Good day, welcome to the Stolt-Nielsen Limited third quarter 2017 results presentation conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Niels G. Stolt-Nielsen, CEO. Please go ahead, sir.
Thank you, operator. Thank you, everyone, for participating in this third quarter earnings release live from Oslo. I will be referring to a presentation which is on our website. If you go to page three, together with me is Jan Chr. Engelhardtsen, our CFO. Page four, go through the highlights of the third quarter. I will go through each of the businesses, talking about what we achieved in the third quarter and also a little about market outlook. Jan will take you through the financials, we will open up for question and answers. If we go to page five, Tankers report an operating profit of $34.4, that is up from $27.6. The main impact from that gain is the gain that we had in our bunker hedging program. Stolthaven Terminals, very much in line with previous quarter of $16 million.
Tank Containers operating profit $14.8, up from $3.7. Again, we see improvements in both margins and in the utilization and the joint equity income from our joint ventures. Stolt Sea Farm's operating profit before fair value adjustment of inventories was $0.4 million, compared with an operating profit of $0.7 in the second quarter. If you do the fair value adjustment, had a negative impact of $2.9, that compared to $1.7 in the previous quarter. Corporate and others reported an operating loss of $6.7, that is compared with a loss of $8.2 previous quarter, mainly reflecting lower restructuring expenses with the separation of Stolt Tankers and also the implementation costs related to the acquisition of JO. That brings us with an operating profit of $56 million and a net profit of $18.5, comparing that to the previous quarter of $15.6 million net profit.
If you look on page six, the net profit variance analysis. In the second quarter, we had $15.6. We had a $6.8 higher Tanker operating profit. The Stolthaven Terminals results, basically the same. Higher Tank Container operating profit of $1.1. We had a lower operating profit because of the fair value adjustment, then lower Corporate and others of $1.4. Higher loss on translation of the FX and others, bringing us to $18.5 net profit for the quarter. If we move to page seven. Deep Sea revenue for the quarter increased by 3.5%, that is mainly due because of an increase in operating days as a result of more ships in the fleet. That is two Deep Sea ships were delivered in the quarter, one was also delivered late in the second quarter but gave full impact in the third quarter.
Total volume shipped in the quarter increased 2.2%. The COA cargo volume dropped by 1.8, lower nominations. That was replaced by spot volume. The spot volume increased 13.1%. The COA renewal rate in the quarter were on average down by 0.4%, compared with a decrease that we reported last quarter of 4.9. More negative pressure is expected in the fourth quarter. The delays caused by Hurricane Harvey had a negative impact of $1 million in the third quarter, and we expect a further $3 million because of the delays in the fourth quarter. If we move to page eight, the operating profit variance analysis. In the second quarter, we reported $27.6. We had a slightly lower trading result. We had lower bunker costs, net of bunker surcharge of $1.2.
We had a gain on the bunker hedge that we have in place of $6.7. We released an excess provision towards bad debt of $2.4. We had a $1.7 gain on the sale of assets. High depreciation because of our new ships being delivered. Lower joint venture equity income of $0.7 and others of $1.2, bringing it up to $34.4. If you take away all the one-offs between the two quarters, the results reflect a weakening market. On page nine, bunker costs. Bunker cost net of bunker surcharge, but excluding bunker hedges, decreased by $1.2 million. The average IFO consumed during the quarter was $307 per ton versus the $317 in the second quarter. The average price of the IFO that we purchased decreased to $306 from the $311 that we paid for the bunkers in the second quarter.
Our COA bunker surcharge clauses cover on average 70% of our total volume year-to-date. The bunker hedges that we have in place year-to-date, or you can see in the third quarter, we had realized a gain of $1.4 of burning the actual bunker that we have hedged, and an unrealized gain on our books of $3.4, with a total gain of $4.9 million for the quarter. Moving on to page 10, the chemical tanker order book still stands at basically the same as previous quarter of 16%, all of which is stainless steel tonnage. You can see here is the challenge that we have in our segment is that there is a significant order book to be delivered in 2018 and then falling off in 2019. We have two more ships from the Chinese yard, Hudong, fourth quarter of 2017 and first quarter of 2018.
