Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to today's Stolt Nielsen Limited Presentation and Conference Call First Quarter twenty nineteen Results. At this time, all participants are in a listen only mode. There will be I must advise you that this conference is being recorded today, Thursday, April 4. And without any further delay, I would now like to hand the conference over to presenter today, Niels Stolt Nielsen.
Please go ahead, sir.
Thank you. Good morning, good afternoon. Thank you for joining us here in Oslo for our first quarter twenty nineteen earnings presentation. Together with me, Jens Gunnregge, CFO and Julian Willard, Head of Corporate Finance. The agenda, I will be referring to a slide presentation, which doesn't have any pages on it.
But the agenda is, as always, I'll go through the first quarter highlights. I'll go through each of the businesses. Jens will take you through the financials, and then we will open up for question and answers. Moving on to highlights. So Stolt Tankers operating profit, 14.3 and that is up EUR 7,700,000.0, but that is mainly due to a positive swing on the bunker hedges of EUR 7,500,000.0.
We'll talk in detail about each of the businesses later. Stolt Haven Terminals, the operating profit, 18% versus 11.7% in the previous quarter, but the previous quarter had an impairment of 6.1% mostly for the Lingang Terminal. Stolt Tank Containers operating profit, point 7%, down from 18.1%, mainly driven by the seasonality in the first quarter, the slowdown in the first quarter, driven by the Chinese New Year. But we're also seeing some softness in the market due to the uncertainty of the global economy. Stolt Sea Farm operating profit before the fair value adjustment of inventory was at €1,000,000 versus 900,000.0 reflecting strong turbid sales during the Christmas season, but that was offset by a write down that we did in Sterling Caviar of €1,700,000 due to some disease that we had in one of the farms.
Stolt Nielsen Gas, again, that is our holdings in each of the three advance Goulard, but the main part is then the Avenir, and that is €500,000 cost, our share of the cost, reflecting the development expenses of Avenir. Corporate and Other operating loss was 3,600,000.0 compared to a loss of 7,000,000 in the prior quarter, which included a €5,900,000 write off of Stolt Bitumen in the fourth quarter of last year. That then brings the operating profit to 42,800,000.0 and a net profit of 7,900,000.0 giving an earnings per share of €0.13 per share for the quarter. I'd just like to highlight that we do have approximately €10,000,000 of treasury shares or shares that we have brought back, but seven of them are being used as collateral on one of our facilities. And therefore, we don't get the had we deducted the 10,000,000 from the 60,000,000 shares outstanding, we will have an earnings per share of €0.15 Moving on to the variance analysis of net profit between the 2018 and first quarter of twenty nineteen.
The first time. The net profit of the previous quarter let me just go here and I can see it. The net profit in the fourth quarter was 3.6 We as I said that we had impairment in Stolthaven and Stolthaven bitumen in the fourth quarter, which we don't have in this quarter, bringing it up by 12%. Then the one off gain that we had when we did the Avenir deal, which we don't have in this quarter of €11,200,000 Higher operating profit in Tankers by €6,600,000 slightly better in Stolthaven Terminals of 300,000.0 Seasonality, lower operating profit in Tank Containers of 2.4% and then Sea Farm of 4.4%, lower operating profit after the fair value adjustment. And the lower operating loss in Stolt Gas, including the cost of establishing Avenir LNG.
Corporate, higher operating loss excluding Stolt's bitumen impairment impact in the fourth quarter of 2.5% and others of positive 1.5%, bringing the net profit for the quarter of 7.9%. Moving then on to Stolt Tankers highlights. The revenue decreased by 5.1% compared to the previous quarter. And this was partly due to fewer days in the quarter and also drydocking, so 2.6% fewer deep sea operating days as a result of that. Decline in the bunker surcharge revenue due to the lower bunker prices.
