBITDA to interest expense has been slightly down compared with the prior quarter that reflects the weaker EBITDA. With a higher capital expenditures looking at the bottom right quadrant, the higher capital expenditures, we're expecting a bit of a dip in the free cash flow during 2019 but expect that to reverse again as we get into 2020. The size of the dip really depends on how much of that $211 million remaining that we will actually end up getting through. On the net debt to EBITDA, which is the bottom left quadrant, this ticked up slightly to 5.22, as I mentioned.
Going forward, we expect this ratio to improve. We run our own stress test, etc. Even though we don't believe so, we test it against the market remaining, the tanker market remaining as it is. Even if the tanker markets continue flat as they at the level they are today, we will see this ratio improve to well below five at the end of 2020, even with flat tanker markets. Moving over to some guidance and expense items. A&G for the quarter decreased to $52.8 million, down from $53.3 million. The decrease was really due to lower accruals for profit sharing in the quarter. Our guidance for the third quarter of this year is a slight increase back up to sort of $55 million. We've had some positive impact of FX rates also on the A&G expense. We're prudently forecasting a slight increase.
Depreciation and amortization for the second quarter was $63.8 million. That compares with just under $63 million in the prior quarter. We had a guidance at $63.7 million. We actually came quite close. The high depreciation from the prior quarter was driven really by an increase in tanker depreciation. That was a result of more calendar days. Pure mathematics, we take the have a daily depreciation charge, multiplied by number of days. Our guidance for the third quarter is $65.1 million as we expect an increase in tankers due to large number of ships that have concluded the dry dockings during the first half of the year. Also, we expect an increase in depreciation from the Santos Terminal, which just concluded its expansion of 15,900 cbm . Moving on to the share of profit of JVs and tax.
Our share of profits from the JVs was $5.3 million. That was down from $6.3 million. For tanker JVs, the higher earnings that you see there is due to the Chinese joint venture, recovering from very poor weather conditions that we suffered through in the first quarter, also improved deep-sea results that we saw, and lower I should mention also lower ship management costs in our joint venture with NYK. At Stolthaven, there was a slight decrease, reflecting somewhat lower utilization at our terminal in Antwerp, the joint venture term we have there, and partially offset with a higher equity income from our Korean terminal. Our guidance for the next quarter is $6.8 million. With tax expense for the quarter, we expect was at $4.3 million. That was up from $3.5 million.
That was mostly due to the mix of the profits that we have with more in terminals, which tends to have a higher tax rate. Also, because we have no matter what the results in tankers, we're part of the tonnage tax regime and the Dutch tonnage tax regime. I also wanted to explain the IFRS 16 impact on the Stolt Tanker results. This, unlike most other companies, does not yet apply to Stolt-Nielsen. It becomes effective for us, with the fiscal year starting December 1st, of this year. Based on the leases that we had outstanding as of May 31st, so at the end of the second quarter, we estimate that there will be an approximate increase in assets and debts of about $186 million in balance sheet impact.
If IFRS 16 had been effective in 2018, there would have been an increase in EBITDA for 2018 of $47 million. This would be driven by operating lease expenses that would have been replaced with depreciation expense and interest on those lease liabilities. Consequently, interest expense would have been higher by about $10 million in 2018 had we had IFRS 16. The actual transition amounts and how they will impact 2020 moving forward will, of course, be dependent on the leases that we have in place at that time. The impact on our bank covenants are shown as per the table. However, what is important to note is that in all our facilities, we have the option to calculate the bank covenants as per the old pre-IFRS 16. There will be no impact on our performance on the loan covenants.
Also, as a reminder, there will be no impact really on cash. With that, I'll pass it on back to you, Niels.
Thank you, Jens. Just the key takeaways, the net profits attributable to the shareholders $3.6 million. That's after the impact that we saw on the ITC fire. The tanker market remains flat compared with the previous quarter. As the new buildings deliveries continue to reduce, the market, as I said earlier, I think, will eventually return. I would say that had you taken away the fire, we would have seen a little positive improvement. We haven't seen anything significant yet. Really, the only good news that I have to say is that there's no new buildings being ordered. As long as that's going, there will eventually be a balance.
We will continue to see steady improvements from Stolthaven Terminals, both operational costs but also replacing old contracts with a better margin business and also, increased earnings from the expansions that are being completed. Stolt Tank Containers, there was some sign there is some sign of improved utilization, up from what we saw in the second and third and fourth quarter of 2018. I think the fundamentals they are strong. Even though there is increased competition, the fundamentals in that market it's a growing market. It's a big market. I think with our platform, we will continue to see healthy earnings from that business. Stolt Sea Farm will continue to see the underlying improvement from sole, from turbot, and also the excitement of the expansion that we are completing in sole.