We have the joint venture with the JO Invest. We have one ship in the fourth quarter and also one ship in the first quarter. Four more new large ships are being delivered end of this year, beginning of next year. On page 11, deep-sea spot rate development. Overall freight rates decreased by 1.8 in the quarter, mainly driven by the spot market, which was down 7% quarter-on-quarter from positioning voyages for the Asian new buildings. Our COA rates were unchanged. Our position towards the market going forward is very much the same as it was in the previous, which we reported in the second quarter. Hopefully, we will have seen a slowdown in the decrease. As you saw from in the second quarter, we had an on average 4.9% decrease in our COAs.
This last quarter, we had less than a % decrease on the COAs that we renewed. However, there are significant contracts coming up for renewal towards in the fourth quarter, we will see if it has actually leveled off or if we will see further decline. Just one more comment. I'll talk about that at the end. Stolthaven Terminals, page 12. Revenue remained unchanged from last quarter. Lower utilization was offset by higher throughput. Our Houston terminal was shut down for seven days with no damage incurred on the terminal from Harvey, fortunately. We were operational after seven days. The global utilization for our own terminals dropped to 85.6%, down from 87.5%, while our joint venture terminals remained at 91.7%. The drop in our terminals or our wholly owned terminals is our Houston terminal, our New Orleans, and Singapore terminal.
Singapore probably being the biggest issue, where we're struggling to find business for the empty tanks, reflecting the economy in Southeast Asia, I guess. If you look on the page 13, second quarter to third quarter operating profit variance analysis, very steady, $16.1 million, flat gross operating margin, higher depreciation due to increased capacity of $0.6 million, higher equity income of $0.7 million, and a slightly higher A&G bringing us to $16 million for the third quarter. Stolthaven Terminals market update and key initiatives. I already mentioned Hurricane Harvey caused no material damage to our terminal business in the U.S. Gulf. All people are safe. Negative impact on the P&L in the third quarter was around $450,000 due to the suspension of operations. Even though our terminal was up and running quite quickly, the Houston ship channel was closed for quite a while.
Asian market remained challenging as we are seeking opportunities to improve utilization. The Korean market is performing well, stable demand. Europe remains stable for chemicals, a slowdown in petroleum products. We are working on developing long-term contract with potential pipeline connected industrial customers in order to improve throughput utilization and revenue. We also continue to focus on ship-to-shore interface, including the construction of a new ship dock in Houston, which was started this summer. This will reduce the waiting time and the turnaround times for our ships, which will, of course, increase the tons per hour that we load and discharge. Quite exciting. Page 15. You can see here the drawing of the jetty that we are under construction. The dredging has been completed. We have leveled the land, as you can see here, and this is really in the middle of the Houston ship channel.
We are quite excited about having this big property in the middle of Houston, in the U.S. Gulf, where we're seeing huge potentials due to the increased production capacity in the U.S. Gulf, the shale gas, and the shale oil. This jetty we expect to be finished by the end of 2018, beginning of 2019. Mid 2019, it says here. Stolt Tank Containers on page 16. The revenue up slightly due to increased market activity. Depot activity increased worldwide and utilization unchanged, margins maintained quite steady. If you look down on page 17, the second quarter versus the third quarter operating profit variance analysis, $13.7 million in the second quarter. Operating gross margin, higher equity income from our joint venture depots of $0.4 million and others of $0.6 million, bringing it up to $14.8 million operating profit for the third quarter. On page 18, strong demand in all regions.
Focus on increasing both utilization and turns per tank. Market deterioration has bottomed out. Price competition continues to limit revenue and margin growth. Of course, controlling is the key, to control our operating expenses. We continue to focus on developing systems and implementation of a global platform to increase efficiency and scale while reducing overhead. I think this is a business where you really see a platform value. The reason I think that we are making money while a lot of other operators are losing money is because of the platform. The platform being the people, the operating systems that we have developed, the systems and the operating procedures that we have in place. Being able to price the service so that you have a balanced fleet globally, so that you minimize or limit the empty repositioning of tanks.
Even under increased competitions as we are seeing now, we're still making a healthy profit from this business. We're able to get utilization back up between 70% and 75%. Yes, lower margin, but still a healthy business. Again, the demand for the movement of products in tank containers is healthy and growing. Stolt Sea Farm, page 19. Volume of turbot sold increased by 17%, while prices decreased by 2.6%. Volume of sole sold increased by 15%, price remained unchanged. The caviar volume, because of seasonality, decreased by 27%. However, prices increased by 14%. I want to skip to fair value for the variance analysis of Stolt Sea Farm. We move on to page 21. Jan will take you through the financials.