And the but deep sea rates were actually flat and so were the volumes. As I highlighted earlier, we had a gain of 3,400,000.0 on our bunker hedges compared to a loss of 4,100,000.0 in the fourth quarter of last year. The bunker cost decreased by 8% compared to the previous quarter. The COA rate renewals that we renewed in the quarter were unchanged, and that is significant. As you probably remember, each time we have our presentation in the last since 2016, we have announced that, on average, the rates have been coming down.
So this is the first quarter where they were flat. So you can hopefully take that as a sign that maybe we have finally reached the bottom. Moving on to next page. Revenue of €287,600,000 in the first quarter, the gross profit of 34,900,000.0 operating profit of 14,300,000.0 and here you see the operating risk compared to the previous quarter. Moving then on to the operating profit variance between the fourth quarter and the first quarter.
So operating profit of 7.7%, lower trading results. The lower trading results of 1.4%, as we show here, is really not deep sea. Deep sea was pretty flat. That is primarily driven by SNES, Stolt Nielsen into European service, so the regional fleet in Europe, which we saw a significant drop. It has started to pick up again, but that had the biggest impact.
The bunker cost decreased more than offset by the reduced bunker surcharge of $1,000,000 We had higher bunker hedge results of 7,500,000.0 This is again a variant. We had slightly higher owning expenses compared to the previous quarter, but we had lower depreciation from residual value adjustment because of the life extension that we did on our some of the ships. Lower A and G of €1,400,000 and higher equity income from joint venture of €300,000 and negative €400,000 for others, bringing the total operating profit for the quarter of fourteen point three million The bunker cost and hedges. The average price of the fuel that we consumed decreased to $422 per tonne in the first quarter, and that's down from $465 per tonne in the fourth quarter. The bunker clause that we have in our contracts covers about 56% of our total covered 56% of the total volume in the first quarter.
If you see, that used to be a bit higher. But because of the challenging market conditions that we have had, some of the customers in the COAs have not been willing to let us have a bunker clause. And this is what happens when you have an extended period of a challenging market. But if you take down the paper hedges that we have included, we are approximately 70% hedged on our total fuel exposure for 2019. The first quarter twenty nineteen gain on the bunker hedges resulted from an increase in bunker prices at the end of the first quarter compared to the fourth quarter as global crude prices recovered from a sharp but short decline.
As you remember, at the end of the fourth quarter our fourth quarter, there was a drop in the fuel oil prices. And at that time, actually, we were able to increase our paper hedges, so we timed that well. Moving on to the next page, page 10, Stolt Tankers joint services sailed in time charter index and sensitivity, and you can again see here the challenging market that we've had since 2016. It's maybe difficult to see here, but it did level off. So the fourth quarter twenty eighteen and the first quarter twenty nineteen is flat, which again, hopefully, is a sign that things have bottomed out.
Moving on to Page 11, the chemical tanker fleet and order book as it stands now. The fleet that we compare ourselves with is IMO two ships between the size of 15,000 ton deadweight to 50,000 ton deadweight, and the average segregation size is less than 3,000 metric tons, and it excludes noncore coated ships. That's the fleet that we compare ourselves and say that that's our competitive fleet. The order book in that fleet is currently at 8.4% of the existing fleet. And all the orders, the remaining orders that is coming into the market are stainless steel.
And you can see here, there are significant you know, it it was supposed to be dropping down further in '19, not because but that has changed, not because there's been ordered more ships, but it's because the ships in '18 have been delayed. So we do have quite a bit of ships coming in in 2019. But then you see it drops off significantly. Again, the total order book at 8.4. Moving then to page 12, Stolt Tankers Market Development.
So our previous expectation for demand growth was at 4.5%. We have downed it to 3.5% based on the slowing GDP growth that we read and see. And this estimate is in the midrange for forecasters of Richardson, Lorid, Drury, Clarkson and Grigg. The potential tariff risk appears to have eased somewhat. The new building oversupply absorption will determine the pace of the market strengthening.
