Good day, ladies and gentlemen, and welcome to the Stott Nielsen Limited Second Quarter twenty sixteen Results Presentation Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Stolt Nielsen. Please go ahead.
Thank you. Good morning, good afternoon. Thank you for joining us here in Oslo for our second quarter results presentation. I will be referring to a presentation, which is on our website. Page three, together with me here in Oslo is Jan Englertsen, CFO of Stolt Nielsen.
As always, we will go through the highlights for the second quarter, then we will go through each of the businesses. Jan will take you through the financials, and then we'll open up for questions and answers. Moving on to Page five. Stolt Tankers operating profit came in at 45,300,000.0 and that is up from 31,200,000.0 and that is mainly due to strong COA volumes and the gain on the hedges that we made earlier in the year. We will talk more about that under the Tanker division.
Stolthaven terminal operating profit was at 13.8%, and that is up from 10.5%. And that is due to the improvement in utilization. And also, we are starting to see results from the business optimization program that we have started. Stolt Tank Containers reporting an operating profit of 10,700,000.0 That is down from 11,800,000.0 in the previous quarter. As an increase in shipments was offset by narrowing margins and lower results from the joint ventures due to competition.
Total Sea Farm operating profit, 3.4 that's down from $5,500,000 mainly due to seasonally strong first quarter. Our first quarter includes the Christmas sale. Corporate and others, a loss of $3.9 This brings us to a net profit for the quarter of $37,800,000 versus $30,400,000 in the first quarter. And comparing that to the second quarter of twenty sixteen, if you take away the gain that we had on the change in the pension plan, we see a significant improvement compared to last year. Going to Page six, first quarter to second quarter net profit variance, dollars 30,400,000.0 we had in the first quarter.
We had a higher tanker operating profit of $14,100,000 We had higher terminal operating profit of $3,300,000 slightly lower tank container operating profit of negative 1,100,000.0 compared to previous quarter, lower Sea Farm operating profit of 1,600,000.0 and also the reevaluation of the inventory. Lower corporate and others, higher tax, higher FX, others brings us to 37.8%. So as you can clearly see, the improvement comes very much from Stolt Tankers. If we then move on to Page seven. Deep Sea revenue increased.
Deep Sea, that's our large fleet from 16,000 tonnes that way up to the largest ship of 44,000 that we have. Deep Sea revenue increased 2.6% from the previous quarter, mainly due to strong COA volume. Average COA rate that we booked or we in our cargo was 3% down. That doesn't mean that the COAs renewals were down. They were actually up 6.8%.
But the cargo mix of the COAs that we loaded, in other words, we loaded quite a bit of large parcels cost the COA freight for the quarter being 3% lower. Spot rates increased 7% compared with the prior quarter. That, again, is not a reflection of what happened in the spot market. But because we had such a large COA volume, we could be more we could hold back more on choosing which spot cargo we would like to fix. So we were able to get a 7% increase on the spot cargoes that we fixed.
COA renewals annual rate during the quarter of the contracts that we renewed were up 6.8% on average. And we also recycled two ships in the second quarter. Moving then on to Page eight, Stolt Tankers first quarter to second quarter operating profit variance. First quarter being 31.2%, higher trading results of 4.4%, lower bunker costs of 2.9%, a gain on the hedge of 8.6%. And then we get lower surcharge from our customers because the bunker prices are low.
Lower depreciation of $2,800,000 due to less ships. A higher ship owning cost of $1,500,000 And in the first quarter, we had a sale of some emission credits, which we didn't have in the second quarter, bringing us to SEK 45,300,000,000.0. So you can see here that the really the trading results improved by 4.4%. Stolt on the Page nine, Stolt Tanker bunker costs. Bunker costs net of bunker surcharge, but excluding bunker hedges decreased by $2,200,000 from the first quarter.
The average IFO consumed decreased to $174 per ton from $195 per ton in the first quarter. So the bunkers that we consumed in the first quarter was in the second quarter was $174 per ton versus $195 in the first quarter. The average price of bunkers that we purchased in the second quarter was $194 per ton compared to $169 in the previous quarter. So we burned cheap fuel that we bought in the first quarter. And you can see that the bunkers that we purchased in the second quarter was significantly higher, so as a result of the oil prices increasing.