Thank you, Niels. Good afternoon and good morning to those in the U.S. on the line. Let's start with page 22, the net profit, the operating profit, this is before one-offs. You can see here is $55.8 million, which is up from $53.7 million. We know, you heard from Niels that, yes, the market is quite challenging for the tanker business, but we were helped by a gain of $4.9 million in the quarter from our hedging program. Altogether, when you compare to the previous quarter, it's $6.7 million. That makes a very huge improvement in the third quarter.
With that being said, we also had a huge swing, as Niels just skipped that slide with a fair market value adjustment, which was actually a negative adjustment between the two quarters of $4.6 million, offsetting quite a bit in P&L terms of the gain that we had on the bunker program. There is some seasonality in the fair market valuation of the inventory. Typically, towards the end of the year, the holidays, prices go up, we see, therefore, a positive adjustment in the first quarter. As we go into the second quarter, as a matter of fact, as we come to the end of the first quarter, prices typically come down. There will be a reduction. Sorry, I stand corrected. There's a reduction in the market value.
In the second quarter, it typically goes up, then in the third quarter, as we saw here, it comes down, then prices will go up as we go into the fourth quarter. Therefore, we can expect that some of this swing will be eliminated. You'll actually see on two slides prior to 22, you will actually see the curve of what it looks like for a couple of years, three years, I think. We did talk about the impact of Hurricane Harvey. For tankers, it was $1 million. For terminals and tank containers, maybe in total, half a million. So we believe that the results for the quarter has been impacted negatively by one and a half million. Niels was talking about delays.
Yes, there were big delays, even though our terminal was up and running with delays with ships going in to unload and to load. Backing up, therefore, we expect going forward in the fourth quarter, maybe as much as $3 million-$4 million impact of this delay. Next, if you look at some of the one-offs, we sold a Stolt Kite, a ship with a profit of $1.2 million. We had some implementation costs for Jo Tankers acquisition of $100,000. We had the reorganization, this is the separation of our tanker business legally and to get a clean structure for that business activity of $900,000. That brings the operating profit as reported down to $56 compared to $51.6. Interest income is also up slightly reflecting a couple of things. We got one new ship delivered in the tail end. This is from China.
One of the C38s delivered at the very end of the second quarter, we'll have the full impact on that in the third quarter in terms of the interest. We also bought one ship out of our joint venture with Gulf Navigation. Altogether there were four ships, and we are going to separate out and eventually close down that joint venture. Step number 1 was that we bought one ship, Gulf Navigation bought one ship, and we took that back into our fleet. Then we're working to do the step number 2, which we expect will be done this month, where we will take the second ship, and Gulf Navigation will buy one of the ships so that altogether we have two each. Gulf Navigation will then place those two ships will be in our pool as they are today.
Very little difference, but we have obviously taken on the debt associated with that purchase in our own balance sheet. Next, FX gain is negative at $2.4. Most of that is translation loss, unrealized loss on intercompany debt. As you know, the US dollar has, during the quarter, weakened quite a bit, even though lately it has come back. That has caused the translation of $2.4 million loss, but not realized. That brings us down to $18.3 versus $15.7. If we just look at year to date, you can see here that the operating profit before one-offs at $162 versus $194. That's almost $33 million, no $32 million down. Most of that relates to the weakening that we've seen in the tanker market.
With the additional interest that we have taken on in connection with the acquisition of J.O., we get the full impact of that in 2017. You can see here that the interest is up from 95 to 77. You can see here that we're $40 million down bottom line, really between tankers on the trading side, the weakening, and also the increase in the interest. Going on to the balance sheet. Shareholder equity now is $1.46 billion, which is up from $1.42.
The increase is, of course, the equity or the bottom line that we had for the quarter, also helped by other comprehensive income, OCI, positive because when the dollar went down, the other side of that is actually the fact that some of our overseas holdings are getting more valuable, and that has actually had a positive impact on the equity of $29 million. Debt is slightly down. This continues to be a preference for us to focus on. It's down to $2.05 billion. Tangible net worth is just under 1.6. The debt to tangible net worth is now 1.57.