And, of course, it's also as I've been saying is as long as there's no new ships being ordered and as long as the market continues to grow or the global GDP is positive, they will eventually become a balance in this market. It's taken an awful long time, but I think that we are now starting to see that balance. Of course, you know, what happens with the global economy is difficult to say, but if if we assume that in three and a half percent growth in demand and no more new buildings coming in, I think we we should see a market recovery. Increasing refining capacity in The U. S.
Gulf should positively impact U. S. Exports over time. This is the story that we've the market has been telling for a long time. In the subsequent end of or actually during the first quarter, we had an extensive fire at the ITC terminal in Houston, which is right next to or very close to our terminal, which has caused closing off the Houston Ship Channel.
They also spilled, chemicals into the Houston Ship Channel. So when ships sail through and they're partly open again, but when ships sail through it, they need to be disinfect they they need to be cleaned. So there is delays. There are customers that are not able to supply the pump the cargo, the customers that are unable to discharge. There will be delays and there will be impacts from this in the second quarter.
There will also be opportunities for the terminal division and the tank containment division because these cargoes needs to move, but I think we will see an impact in the second quarter on Stolt Tankers as a result of this. It's too early to say give a number, but it will be I would say fair to say that it will be at least $1,000,000 Then moving on to page 13, Stolthaven Terminals highlights. Revenue and expenses were flat compared to the previous quarter, reflecting stable market conditions. Equity income from our joint ventures of 5.7% was flat compared to the previous quarter, excluding one offs. Utilization for our wholly owned terminals increased slightly to 92.3% compared to 91.4% previous quarter.
The total product handle increased by 8.9%. And we have major capital projects that have been completed, and that's the jetty in Houston is now fully completed and operational and also the expansion that we have done in Irsan has now started its operation. And therefore, I will think that you will see a continued improvement in results from Stolt Haven terminals going forward. Quickly, the revenue, 63,000,000, same as previous quarter. Gross profit, down.
Net operating profit, slightly up to EUR 18,000,000. And utilization, as you can see, has increased from fourth to the first quarter. Quickly through the operating profit variance analysis for Stolthaven Terminals between fourth quarter and first quarter. The fourth quarter twenty eighteen was €11,700,000 one off impairments of Sloathaven assets, that's the Lingang Terminal that we did in the previous quarter, which we don't have in this quarter of €6,100,000 higher operating of $300,000 lower operating expense of $600,000 higher depreciation because of the assets that we have built or the jetties that we have built and the new tanks we built of $1,600,000 and higher equity income from our joint venture, excluding impairment in the fourth quarter of 1.8% positive and others of negative 0.7 brings it from 11.7% operating profit to $18,000,000 operating profit for the quarter. Page 16, market development in the Terminal division.
Strong fundamentals in The U. S. Gulf, allowing for rate escalation at both Houston Terminal and the New Orleans Terminal. Both currently have high utilization. Impact of the fire at ITC Terminal in Houston is not yet known, although increases in inquiries has been seen in the market.
The Singapore market remains challenging, but currently working on multiple opportunities. The Chinese market has shown some improvement, although still negatively impacted by the uncertainty around The ongoing US China trade disputes and the general economic slowdown. Brazil remains stable and with strong demand for chemicals and CPP storage. Europe remains stable for chemicals. There has been some increase in inquiries for CPP, especially bunker fuel storage, which is related to the IMO twenty twenty coming up.
New Zealand and Australia are stable for chemicals, working on opportunities to increase the utilization and potential expansion of CPP. Capacity expansions continue projects continue in New Orleans, in New Zealand and in Santos, Brazil. Moving then over to Stolt Tank Containers, Page 17, highlights. Revenue decreased 7.1% in the first quarter versus the fourth quarter, consistent with the seasonal patterns. Shipments were down 4.7% and also lower demerger billing during the quarter.