So you can expect that the bunker price that we consume in the third quarter will be in line or close to $194 per tonne, if you exclude any bunker surcharge or bunker hedge. COA bunker surcharge clauses covered on average approximately 80% of total volume in the second quarter due to our high COA volume. Bunker hedges that we realized, we had a gain of $500,000 compared to a realized loss of $300,000 in the prior quarter. So of the hedges that we have done, we gained $500,000 compared to 300,000.0 loss in the previous quarter. And then we have the remaining hedges outstanding.
We have an unrealized gain of $6,100,000 Moving to Page 10, which is the index of STJS, Time Charter Index. You can see that it has picked up nicely. Moving to Page 11. On the top graph, you can see that the spot rates our spot rates that we fixed in the second quarter was up, while the market reports, basically, most of them show a downtick in the spot market. So and that's again because we have strong large COA nomination.
We had very little spot space left. And when we have little space, we have more time to be selective on the spot cargo that we fix on our ships. Moving to Page 12, chemical tanker fleet and order book for in the second quarter of twenty sixteen. The order book still remains at around 27%, out of which 23% close to 23% is stainless steel. So still a large order book.
Out of the order book, 33 is going to be built in China. And the question mark, which we have stated in our earnings release and stated several times, there's a question of will all of it be delivered, if or and when will it be delivered. In other words, we expect that hopefully some will be canceled. And if it's not canceled, we, from our own experience, have six month delay on our ships. So I would expect some of these ships will be late in delivery.
Moving to Page 13, outlook. Global spot market indices have been declining since first quarter twenty sixteen. While spot rates out of The U. S. Have been relatively strong, The U.
S. Gulf to the Far East is by far the strongest market that we see. But the other markets are suffering. We see weaknesses out of areas both in Europe, Middle East and Asia. So even though we're able to get our ships out from The U.
S. Gulf to the Far East, it's a dogfight to get them back with cargo. The MR market has fallen from $30,000 per day in the mid-twenty fifteen to the current level of $10,000 per day, and that is not helping or supporting our segment. The large order book will put a lid on freight rates, though cancellation and delays are likely. The World Trade Organization predicts that the trade growth in 2016 will remain sluggish and unchanged at 2.8 after the increase registered in 2015.
Risks to the forecast are on the downside due to the sharper slowing in the Chinese economy, and we can all speculate what the eventual outcome will be of Brexit. Moving to Page 14. This is a picture of Stolt five, which was christened a couple of weeks ago. And that's the first ship in the newbuildings. We expect her to be delivered or that will take over the ship within a couple of weeks.
Moving on to Stolthaven Terminals. It's nice to see that we are it's not where it's supposed to be, but it's moving in the right direction. Revenue increased in line with high utilization and throughput at most of our own terminals. The overall utilization increased to 90.5%, and that's up from 87.5% in the previous quarter. Joint venture equity income increased to 5.3% from 4.5% in the previous quarter.
Cost saving initiatives are slowly starting to have impact on cost per cubic meter. If we look at Page 16, the variance analysis on our operating profit between first and the second quarter, the operating profit of 10,500,000.0 in the first quarter, we had higher storage and throughput revenue of 3.7 slightly higher operating revenue of 0.9%, higher income from our joint venture of 0.7% and higher A and G expenses and consulting consultancy fees. And that is of course, we are putting a lot of resources primarily on Houston, and that's why we have higher A and G and consultancy costs. And others of $1,000,000 brings it to 13.8 Page 17, Stolthaven owned terminals. We added 9,500 cubic in Singapore and 36,000 cubic in Newcastle with further expansions ongoing.
We expect to add an additional 65,000 cubic meter of capacity over the next twelve months. The average lease capacity improved at all owned terminals, the biggest improvement in New Orleans and Houston. Stolthaven Houston continues its business optimization program. Again, we are putting a lot of resources to upgrading and also reviewing on our operating procedures. The underlying demand for storage is strong, and we expect improved performance as we resolve the issues encountered in recent years.
But as we have always said, it will take time. I think you will not see the big improvement until 2017. Stall Tank Containers, revenue driven by growth in shipments. You see that we picked up on revenue. So what we have done is that we have actually dropped our price.