You may recall in the last quarter, it was high at 1.6, I said that we had just done a refinancing in the second quarter, end of the second quarter, where we had quite a bit of cash left over and was holding it, that's why we ended up at 1.6. Now, we're at 1.57. If you do a net cash to tangible net worth, we're at 1.52, slightly above the target that we have of not to exceed 1.5. Cash, I said, is down from $122 to $86. Uncommitted lines that we have on our revolver, $255 million. We also have $65 million on non-committed lines that we do dip into all the time to get the benefit of the lower interest rates. All together, right now, we have roughly $406 million of available liquidity, should that be required.
70% of the debt is fixed, 30% is variable. In the environment we are in today, where interest rates are expected to go up, it's important to note that given the high ratio of fixed, if for every 25 basis points that interest rates go up, the bottom line will be impacted by roughly $2 million for us. The average interest rate is 4.64% as we end the quarter, slightly up from 4.4%, the main reason for this is the fact that during the quarter, or just at the end of the quarter, towards the end of the quarter, we took on some fixed higher rate that brought it up to 4.64%. Net interest expense is expected to be roughly $34 million. Again, reflecting delivery of one more C38 from China. As Niels showed, that is our last ship that we own 100%.
We do have one C38, and that's the last in the series that will be delivered next year in the first quarter, and that's in joint venture with NYK. In addition to that shipping delivered tail end of the fourth, we also will get in, I mentioned from the Gulf Navigation JV that we're splitting up, there will be one more ship for about $36 million. Looking at the cash flow, the cash generated by offering activities didn't really change from last quarter. They're much the same. Capital expenditures, this reflects Stolt Sisto, which is the ship that came from GST, plus it also reflects some payments we made towards our new buildings, and also a little bit, not much, a little bit of tank containers and towards terminals.
Moving a little bit further down, in terms of the debt, the $139 million of debt that we repaid, $80 million of that was related to short-term financing that we had taken up in connection with the Jo Tankers acquisition. The rest were more or less regular bank principal payments. The $71 million of debt that we're taking on is primarily from the new ship that we took delivery of. That basically leaves the cash at the end of the quarter at $86 million, which is down from $122 million. On the EBITDA slide, this is page 25. For tankers, you see from $70 million to $78 million. This certainly reflects the improved situation. Keep in mind that we are treating the gains on the hedges really as an operating cost.
That's at least consistent through the whole, and as we know, it's only a portion of that that is realized. Terminals, more or less the same. Tank containers, there was an improvement. All together, we're up from $116 million to $122 million. A&G, not much really to say. We're at $54.6 million, which is very close to what we guided. Going forward, we're at $54.3 million, and the main difference here is the reduction in the cost relating to the reorganization. We're very close to finalizing the separation of tankers. We have more or less done what we need to do in terms of the legal restructuring, and therefore the consulting fees, the professional fees, legal fees that we have in connection with this project will taper off as we go into the fourth quarter. Next is slide 27 Depreciation and amortization, $66.8 million, which is up from $64.2 million.
Again, you get the full impact on the C38, Stolt Tenacity, that we took delivery of tail end of the second quarter, plus we get Stolt Sisto for the full period. Going forward, updated guidance here is $67.9 million, which will then reflect the last of the C38s we're going to have, plus it reflects the second ship that we're going to end up with from the JV, GST, Gulf Stolt Joint Venture. Share profit of joint ventures, $4.7 million. The tanker JV is slightly down, reflecting the underlying weakening of that market that Niels was referring to. The terminal division doing slightly better. This is due to our terminal in Amsterdam, with Oiltanking, that's doing better. We expect, as we go into the fourth quarter, to have a profit from, or equity pick up there of $5.1 million.
The improvements in tankers is the fact that we will get additional two ships trading in the joint venture that we have with JO, in a joint venture. Taxes, not really much to say there. The big swing, obviously, is in Stolt Sea Farm. We know that the tax is actually based after the fair market value adjustment, so profits have come down. Taxes will therefore come down. The increase in SNL Corporate is really just tied to the restructuring that we did. Separating tankers out in the U.S. did cause, on paper, an increase in the tax of just short of $1 million. Page 29. We are now in our five-year plan, and in the projections now total $554 million. You can see here that $159 million of that is for the fourth quarter.