Decrease in operating expenses of 7% reflects lower shipment volumes and reduction in inland and ocean freight costs per shipment. The utilization decreased by 1.9% to 66.3% compared to the previous quarter, tied again to the seasonal slowdown. However, we have seen a nice recovery subsequently after so we're seeing volumes being picking up again. Quickly through the highlights. Revenue, slightly down again because of the seasonality.
Gross profit, yes, you can see it's steady. It's seasonal. I must say that there is okay, let's see I will talk about the market going forward. On Page 19, euros 18,100,000.0 operating profit in the fourth quarter, lower revenue of 9,500,000.0 in this quarter, lower freight costs of positive 2.7%, lower other operating expense of 3.8% and lower A and G of 04%, bringing it to 15.7% operating profit for the quarter. The market development for Tank Containers.
We are starting to see signs that the market is improving following the prolonged downturn since the second quarter of twenty eighteen. Margin pressure due to oversupply of tanks and smaller operators entering the global market is contained. So as we have said that there has been an increased number of operators in this segment, and we are seeing a squeeze on margins. STC tank supply is supplemented with short term leases. There are great leasing opportunities that we have captured.
Ocean freight rates are expected to firm due to the Ocean carrier consolidation of the operators and also the IMO 2020. But I remind you that ocean freight is then passed on to our customers and tight ocean freight capacity in certain markets. The market outlook remains promising with pickup in activity seen in multiple markets. But, you know, I can't deny that if you look at the top right graph, those numbers are the rolling four quarters shipments. And we have seen a significant drop more than seasonality.
I think that that is not because of more competition because we can compete, but it's it's it's seasonality and also uncertainty in the market, the global economy. Stolt Sea Farm, very quickly highlights Page 21. Turbot revenue increased by 2.9, driven by a 4.4% increase in volume, partially offset by lower average price. The sole revenue decreased due to lower volumes sold as a result of less available inventory, and prices fell by 4.8% due to increased seasonal wildcatch. The fair value adjustment and a negative impact of 2.1 compared to a positive impact of 2.4 in the previous quarter.
We are completing or building new two new soil farms, one in Portugal and one in Spain, using the recirculation technology that we have developed. It's land based, and it's about the first one is expected to commence production. Now when I say production, that means you start putting fish into the farm. It takes a a year to for the fish to be ready to be harvested, we're already starting to to put fish in the farm already in the '19 in Spain and then the following year in Portugal. And during the quarter, Stirling Caviar incurred a biomass write down of CHF 1,700,000.0 because of the seas that we had at one of our sites.
Revenue from CHF 24,900,000.0 to 25,400,000.0, the operating profit down to CHF 2,500,000.0 and the gross profit, sorry, DKK 2.5 and the operating profit slightly up DKK 1,000,000. I'm just going to jump over that one. Avanskast or Stolt Nielsen Gas, as you might know, we have an established Avenir as a stand alone company. Stolt Nielsen owns 45%, Golar owns 22.5%, Hoegh owns 22.5% and the market, which listed in the OTC, owns the remaining 10%. In November, the company raised €110,000,000 €100,000,000 from the funding partners and €10,000,000 from the market.
The funding partners have committed a further €72,000,000 so a total of 182,000,000 fund equity coming into that company. And with that money, we're building a terminal in Sardinia, and we have two seven and a half thousand tonners and two twenty thousand tonners and also two an additional two seven thousand so four seven thousand five hundred and two twenty thousand cubic meter small scale LNG. The market is very exciting. Lots of opportunities. Again, our stated strategy is not really to be a shipping company, it's to be a small scale LNG supplier, supplying remote communities, stranded customers with LNG.
Using, Hoegh and Goulash, the the thinking is to be able to use their fleet of FSRUs or their the unused capacity on their FSRUs around the world and also using our terminal capacity around the world to see if we can supply LNG competitively to the end user. That completes my part of the presentation for for the time being, and then I'll give the word to Jens.
Can you hear me? Okay. Yeah. Thank you, Nelson. Good afternoon to everyone here, and good morning to those calling in from The United States.