We have aggressively competed to get our the number of shipments up, getting our utilization up. And as a result of being aggressive, the margins have fallen. But it's unrealistic, as we have said earlier, to believe that the tank container market could have been that strong for such a long time, and we're now seeing stronger competition. Still, it's a very, very healthy and good business. It is still the most profitable business that we're I'm hoping actually that we are now starting to see the bottom.
But even now we've reached the bottom, it's still a healthy and a good business. STC operating profit first quarter to second quarter, operating profit variance in the first quarter, 11,800,000.0 higher gross profit of 700,000.0 higher A and G of $1,100,000 Jan will talk about that 1,100,000.0 a little later. And lower equity income from our joint venture of $700,000 leads us to 10,700,000.0 The 1,100,000.0 was a bit of an adjustment, a one off. So I think you won't see that going forward. Page 20, Stolt Tank Containers market situation.
Continued strong competition is putting pressure on rates and margins, as I said. We continue to take an aggressive view on pricing to drive utilization and increase turns per tank. Noodling orders that we have in place are almost complete. We also returned some leased tank, resulting in a small reduction in our fleet size. We will continue to develop strategic location in order to support our global operation.
Stolt Sea Farm. There's a the turbine prices over the fourth quarter and the first quarter, we were able to push the prices up, and the market has supported us. So we see a much better supply and demand balance in that segment. And that's also very much due to our competitors having production difficulties. So the volume improved marginally, but the growth remains lower than targeted in Iceland.
So until we see the production of Iceland coming up to where we need it to be, we will continue to see slower growth in that on Iceland. Caviar prices increased during the quarter, but volume was down following the seasonally high first quarter. So most of the caviar is sold for Christmas and New Year's. And of course, then you drop down the volume in the second quarter. The fair value adjustment of inventory at the gain of $3,300,000 compared to a gain of 3,400,000.0 in the first quarter.
Very quickly, the on Page 22, the variance analysis on the profit operating profit of 5,500,000.0 in the first quarter, dollars 600,000.0 lower on the Flatfish lower Flatfish fair value revaluation adjustment, lower gross profit on the Caviar because of the seasonal sale, higher Caviar fair value adjustment of 1,600,000.0 and other brings us to 3.4 Just to remind you of the LNG investments. Our plan is to build a global business of small scale regional LNG distribution projects, focusing on terminals and strategic location serviced by a flexible fleet of small ships, which are underwritten by a committed base load demand. Developed an integrated model to include sourcing of LNG, shipping to small scale terminals and distribute from the terminals via trucks or ISO containers to the end user. We are exploring opportunities, and we are actually receiving a lot or lot of inquiries. And I think we have found an area where there's going to be a growing demand for these projects.
And again, these are the project is to supply LNG to stranded customer that don't need 2,000,000 or 4,000,000 tonnes per year, but that needs 500,000, 200,000. And we are seeing projects all over the world in Europe, in the Caribs, South America, Indonesia, Canada, everywhere. Project aimed at serving stranded demand customers out of reach of conventional pipeline gas, offtake agreements are currently in the ten to fifteen year range with suitable counterparty credit. I think I received some feedback from the investors last time, but this is I'm committed to this. I think this is a huge growth area for Stolt and Ingersoll.
And to use our logistical experience through tankers, terminals and tank containers, I think we can create value by pursuing this LNG in the LNG segment. Then moving over to financially. Jan will take you through the financials.
Thank you, Nid. Good afternoon and good morning. We are now on the net profit, Slide 25. And the operating profit, this is before one offs. For the second quarter, it was $73,400,000 compared to $63,500,000 So there's been a nice improvement.
As we heard, most of this improvement is coming from tankers, who has had very strong trading results. And, we have had an environment with low bunker costs, and we also had gains on our hedges. Terminals is also up, but the tankers and Sea Farm is down in terms of operating profit for reasons that Niels just has gone through. If we look at the one offs, the tanker accelerated depreciation, what we're doing here is that for 2016, we have six ships what were planned to be retired. And as you know, the steel prices have gone way down, which basically is impacting the residual value of the ships.
And therefore has necessitated that we increase and accelerate the depreciation during 2016 for the ships that we are recycling. So you can see here that in this quarter, we took $3,700,000 of accelerated depreciation compared to $6,900,000 in the first quarter. Out of the six ships, of which one is actually in a joint venture, so you don't see it go through the depreciation line. But out of the six, we have done three, plus the one in the joint venture, so that's four. So we have two more to go during the year.