Stolt Tankers at $102 million is primarily, again, I keep repeating, it's the last of the C38s we are going to get, plus the second ship from the GST joint venture. It may be that part of the $159 actually will move into 2018. When we look at the total adding up to the $554, in addition, in tankers, it's some $54 million in the plan that you see here for ballast water treatment systems, and also some for planned dry docking, and it's the part that is capitalized of the dry docking. For the terminals, which now is actually the largest outstanding here of $229. Niels showed you the photograph of the jetty that we're building in Houston, roughly in this plan going forward is $36 million. We have more than $50 million of other investments in Houston.
Part of what we previously have reported back as Project Phoenix, which is an upgrading and more of an automation of the terminal. There are also some other specific projects. We have another expansion project in Santos in Brazil for $15 million. The rest is really capacity maintenance around at all the other terminals, plus a little bit of capacity expansion also in Dagenham, outside of London. The other amount here worth mentioning is the Stolt-Nielsen Gas, and you know that that's for the payment of the two small LNG ships that will be delivered during 2019. Page 30, just the debt maturity profile. You can see here the fourth quarter 2017 is only very small. This is just regular principal payments. That's the small blue part.
We go into 2018, the top part of the bar reflects it's actually SNE03, and this is the bond issue that's maturing in March of 2018, and it's $164 million. We actually did go out to raise a new bond issue that we did in this quarter for $175 million. The $175 million was done after the quarter end. We have used the $175 just to draw down on our revolver, and it will also increase slightly as we go past year-end, our cash outstanding amount. All of that will be used just to repay the maturity in March. We've taken, if you will, removed that refinancing risk. The green part here on page 30 under 2018 is refinancing of the remaining part of debt that we took over in connection with the Jo Tankers acquisitions.
Some of you may remember that part of the financing, we went to the JO banks, they agreed to give us a two-year loan, we just renegotiated the terms and not so much the structure, but the terms and the repayment terms of that loan. That is due at the very end of 2018, but we will start to refinance that in the first half of 2018. I think that's all I have to say. Niels, back to you.
Thank you. Page 31, key takeaway, $18.3 million net profit at the end of the third quarter. The integration of JO is progressing as planned, we are pulling out all the synergies, operational efficiencies that we can get out of the deal. Hands down, each quarter we do a competitor analysis. There's not that many of the competitors that publicly where we have numbers, but it's interesting to see that we are consistently outcompeting our competitors significantly in tankers, which is nice to see. It's a tough market, we are approaching a break-even level in tankers now, unfortunately. Let's hope that our predictions are right, that towards the end of 2018, we will start to see a turnover once all of these new tonnage have come in. Hopefully the global trade will continue, we should see a recovery in 2019.
Continuous soft market in tankers due to the new buildings. We see strong demand in tank containers. The fundamentals in terminals remain solid. The Stolt Sea Farm turbot volume is up, prices are rising. The prices are rising significantly, we believe that that is actually sustainable. In the fourth quarter, you will see the reverse of what happened in the third quarter, hopefully you will see some nice contribution from that business. We continue to focus on our debt reduction. Even though we have projects that we would like to pursue, we are holding back until we see a lowering of our debt level. As Jan showed you, the group has access to competitive funding. We have sufficient liquidity and much of our CapEx has already, capital commitments are funded. That completes the presentation.
Operator, now we will open up the floor for questions. I will try to remember to repeat the question so that the people on the phone can hear. Yes, from Nordea.
Yeah. Thank you. Can you go into demand for chemical from Singapore terminal, where you see there are the markets possibly also with that last quarter, you lost some contract there, but now it continues. Where specifically market weakening in 2023?
The question is, the terminal in Singapore, why are we having problems filling up the business that we lost, and where do we see a weak market in that area? It's a difficult question. Let's put it this way. The piece of land on Jurong Island we won because there was a shortage of storage capacity. They gave us the land to increase the supply of storage of chemicals and gases. I think maybe we have created a little additional supply in that market. At the same time, it's still profitable. It's a fantastic investment, and it is still very profitable. We are now seeing lots of inquiries, but there is a bit of uncertainty, and we don't want to go after these short-term business, the spot business. We are looking for the right business for long-term contracts.