I'll provide some details about the financials as I normally do. As they were released today for the 2019 and also some further guidance on some of the P and L items for the next quarter. I also want to remind you that today we have filed both the earnings release, the interim financials. We also posted this presentation on our website and we also filed them with Oslo Stock Exchange. And in addition, for those of you that have been in to our website, you will have seen that we have posted our annual report during March and with that we also have included a few videos, video interviews, I should say, with Nils and the divisional presidents which I hope you'll find interesting.
Moving to the net profit. In the first quarter, if you look before one offs, we had an operating profit of €44,600,000 That was up slightly from the fourth quarter of €41,700,000 And as you were caught, it was rather uneventful when it came to one offs this quarter with only one write down of some of the biomass at Sterling Caviar, written down by €1,700,000 And that compares to the previous quarter where we had took impairments at both Stolthaven terminals and at Stolthaven services. Net interest well, after those one offs, you have operating profit came in at €42,800,000 and that's a significant improvement above €28,900,000 in the fourth quarter. Interest expense, net interest expense came in as we guided pretty much at €34,200,000 Not much to say about income tax, but I would like to point your attention to the fourth quarter Other where we had 11,800,000.0, 11,200,000.0 of that was a gain that we took related to setting up Avenir as a joint venture. That brings us down to a net profit of 6,600,000.0 for the quarter, and that's up from 3,200,000.0 in the prior quarter.
And also if you look at the EBITA of 109,000,000, that was up slightly from 102,600,000.0 in the prior quarter. Moving over to the balance sheet, you'll see here that debt is slightly up from the previous quarter. We're at $2,430,000,000 and that's up from $2,390,000,000 in the prior quarter. And most of this is really, if you look over at the cash and equivalents, you see that is now up at 125,000,000. So we had a buildup of cash during the quarter, and this was very much because just around quarter end, we were busy with refinancing, and we did not manage to turn around and use that cash to pay down on the credit line.
If you adjust that to normal, we would have been slightly below or in line with the prior quarter's debt. So just so you are aware of that. Current maturities of debt stands at $322,000,000. This includes the bond that matures in September. It also includes a short term credit facility of $60,000,000 which rolls over on an annual basis and also some various smaller maturities that we have.
Tangible net worth came in at $1,600,000,000 and that's pretty much in line with where we were at the last quarter. And if you look at the debt to tangible net worth ratio, because the debt was slightly higher, we're at 1.5 versus 1.48 in the prior quarter. And EBITA to interest expense, because EBITA was slightly up, improved somewhat from 3.34 to 3.38, so mostly flat. Plenty of liquidity at the end of the quarter. We had available credit lines of €240,000,000 plus €125,000,000 in cash, as I mentioned, so well over $350,000,000 in available liquidity.
Debt interest expense for the quarter was at an average rate of 5%, and you see we have increased the fixed portion up to now 81% from where we were before. With that, we expect that the net interest expense for the next quarter, the second quarter of twenty nineteen, will come in at approximately $35,000,000 One ratio I want to mention to you is the net debt to EBITDA because that drives the pricing on some of our facilities. That remains under five:one at 4.93, relatively stable, and we also hope to keep it that way. Moving over to the cash flow. Cash flow from operations was a positive $75,000,000 and that was marginally down from 82,000,000 in the prior quarter, and that's mostly related to working capital movements.
During the quarter, we spent on the capital expenditures some $33,000,000 and that's really split between terminals, about $15,000,000 We spent about $5,500,000 on dry dockings and another €5,500,000 on tanker CapEx and another €3,600,000 on Stolt Sea Farm expenditures but down in Spain and Portugal related to the new farms under construction. Also, as mentioned, during the first quarter, we repaid a $150,000,000 balance on JO tanker acquisition facility. That was financed with a Japanese operating lease based on eight ships that we did. That was for $242,000,000 and the balance of that facility is then going towards reducing the outstanding on the revolving credit line. Also note that in the quarter, we paid dividends of some $13,500,000, and we also bought back shares for just over $4,000,000.