And that basically explains, if you will, in the second quarter, why also this figure is down. We will continue for next year 2017, we have an additional seven ships that we will recycle. These are four of them are much smaller, so the impact will be less. Nick mentioned that the in the first quarter last or this year, we had a gain on sale of assets for $2,500,000 but that of course includes the sale of the emission credits that we had. And we didn't have anything similar in the second quarter.
Then if you look below the operating line, net interest, basically the same as in the first quarter. FX gain, you may recall that just as we got into the New Year, the dollar got extremely strong. In the second quarter, it has actually come off some of its levels against various other currencies, which has led to translation losses, if you will, on some of our intercompany balances and also the net account payable receivable outstandings. But and that has resulted, if you will, in the quarter, to $1,400,000 loss. But as I said, mostly translation.
Income tax, we're doing better on the terminal side, and that has resulted in an increase in our tax side. And that basically leaves a profit of $38,000,000 versus $30,400,000 So there's a nice improvement, which I think has been recognized by most of the analysts today. Just a quick note on the six months. Again, I think the worthwhile to it is worthwhile to stress that the operating profit before these one off changes for the six months of 2016 is up to 136,900,000.0 versus 120,800,000.0 So there's a good improvement, again, underlying the improvement here by the tankers and also the terminals. The reason why the net profit, the bottom line, is below, you can see 68,330,000.00 million dollars for the six months versus $81,600,000 for the year for last year is the fact that last year, we had a cancellation, if you will, of a defined benefit plan that caused almost $20,000,000 of gains.
These are one offs. So it's very clear that, that is not part of the operation. It's a onetime arrangement. So you have to sort of put that to the side when you're going to interpret the figures. Now on to Page 26, balance sheet.
The shareholder equity is $1,370,000,000 and that is up from $1,330,000,000 Here again, part of the increase, of course, we had $38,000,000 in gains. We gave up $27,000,000 in dividends. And then we had a further improvement on the OCI. We talked about that earlier, the slightly weakening of the dollars basically led to a reduction of the OCI, which obviously is improving the equity situation. So on the debt side,
our
debt went up, you can see here, to $1,853,000,000 On the last day of the quarter, we concluded a sale and leaseback transaction for our tankers, raised $129,000,000 We couldn't really get all of that those proceeds into our revolver to pay it down. So you can see that, as a result, debt went up, but also cash went up from $64,000,000 to $152,000,000 The debt to tangible net worth ratio, 1.18:one, That's up from 1.11:one. EBITDA interest, 4.82. And that also shows a nice improvement from, the last quarter, where it was at 4.4. That's good news.
78% of our debt is fixed, 21,600,000,000 is variable. Average interest rate has come up slightly from SEK 4,700,000,000.0 to SEK $4,890,000 in this quarter. But again, I think that can be envied by many of our competitors. The third quarter interest that we expect is around $27,000,000 which is pretty much in line with where we were in the second quarter. I'll come more into this later, but we have with the cash and the unused revolver or the credit facility that we have, we have $569,000,000 at the May of available liquidity.
This is before $85,000,000 of additional uncommitted lines. And as most of you know, since the end of the quarter, we have repaid SNE-one, which was $300,000,000 bonds, and we tapped and raised $130,000,000 Then going to Page 27, cash flow. Net cash flow generated by operation, 82,000,000, up from 76,000,000 Not much really to say here. Net cash used in investing activities, dollars 43,000,000 for the quarter, which is a little bit less than in the previous quarter. And you can see here the $44,000,000 in pure CapEx really is what we have put into our terminals, both in Houston, in Singapore, in Australasia and also in London in Dagenham.
Net cash provided by financing activities. Here, the proceeds from the transactions that we did in the second quarter of two zero six million dollars Again, we raised it. We repaid $104,000,000 in long term debt, and we paid down on our revolver by 23,000,000 And so one of the proceeds we got in was sort of mostly offset or at least partly offset by what we repaid. And then you can see here, we paid dividends of $27,000,000 I mentioned earlier. And also, we purchased treasury shares for $2,000,000 in the quarter.