We haven't gotten there yet. We have a lot of leads, a lot of meetings, but we haven't been able to get that. Is that a reflection of a fundamental something is shifting or something is changing? Is it just there has been a period of a little too many tanks being built in that area, and it takes some time to be able to absorb? I don't know. I wouldn't say that there's a fundamental change in the demand for storage of products in Southeast Asia. Still a very profitable terminal, one of our better-performing terminals. We had a huge ExxonMobil contract, and we lost part of it. It just takes time to find the right customer to be able to fill up that. We will, but it just takes some time.
One question about the potential spin-off of Stolt Tankers and your update also on this.
Yes, as we have said all along, we have them separated out, and we are just about to complete it. Now we are ready to do another deal if that is out there. Another deal meaning acquiring a competitor or merging with a competitor using shares instead of cash. If that does not happen, we are also ready to do an IPO if we so choose. We have all along said that we are just positioning ourselves to be able to pursue an opportunity quickly. Had we not separated it out, it would have taken us one year to do a deal with a potential acquisition. We are now positioned to do it, and we have not made a decision to do an IPO, but we can. That is an option that is there.
Doing a potential IPO, even though it has not been considered at the board or it has not been on the agenda, it needs to be at the right time. I don't think right now is the time either for the chemical tanker market. It is absolutely an option that we are pursuing. We will prefer to continue to see if there are further consolidation opportunities. I think there is very much room for further consolidation of the business. It will help everyone. If that is not possible, we can look at doing an IPO. It is certainly big enough, the company, to be standalone. Again, I want to repeat, it is Stolt-Nielsen's intention to by no means end our chemical tanker business.
That it is always our intention to be a significant majority owner so that we can pursue and continue to pursue the terminal tanker strategy where we create operational efficiencies between our two businesses.
The final question on the energy side. Previously you said that the contract coverage of 50% of two first ships would generate about $24,000 per day half the year. What do you expect to make for the other half of that year for those two ships?
What we have said is that we have found business for half of one ship, which is the equivalent of, you know the amount, $24,000 for the full ship. I think that our strategy is we would prefer not to time charter out the business. That's not really building an asset and time chartering out one. That's not our business. Our business is to work on logistics, provide economic solutions for our customers to ship their products. Customers that don't have enough business for a full ship, we try to gather three or four or five and do a pattern of trade and manage their inventory so that they share an asset for a customer that does not. I think that to pursue that, we will be able to get a better than $24,000 a day from the numbers that we're seeing today.
Half of that business has been secured at that number. I think that the other part, I think by parceling out the ship, we should be able to get higher than that. We are looking also at time charters because we are looking at everything. I think that the timing of those two ships, and hopefully we can hang on to the options because there's a lot of business coming, not only in the Mediterranean, but all over the place where the delivery slot that we have looks very good. If we're not able to parcel out the business, we will certainly be able to time charter out the two ships. We are holding back a little again, because I think that time chartering out all ships is not our business. It's providing a logistical service that is our business. Yep.
You are becoming more and more specific here on your focus on debt reduction. This is, outside of a potential tanker spin-off or IPO, is debt reduction, that purely going to be made by deferring or not doing capital expenditures and also putting capital on the balance sheet? Or is there a D&A reduction to be done by growing income compared to maybe less efficient?
I don't know what you're referring to, I just said the competitive analysis shows us that we are totally out-competing any of our competitors after their initiatives. I agree. To go back, our debt reduction exercise is in the form of holding back on capital expenditures. If you see then, based on our five-year plan, based on not committing any further CapEx, I see the cash flow from the investments that we have in hand and the assets that we have, the debt will significantly go down. By the end of this year, it will be below 1.5 to one, and by the end of 2018, it will be further down. It will quickly go down, and we will be quickly in a position back where we can invest. Of course, we review our portfolio.
As a traditional conservative shipowner, we tend to hang on to our assets. We are reviewing our portfolio in each of our businesses, if there are things that we can sell which are non-strategic. We are willing to sell if the price is right, if the price is reasonable. I don't think that we are in a position where we have to start selling because, as you can see from the numbers, the debt level is quickly coming down and it's manageable. When it comes to initiatives, I think that if we don't continuously have initiatives to do the same amount of business that we do today with much less people, a simpler organization by automating and robotics, et cetera, we will die. We have projects in our organization that are looking at radical change. What do you call these?