That puts the total cash flow for the quarter to positive $60,000,000 and brought the cash balance up to €125,000,000 as mentioned. Moving over to the EBITDA, just as a reminder, the EBITDA figures that we are presenting here, as you will see from the footnote, they exclude the impact of IFRS fair value adjustments to Stolt Seafarms inventory, also excludes gain or loss on sale of assets and other non cash one time events. Tankers EBITDA increased mainly due to the bunker hedge gain, as Niels explained. This was partly offset by the lower trading results at Sneez into European fleet. Terminals increased due to higher operating income from Houston and higher equity income from our joint venture terminals.
STC's EBITDA decreased slightly, as discussed earlier, due to the seasonality. And as a result, you see the S and L's EBITA increased from €103,000,000 in the fourth quarter to €109,000,000 in the first quarter of twenty nineteen. Moving over to capital expenditures. During the first quarter, we spent €27,000,000 and this excludes the 5,500,000.0 that we spent on the drydocking of ships. So if you add that in, we get up to $33,000,000 rounded.
Tankers CapEx came in at 5,000,000. I won't go into further details on that. Just mentioned that we have remaining for 2019, $241,000,000. And as we explained at the fourth quarter presentation, we've seen an increase in the first quarter over the fourth quarter because of projects that were moved over. For the five year period that we're showing here, we have a total of $433,000,000 in CapEx, so a bulk of this is really coming in 2019.
Moving over to the debt maturity profile. If you look at the coloring, just to remind you of that, the black, it looks like a very dark blue, that's the normal amortization of debt. The blue, the lighter blue, those are the bond maturities that we have. And the orange ones, those are balloon payments that we have on our various debt facilities. Will with the $242,000,000 Japanese operating lease that we just closed, puts us in funds to repay the $148,000,000 bond maturity that matures in September.
So that leaves really, for the rest of the year, just normal amortization as we progress. We're working on refinancing or providing the cash for a repayment of the bond that matures in March 2020 that you see there of €161,000,000 The balloon maturities that we have in twenty twenty of one hundred and fifteen million. The biggest part of that, again, is the ANZ terminal facility of some $70,000,000. Just to take a different view of the financial key metrics that we introduced last quarter, the top left quadrant shows the debt to tangible net worth, And the covenant limit is two:one, which is marked by the dotted red line. We're currently at around a sort of a self imposed limit of 1.5:one that we don't want to go over, and we aim to reduce this going forward.
EBITDA to interest expense is hovering above three to one, but the limit there is two to one. Bottom left, you have the net debt to EBITDA, which you see is just under the five:one mark, and you can see we have dipped above a little bit or gone above a little bit, but aim is to, again, get that down. And then you have the free cash flow, and this is before interest that's shown on the bottom right quadrant. So despite the, excuse me, the expected increase in capital expenditures for 2019, we do expect to end up with a positive free cash flow, not as much as we had in 2018, but still positive. Moving over to some of the cost categories that we have.
The A and G expense came in at 53,300,000.0 for the quarter, that's down from 56,300,000.0 in the prior quarter. And really, most of that move is related to professional fees, legal expenses, some auditor fees, etcetera, that we had in the fourth quarter. So maybe got a little bit of help from the exchange rates as well, but that was really the big mover. Looking at the guidance going forward, our expectations is that for the second quarter of twenty nineteen, we'll end up at $54,500,000 Moving over to depreciation and amortization, we had a total depreciation in the first quarter of 62,600,000.0. Worth noting here is the tankers depreciation is down slightly because we have life extended some ships, some Danish built 37,000 tonnes.
And we have we do once a year, we look at the residual value and that has been adjusted up a little bit and that has had the effect of reducing the depreciation for tankers. The terminals depreciation is because we have brought on more capacity. It's become operational, and that's when we stop capitalizing and start depreciating. The guidance for the next quarter is a slight increase up to about $63,700,000 more calendar days, etcetera, that accounts for more depreciation, but otherwise it's rather uneventful. And finally, the share of profit of our joint ventures and the tax review.