You may know that we announced March 2, a repurchase program of shares of the $2,000,000 and we have so far completed $2,000,000 towards that program. So at the end of the quarter, we had then a cash position of $152,000,000 up from 64,000,000 And of course, we will aim to bring that cash position down. Slide 28, the EBITDA. Just to remind you here in these figures, have taken out and removed any sale or gains on or losses on sale of assets. And we have also taken out other non, let's call it, onetime really non operating items.
You can see Tankers, very nice improvement here in the second quarter. It's actually the highest we've had since back in 2013. Similar improvements, you can see $5,000,000 improvement in the quarterly EBITDA for terminals. But on the tanker side, you can see the trend has been on the down slide. But overall, for Stott Nielsen, as a consolidated company, we are $124,000,000 for the quarter, up from 115,000,000 And for the full year of 2016, for the first two months, we're at $239,000,000 in EBITDA versus $222,000,000 for the same period last year.
So again, the improvements you can see is coming through the cash flow. A and G, dollars 52,300,000.0 for the quarter. I think we guided at 51,200,000.0 The increase there's a little bit impact here of the strengthening sorry, the weakening of the U. S. Dollar, the strengthening of the non U.
Dollar cost that we have tied to some of our offices. Edwai, I think I should just continue. So again, the we've a little bit higher on our A and G side. Nils has already mentioned that tied to the terminal in Houston, where we have a lot of resources focusing on getting the profitability and utilization of the terminal back into where it should be. We have professional fees that we have paid that, of course, goes through the AMG line.
We had the impact on foreign exchange, as I mentioned. And we also had some additional BT costs and also some higher personnel costs to back fill some positions that have been opened for a while. And we expect for next quarter to be roughly about $52,400,000 Depreciation, dollars $57,900,000 which is down from 60,100,000.0 I've already talked about the accelerated depreciation. We got the full impact, if you will, in the first quarter. We recycled two ships in the first quarter.
And you can then expect that the accelerated depreciation would come down. We already saw that in one of the previous slides. So we now expect that as we go into the third and fourth quarters that the accelerated depreciation, if you will, will go down. But we will take delivery of new ships, which will bring it, if you will, back up. So for the third quarter, we're estimating 59,000,000 Slide 31.
Again, from JVs, 8,800,000.0, dollars 10,700,000.0 in the first quarter. Tankers tanker JVs are doing well for reasons we have covered Stolthavan terminals. We had very good performance by our JSTT terminal in Korea, which basically had impact on positive impact on the results there. Tank Containers had a little bit more issues with some of the depots we have. We only have in Tankleman, we only have JVs tied to our depots around the world.
And also one other small JV in China. And that brings it down to $8,800,000 And I think that going forward, next quarter, conservatively, I think we're saying that it will be around $8,000,000 Taxes, I already dealt with saying that the terminals had better results, and therefore, have accrued $1,000,000 more in taxes there. Capital expenditure program, dollars $877,000,000 left in our five year plan, of which four twenty three million is for the remaining half of 2016. That most probably, is too high, maybe to the tune of between 50,000,000 and $75,000,000 too high. It, of course, relates to delivery of the new buildings.
And it also relates to the purchase of a couple of ships that we have exercised purchase options on that we already have in our fleet trading and that we've had for a long time. We will take delivery of those in September. Terminals, €91,000,000 further capacity expansion in a number of locations, plus jetties in Houston and jetties also in Australasia. And like I said, more money is going into, if you will, automating and improving the operational side of the Houston Terminal. The tank containers, 32,000,000.
We have a little bit more we're almost done with taking delivery of new containers. But the rest of this is really for more investments in our supporting depots. Debt maturity profile, this is Page 33. It shows that the in 2016, we actually have paid back SNE $1,300,000,000. So you can see what is left for this year.
You can see as far as the five year or the plan here out to 2022, we have now bonds maturing in 2018, 2019, 2020 and 2021. Those bonds most of those bonds have actually increased because those were the ones we tapped in June. The maybe what about just to talk about the two green parts of the bar in 2017 and 2018. The 2017 refers to the maturity of financing we have on our Singapore terminal. That is coming up in 2017, and we will start to work on refinancing that terminal.
And based on feedback we have, that's not going to be a problem. The 2018 maturities here refers to a financing that we have for six ships that we bought some four years, five years ago. And what we will do, we're in the process of renewing our revolver. And the plan is that we will take the ships in that facility that matures in 2018, put them into the facility the new revolver, increase the amount of the revolver from $4.50 to $650,000,000 and that we expect to have that in place by September. So far in terms of commitments by the banks, we are way oversubscribed on that facility.