With the significant financing committed subsequent to the quarter end, which Jens and his team have done a tremendous job, as you saw, these Chinese sale lease back, the [JOT refinancing], the new bank revolver, and also with the just newly completed financing of the New Orleans terminal, our company has the liquidity in place to repay our Nordic bonds in 2019 and 2020 and even maybe in 2021 without having to go back into that market. Also having close to $200 million of liquidity at the year-end of each year, which is a significant achievement in this market. It's important to note that even if we assume that the tanker market will remain in 2020 the same as in 2019, in other words, no recovery.
If we assume that the tank container business this quarter continues into next year, you will still see a reduction in debt in Stolt-Nielsen. Even without the recovering tankers, debt level, which we've been very much focusing on, will be coming down in Stolt-Nielsen. Our focus remains on overall debt reduction and that you will see from 2020 and onwards, and to strengthen our free cash flow. That completes our presentation. Now we will open up for questions. We will start here in Oslo, then followed by people on the phone.
Thank you. Bendik Engebretsen from Danske Bank Markets. Two or three questions from me. You keep talking about Singapore, the Singapore terminal, that this is a challenging market. Could you talk a bit about how the utilization in this terminal has developed? Is it possible that you will no longer consider it part of your core terminal assets? Can it be divested, as we've seen in other part of the terminal business?
It is a hub terminal at its core. It is nothing that has been discussed for divestment. Even with today's utilization, it is very profitable. Instead of pursuing short-term spot opportunities, we are trying to find pipeline long-term business. That is what we are in. We have several leads, which we are working on. To answer your question straight, we have no intention of selling that terminal. It is a profitable terminal. It is modern. It is highly operational efficient through optimization. No, we do not intend on selling that terminal. We are optimistic that we just having the patience, we will be able to get the utilization up and also expand the or build out the remaining land.
All right. Thank you. Over to bunker surcharge clauses in contracts. You mentioned that all contracts extending into next year have these surcharge clauses. Could you talk a bit about is the contract coverage unchanged since earlier? Do you see more requests for short-term contracts? What portion of your client base would you say have opposed including these surcharge clauses?
To answer in the weak market, when customers believe the market is strengthening, they tend to ask for long-term contracts. We are actually seeing that now. They are trying to then say, "Okay. We will fix now." They want the customer's option to do year two and three. This is the game that we are playing. We are saying we are only willing to commit to a one-year contract. If we have to commit to year two and three, we want to have the window to ±10% or ±15% so that we can if the market comes, we have an opportunity to benefit from it. Of course, we are not living in isolation. There are competitors out there that are willing to fix two, three-year rates.
We have lost a couple of contracts. We have lost a couple of contracts in the last quarter because our competitors were willing to take on bunker clauses, which is not with full pass-through of costs and which are at freight levels, which we do not think, you know, it is not sustainable. We rather take our chances in the spot market. We are also winsome. I think our contract, overall contract coverage in tankers right now is at 65%-70%, just under 70%. Very little change. When it comes to the bunker clause, it still remains that I would say that most of the major large customers, they are positive. They have accepted the bunker clause. The big names are accepting the pass-through.
You can really see that this is a pass-through of an environmental cost that we need to do to clean up the air. You know, it is a joint responsibility to do this. The majors, the serious, the big guys, they are responsible. They are taking on that additional cost. As we have said many, many times before, the shipping industry is close to bankrupt. Everybody's losing money. For Stolt-Nielsen to take on the additional cost of $130 million, you can't do it. If you can't pass it on, you shouldn't take the business and hope for that market. I mean, I think we're also fortunate in the timing of the market. I think everybody understands that this market will eventually strengthen.
I think with the strengthening market, we should have a bigger chance of being able to pass on that cost.
All right. Thank you. Final question from me. The terminal business has been part of the unencumbered Stolt-Nielsen's assets as of late. With this private placement of $200 million, do you still have unencumbered terminal assets in the portfolio?
Yes. We have three terminals that are unencumbered. There are further opportunities. It was big interest in this part. This is something, of course, we will continue to explore. Very attractive. I don't know if I may say, and I would like to compliment Jens, but with this new financing that we have in place, when it's all drawn down and refinanced, we will have a $6 million lower interest expense per year. It's a, you know, great job done by Jens and his team.
Thank you very much.
Ladies and gentlemen, if you wish to ask a question over the phone, please press star and one on your telephone keypad.
[Al Steman] from Nordea. Thank you for your presentation. Very interesting, as always. A couple of quick questions. First one is related to the Tianjin terminal. What is the current utilization on that terminal? The second question is, where do you see that increased competition on the tank container market? Is it from the Chinese? Thank you.