I tend to tell you what we have done rather than tell you what we are going to do. Hopefully we can show you that gradually that our operating costs, our A&G, will be coming down. I prefer to talk, instead of announcing these type of projects, I would rather show you the results.
Also just on your COA, the reduction in COA rate perhaps is lower than expected this year. Can you give any insight? How much of your COAs now are legacy contracts from 2015 that were significantly better than now? Just trying to see if there should be a drop in this quarter.
The question was, the contract renewal in the last quarter was lower than expected, or the rate reduction was lower than expected. Is that because we are living off legacy contracts, or is it a pure reflection of the current market? I would say it's a combination. We have, because of our conservative outlook of the market, going back quite a few years, we have locked in business. Part of the reduction, because of the low reduction in COA rate, is driven by because we had multi-year COAs where the rates are locked in for one year, and the second and the third year has a cap, either ±5%, ±7%. We're living off that, and some of these contracts, we have given the max reduction.
We continue to have these, which will carry us well into 2018 and 2019. We also have all the contracts where we don't have it. We have renewed contracts outside of these legacy contracts, where we saw a leveling off or a slowdown in the reduction. I think the big test will be in the fourth quarter. It's worrying. I see that our earnings level on the large ships now, subsequent to the end of the third quarter, it's getting scarily close to break even.
How much of your CapEx is committed, or how much
On the tanker side, there's not much we can do. The $165, that is committed. Stolthaven Terminals, there are things that we can hold back on, and we can delay, and things that are not committed to third party. Jan, out of the $229, how much do you say that
I would say
$50 million maybe that we can.
No, more. $75.
$75 million we can hold back on. Stolt Tank Containers, the same. I think that most of that actually can be held back. Stolt Sea Farm, the $20 million of the $17 and $10 maybe we can hold back on. Stolt-Nielsen Gas is committed. Let's say if we say that we could maybe hold back on $150 million out of the $550, if we had to.
On the tankers consolidation with this new merger, I was just wondering how you think about the market. When do you think is the optimal time to act, if you are going to act at all?
In acquisition and consolidation?
Yeah.
I've been actively working on this for the last seven years and we continue. We are continuously working on and talking to see if there are interested parties to merge, to be acquired. As it stands right now, we have no current talks. We have talks, but we have no active project at this time.
Your market view, your committed CapEx and your leverage, all that combined will come to above $1 dividend?
Of course, we have two things which we can cut back on right away. One is, which is not really on the Stolt-Nielsen, not that we usually have what the board delegated authority of $60 million they give to me so that I can run the businesses without going to the board, that we can call back on which we have. The other thing is dividend. That is one natural thing we can hold back on if we feel uncomfortable with our debt level. We also have to remind ourselves that we work for the shareholders, and we want to give money back to the shareholders, but it has to be sustainable for the company. That is, of course, something that will be considered by the board.
Just a follow-up.
I can't say anything because it's the board that decides the dividend. I can propose something to the board, but it's the board that decides. The board will decide the final dividend for 2017. Sorry, for 2016, at this board meeting. 2017, sorry. We already paid an interim dividend of $0.50, and we'll see what the board decides. We'll have our board meeting in November. Yes.
On the one side, you're seeing a reduction in the operational backlog , but you're also seeing throughput going on. Is that specific areas, or is it on a global basis?
It's in specific areas. The utilization issue is Singapore, Tianjin, and Australia. Australasia, New Zealand. That's where we have the lowest utilization, that we have utilization problem. Throughput, I can't remember. Where did we have increased throughput in the last quarter?
Houston.
Houston? Yeah. It varies. There's not a common trend anywhere. The utilization, being able to fill up the tanks is Tianjin because the explosion takes a long time. We were down to zero utilization. We are back up to above 50, I believe. Singapore, I've already explained. You have in New Zealand, which is also a couple terminal tanks where we are very empty. Any further questions before Operator, would you ask the people that call in if they have any questions?
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Okay. Any further questions here in Oslo? All right. That completes our presentation. Thank you very much, everyone, for joining us.
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