So that's again way ahead of our original plan because the revolver actually matures, if you will, in January 2018. Just to summarize on some of the transactions we have done. The $131,000,000 sale leaseback transaction, this is the second one we did of tank containers. Doesn't really the tank container still stays on the balance sheet. You won't really see any difference.
It's just a way of utilizing those tanks for to raise financing. And this is something we have done through time, this time with sale leaseback transactions, but with limited partnerships in Texas in the 1980s. We did KSs in Norway, in the 1990s. We did tax leases in U. S.
In February. And now, we are doing this Japanese lease, where the cost to us the all in fixed cost to us is around 3.6% all in, 100% financing. So very attractive financing. We couldn't resist. SNE, we raised $130,000,000 We talked about that.
We paid off the SNE 1,000,000 We talked about the $650,000,000 revolver and the refinancing of the Singapore terminal. So with that, back to you, Anil. Thank you, Jan.
Key takeaways. Continued strong performance in the second quarter with a net profit of 38,000,000 and EBITDA of 126.6 The second quarter annualized earnings per share is NOK 2.73, which gives a PE ratio of 4.55 and price to NAV of NOK 0.5. That is taking a share price of SEK 103. The current dividend yield, as long as we continue to pay $1 per year, is 8%. So you both get 8% and the potential upside in the share price.
Good liquidity position with approximately $400,000,000 as Jan showed you. Solid performance in Tankers. Steady tank container result in a competitive market and a start of a turnaround in Stolthaven. Our entry into LNG space will be leveraged using our experience in chemical logistics. We're targeting the small scale LNG demand stranded customers.
That completes our presentation. We will now open up for any questions. And operator, we will start here in Oslo before we go over to the phone. Any questions? Yes.
There's no additional cost in association with the newbuildings. To the contrary, because they are delayed, we are actually getting some compensation for the delay. I think the increase that you see in tankers is that we used our purchase option on the ship that we had on time charter for, I think, one of the Japanese ships two Japanese ships that we acquired. Yes. We also seem to have been increasing your capital expenditure guidance on the ethanol order.
That's the $45,000,000 that was under other. If you remember way back, we used to have a line that showed $60,000,000 every year in the five year plan, and we have decided to remove that $60,000,000 because that's what we call delegated authority. So the Board gives me $60,000,000 to use without having to go to the Board to support the business. Small things that if you win a contract at a terminal that needs a new lining or new pump or something. So that is really capital expenditures to for me to invest or the businesses to invest without having to go back to the Board.
And that just shows that we have out of the SEK 60,000,000 that I haven't delegated authority, we have used SEK 45,000,000 on various projects. This is, again, for me to be able to pursue is that $45,000,000 committed, Jan? No. It's not committed. So these are what I it's what I have left off my delegated authority, yes?
So out of the $60,000,000 I have $45,000,000 left. So it's not committed. Also, I was just wondering if you could be a bit more concrete on your LNG initiatives. Have you made any progress that you can comment on? So there are various projects.
One that we have been talking most about is the Sardinia project. We have signed LOIs for offtake agreement on this on that project. We have not yet signed a binding agreement. So we will not, of course, take any FID before we have a binding agreement on offtake. But we're getting close.
And once we get the offtake in Sardinia, we will most likely we will take the FID on building of the storage terminal in Sardinia and also order the small tail ships. So we're looking at 7,500 cubic meter, but we still haven't taken the FID yet. We are also looking at, I mean, various projects in Europe. And there's another project that we're working quite actively in Europe, where we will source the LNG in Antwerp or in Rotterdam and bring it to I don't want to tell before we have it, but it's quite exciting. Again, tied up against contracts.
Yes?
The spot market is weakening, as you can see from the reports. The CUA nominations are lower, but that I think is a bit seasonality. What is encouraging is that we are able to fix nice contract renewals. The 6%, 6.8% we got in the second quarter is the highest that we have I can't remember, but that's quite high. So
yes. So
because I've said it before is that the contracts that we focus on are the major chemical producers. They don't operate in the spot market. They are dependent upon having somebody that can consistently service them regularly, the quality that they require, the flexibility that they require. And they're clearly seeing that there are not that many that can do it. So it's encouraging to see that we are able in the declining spot market, as you say, that we are able to still renew with nice increases.