Our joint ventures contributed with $6,300,000 in net profit for the quarter, that's our share. Tankers is pretty much flat. Stolth Haven terminals was up partly because of expenses, some onetime expenses that we had in the fourth quarter plus some improvements that we had in this quarter that just was. Looking at the guidance, we expect a slight increase to €7,800,000 Not much coming from tankers as we maintain a cautious outlook on the tanker market, but more because in terminals because we now have the Olsan Terminal, that 160,000 cubic meter expansion is now operational and that should start trickling through an improved equity income. On taxes, we came in at 3,500,000 That's up slightly from the prior quarter, and this was predominantly driven by the increase in profits in terminals rather than anything else.
And with that, I'd like to hand it back to you, Niels.
Key takeaways. Net profit of 6.6% for the quarter, that's up from 3.2% in the fourth quarter. The tanker market has stopped falling, and I would hope that, that is a sign that we have reached the bottom, and I expect a gradual improvement. How fast is difficult to say, but I don't expect further decline. Stable performance in Stolthaven terminals.
As new capacity comes on, I expect then also the earnings will improve. Tank Containers market has remained soft since last summer due to the economic uncertainty, but we are seeing a nice pickup in recent weeks. Avenir LNG, we are building we're going to try to build a leading provider of small scale LNG. Strong earnings base from the businesses supported by a positive free cash flow and continued debt reduction that we've been focusing on. And Stolt Nielsen continues to have access to competitive funding and, as Jens showed you, healthy liquidity.
That completes our presentation, and we now will then open up for questions. And I think that if you have any questions, you need to get a microphone so that people on the phone can hear you. Start with Ox. Oxfel.
Thank you. Axel Sturman, Nordea. Just one quick question regarding the order book. As we know, the the current ordering is quite slow in general in almost all market segments. So there's ample shipping capacity shipping capacity available in Korea and China and elsewhere.
Just wondering, the order book now is is coming down to a lower level. How what's your estimate if looking at the core segment and if someone came around and wanted to order new ships, how how do you think that order book should how quickly could it increase again within 2020? We are in the middle of '19. Is is that that
Come on. Let's be positive here. We are rather If you look at 02/2014, in the beginning of 02/2014, the order book was at 7%. At the end of the year, it was at 30%. That's how quickly it could change.
And that that increase in '14, that's what we are kind of finally now seeing that's what we are absorbing. And the reason it's difficult to say that where is the balance or how much surplus is there? Yes, the order book will come down, but how much existing surplus is there? So to answer your question, the order book can quickly come, but I would say that the next 2020 and 2021, I'm certain, if there's not a demand collapse, which we have rarely seen, we saw a short reduction in demand after the financial crisis in two eight. In 02/2009, there was a slowdown in demand, but that actually picked up very quickly.
So if you look at the demand for the services that we provide, it's very steady. So if we assume that that demand continues, and even if people start ordering now, I would expect that 2021 should be healthy healthy years. Having said that, you know, again, you guys follow the market as as well as us. I I think there is, for the time being, a bit of a reluctance to come into, shipping, but especially into chemical tankers. They they understand.
I mean, look at the historical return on this business. It's been 8%. It was 8% of February. From 2000 until today, it's been around 5.3%. The last ten years, it's been 3.4.
So it's expensive ships. They are highly operational. You know, it's it's it's it's not just to buy an asset. You need to have as I said before, you need to have that the right platform to be able to operate those assets. So I I I maybe I'm naive, but I believe that the people that came in in 14, I think that they still they're still trying to get out.
So that's the you actually answered my follow-up question because that was related to why you think the order book is coming down actually. And so so your conclusion is the lowest burn for the last ten years. That's the it's kind of the prime reason.