Starting with the terminal, I think that the Tianjin terminal is at 50% utilization. I think by the year end, we'll be up at around 60%-65%. There are things that we're working on, getting business there. Remember that's two joint ventures. One is for the jetty, and one is for the terminal. The jetty joint venture has been profitable all along. The terminal, because of the explosion and the low utilization, the jetty has really been financing the terminal joint venture.
It's been tough. I mean, when you lose your license to operate, when they closed down, when the authorities closed down, and when it takes an enormous amount of time to get license per product that you want to store, it's a bureaucratic process. We have gotten those licenses now. Unfortunately, everybody has been through the same process. When everybody got their licenses back, everybody's chasing the same business. The business is there. It will just take time to build it up again. When it comes to tank containers, we are seeing increased competition. You have the large operators, the Hoyers, the Bertschi's, the Bulkhauls, the Sinochem or NewPort. In addition, you also have small operators. Yes, these big guys, we have all expanded and built new tank containers.
You also have a bunch of new operators, regional operators, you know, that are under the radar screen. We have 40,000 tank containers. If you look at operators with 10,000 tank containers and below, there's a lot of them coming up. Can't operate as internationally as, you know, with the quality, the reliability, and the flexibility that we provide and which the large customers need and which you need a platform to be able to operate profitably. There is increased competition, not only from the large guys but also from newly established companies. Again, we remain as I've said before, with our platform, with our systems and we have I've said many times, we have I think what the differentiator is that you have the right tools to be able to operate these profitably.
The key to the trade is to make certain that you minimize the number of empty repositionings. You need to think not the next leg, you need to think three or four legs down the road to make certain do you make a profitable round voyage to be able to make this money out of it. We are making money. That doesn't mean that all of the new operators are making money.
Petter Haugen, Kepler Cheuvreux. On the bunker exposure going forward, you have as of just to understand that correctly, in 2020, you have no contracts, hedges in place?
Beyond 2020, no. We don't have any paper.
Beyond 2019, actually?
Beyond 2019, no.
Right. This was well, I cannot remember, to be honest. I have seldomly seen the product tanker slides that you have shown now. To what extent do you believe, as sort of a company, you were referring to those brokers? From the company perspective, how important is that relationship to the product tanker fleet?
We are 65%-70% COAs. That is filled up. We are that 30% we have left is spot business, commodity chemicals. To make it so, of course, when you have a strong market, you get the COA rates. You most likely fill up most of that ship with COA nominations. You are not always able to fill up everything with COA. Our main business is contracts over freight. You are dependent upon the gravy on top of that is the spot business. That spot business is, of course, influenced by the swing tonnage coming in. I think that it is a very difficult question because it cannot be proven.
We always believe that there are more of these big slugs that have been taken, which we sometimes use for repositioning of a ship if you have to do that or to fill up the remaining 30%. You are dependent upon the spot business, on this commodity business, which we really don't focus on but which is there to kind of get the utilization on your voyage up. You can see it from the historical earnings. There is a correlation even with crude tankers, product tankers, and chemical tankers.
Agree. You were commenting on the competition taking not sustainable renewals with no pass-through on bunkers. Would that then be sort of liner competition? Or is that tramping tonnage coming in and trying to do COAs?
Without mentioning names, we are not liners. If you talk about the major operators, there are some major operators, not our main competitor but other operators that are willing to take that took one of our contracts without the full pass-through.
Okay. Thank you.
Thank you. Lukas Daul from ABG. Just to follow on that IMO 2020 negotiations, we have discussed it before. How big percentage of contracts that you want to sort of renew are you still having on hold until October where you either walk away or you agree on full pass-through? Is there sort of a good metric?
To understand your question, of the contracts that we renew that will be going into 2020, how many have an agreement that we will meet in October?
Yeah.
Do you know? I need to come back to you. The majority has been passed through. There are certain I'll come back. We need to come back to the exact percentage. The majority of contracts that we renewed into 2020, the full pass-through clause has been accepted.
Okay. Can you say the terminal that you have what was the loan-to-value on that transaction? Could you disclose that?
[audio distortion]
The value is determined based as the value of the land itself that we own in Orleans as well as an estimate of the multiple of EBITDA. We ended up at a value over loan of about 175% roughly.
Okay. Thank you.
I should just add that valuation was done by a third-party agent.
Is that public information, right? It's in the loan documents. It's how much what was the valuation of the New Orleans terminals that we got from third-party independents?
Just under $350 million.
That you can put in your model. Okay. Is there any other questions here before we then open up to the, sorry? All right. If there's no further questions, I wish you all a long and relaxing and warm summer. Thank you.
That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day.