I will tell you when we announce it. It's not clear how many ships we order and how big tanks because it depends on if we get $200,000 of offtake agreement or 50,000 or so it depends on the tank size and also the number of ships that we order. The ships that we are looking at, I mean, it's very attractive right now to order ships. We have gotten some very attractive orders. So I will tell you when we have a better idea of the size of the offtake agreement in Sardinia.
The construction of LNG ships would be it needs to be ready in eight, two years. Yes. The reason that we have a significant jump in the COA is that the normal COA is this partial business plus normal volume. It is the it was a significant pickup in acid that we transport. So I would say that the COA pickup in volume was not our core business.
It was the acid trade that picked up very nicely this quarter. So I wouldn't use it in your model as a strong indicator that we would expect that this volume will continue in nomination. The spot rates that we were able to benefit. So you saw the market was the spot market was down, and we were able to get nice spot increases. That is due to there came quite a bit of sophisticated, parcels into the spot market.
That was not carried under a COA, which there's a limit of who could carry, and we were able to benefit from that. The where most The asset trade most of the asset goes to India. So it goes to from West Africa and from Akbar to India.
So there's a better market than The U. Gulf, and that's also an incentive for taking some of your vessels out of the fleet because of the swing tonnage supply. So let's see is that mainly the stainless steel vessels going in and picking up the methanol going in?
No, I think it's the swing tonnage that are picking up or the methanol has the export of methanol has picked up. We don't operate in it, but that has taken easier, tonnage, less sophisticated tonnage out of the segment that we operate in and has had a positive effect. So I have said earlier that I wouldn't get too carried away with this prediction of methanol being produced in The U. S. Gulf.
We have said that how much will be exported. Well, we've seen nice export both. There is an order book coming of 27%. So we hopefully, the export from U. S.
Gulf to Asia will continue off methanol. But if that methanol increase is enough to absorb all of the additional tonnage coming into the market, is too early to say. You can also see that there's a decline in import of methanol into The U. S. Gulf, which I mean, it's natural when they increase the production.
So overall, if you look at the ton miles of the methanol being shipped, it is not as high as you would expect. Yes?
The increase in utilization in your terminal business, I think, was a bit higher than most expected. Was there any kind of positive one offs included in utilization? Should we expect it to continue increasing?
I think that's a good indicator of how it should be going forward. So most of the terminal contracts that we try to fix are long term. Some of the terminals we got some short terms in short term contracts in some of the terminals. But the fundamental terminal market is strong. So I think that once we get the capacity in place and also when we get our get back on track in Houston, I think that the utilization should be above 90%, should be at 95%.
But how far have you come on the utilization prices from Houston Terminal? Is it 20%, 50%, 70% complete? Can you give
us No. That's going to be, well, I mean, utilization in Houston hasn't really dropped that far. Utilization in Houston is still at 90 Low 90s. Low 90s. The problem in Houston is the cost side.
We need to upgrade it so we can have less people having to so it's extremely manual. And to be able to automate it, you need to first look at the way you do the business. And then you need to but we have done a significant study of where we have gone through the whole the business process, the operating process. And we have gotten we used external help and have gotten a very good report. And now that's the easy part.
Now it's to implement that. But I expect to see significant improvement in margins once we put that in place. You got to remember that also in Houston, we have split the terminal into two. It's really the East property and the West property. The West property is developed.
That is full. That's the old terminal. But we have also invested in the East property, where we have invested the infrastructure, the rail line, the filling base for the trucks. And we have so and we but we haven't filled up the land yet with tanks. So that terminal is going to be properly profitable once we have started to fill up the space that we have on these properties.
We also will build an additional jetty on these properties so that we get better throughput, more throughput in our terminal. And that will take time. But again, I will Houston, the fundamentals are strong. Demand is there. Any other questions?
Operator, if you can try to see if there's anybody on the phone that would like to ask some questions.
Okay. Thank you.
We have no questions.
Thank you very much. That completes the second quarter earnings release. I wish you all a sunny summer. Thank you. Thank you, operator.
That concludes today's conference call. Thank you for your participation. You may now