I think a lot of people have burned themselves. I mean, and, we know that Odfjell, they have they have taken care of their fleet renewal program. We have through our new buildings and through the acquisition of Jelo. So the main operators have taken taken care of. So I I think I'm I'm cautiously optimistic that we will see a nice run.
Thank you.
From TDN. You previously said that you worked on refinancing for older or, say, leaseback financing for four older tankers. I wondered if you can give an update on that. Yes. Why don't you
Yeah. That is in in term sheet stage. So it's under progress, and we expect to have that financing ready in good time before it it actually will be needed. I think more important for us, it's we're not gonna we don't wanna take on debt unless it is needed because you have to carry it on your books. You have to pay the fees, etcetera, that are needed.
Main thing is we have taken care of the September maturity. We're making good progress on taking care of the March maturity. For The the bond maturity. Sorry. The bond maturities.
Yes. And the rest is is rolling, as part of some normal cash flow planning.
Our goal is to be in a position where we don't have to be dependent upon the bond market this year or next year.
Lukas Laut from ABG. Last time,
we talked about you talking to clients about contract renewals for 2020 and beyond and having the sort of bunker discussion around it. What is what is the latest on that front? Have you sort of been able to sign any agreements where you have a full pass through of the bunker cost increase, or have you sort of pushed that further to the right as you alluded to last time?
I just got off the phone, and we just renewed a major contract with full pass through of the, of of of the, the IMO 2020, which is a very, very, you know, important achievement. But I've also stated that we cannot you know, you can see the the the state of our industry and the the challenges that we have. So we we have to pass it on. So we have not accepted any contracts where we don't recover our the increase in fuel costs, But there have been contracts, as you pointed out, that has we've renewed the contract, but we have agreed to address the bunker clause in October, and that's when we start purchasing low sulfur fuel. So but we are seeing a nice development towards being able to include a bunker clause where we're able to pass it through.
To give you specific numbers of percentages of what contracts, I don't have. But I can tell you that we haven't taken on any contracts where we will take the we haven't made a commitment where we will take the cost increase.
Okay.
Anders Karlsson, Danske Bank. You partly answered the question, but you also said something that you have now less bunker coverage in your contract of affreightment. Is that a recent trend or is that, you know, old contracts? These are old contracts. But there there has been contracts where the the customers are not willing to give us a bunker clause.
But then we, of course, adjusted in the freight rate. So so you have a you have a negotiation, and you say, okay. You know, we're go then we adjust it based on the freight rate, based on the current bunker cost, but the fluctuation in the bunker cost is our risk. And that's why you have seen that the the bunker c bunker clause in the COA used to be around 65%. And as I showed you here, it was fifty fifty six.
But, you know, you have to understand that the challenges of having an extended period of bad market doesn't only affect the freight rates, you know, the dollar per ton, but it's also a deterioration of terms in the in in the in the in the contracts. So they negotiate longer late times, lower demurrage, you know, putting pressure on every part of the contract, which once the market turns around, it's not just to jack up the freight rates, it's also to to recover some of these these favorable terms that we have have been forced to accept in the contracts.
Petter Haujen from Kepler Cheuvreux. You've write in the report now that you have seen an increase increase in inquiries for CPP bunker storage related to the IMO twenty twenty regulation. Could you expand somewhat on that and what to what extent is that expected to be meaningful in terms of your terminals?
So we primarily focus on chemicals in our terminals. That comments refers to our joint venture, in Antwerp with, oil tanking for for the the capacity that we have available, there. I don't know exactly which inquiries is being referred to, but I can find out and come back to you. Any other questions here in Oslo? Operator, we can you ask if there's anybody on the phone that would like to
At the moment at the moment, we do not have any telephone question.
Okay. That completes the first quarter earnings release. Let's hope that when we come back here in the second quarter that we have seen a significant and nice recovery in Tankers. We deserve it, and we need it. Thank you very much.
That does conclude the conference for today. Thank you all for participating. You may now disconnect.