Good afternoon, and welcome to Stolt-Nielsen's earnings call for the third quarter of 2026. As always, the earnings release and related materials are available on the Stolt-Nielsen website. We will also be recording this session, and the playback will be available on the website tomorrow. Included in this presentation are various forward-looking statements. Such forward-looking statements are subject to risks and uncertainties. Please refer to the latest annual report for further details. On the call today, we have Udo Lange, CEO, and Alex Ng, CFO. At the end of the presentation, there will be a Q&A session where we will take your questions. To ask a question, simply type into the Q&A function on your screen at any time. Thank you, and over to you, Udo.
One second. Sorry, Kirsty. Technical issue. One second. Good afternoon, everyone, and thank you for joining us for our third quarter 2026 earnings presentations. These are solid results in a generally difficult market. Global supply chains remain complex and the visibility window is short, yet the scale and the breadth of our portfolio allowed us to keep our customers' product moving and deliver a solid quarterly performance. Group EBITDA before the fair value adjustment was $194 million in the third quarter, a steady performance versus the third quarter of last year. Stolt Tankers navigated a difficult market. Revenues, higher bunker costs. Stolthaven Terminals delivered a strong year-on-year performance. Stolt Tank Containers built positive quarter-on-quarter momentum, returning to profit as their scale helped them perform well in a challenging market, with a quarter-on-quarter swing of $13 million.
For context, a $13 million improvement in the quarter is roughly equivalent to around a $2,000 per day positive swing in TCE. Together, our non-tanker businesses grew year-on-year and accounted for 50% of the group EBITDA in the third quarter, up from around 45% a year ago. This is the direct result of our strategic investments across our portfolio. In the current environment, we continue to be focused on our customers and optimizing our balance sheet. Ongoing market disruption has shifted the conversations with our customers from talking about supply chain efficiency to a focus on supply chain resilience. Our logistics portfolio, shipping, storage, and tank container solution allows us to meet that need directly, offering stability and reliability.
We believe it is a real factor behind several key contract renewals we've secured with large customers this year, who value having the breadth of offering available to them via our liquid logistics portfolio. During the quarter, we also completed the sale of a 50% interest in Avenir LNG to NYK Line. This creates a strategic partnership to accelerate growth in small-scale LNG and LNG bunkering whilst releasing capital and reducing our consolidated debt. We continue to maintain a robust balance sheet with liquidity of $660 million and net debt to EBITDA of 2.86x . We are also continuing to optimize our financing as opportunities arise. During the quarter, we signed a new 10-year facility on competitive terms, and after quarter end, we replaced our existing $450 million revolving credit facility with a new $307 million facility across nine banks on improved terms.
Let's now turn to the numbers in more detail. Taking the key third quarter metrics in turn. Operating revenue was $770.65 million, up 11% on the third quarter of last year, driven by higher tanker and tank container revenues. EBITDA before fair value was $194 million, up 1.3% year-over-year. Operating profit was around $100 million, down 8% year-over-year. This was impacted by increased fair value losses on Stolt Sea Farm's biological assets and higher depreciation. Net profit was $84 million, up 32% compared to the prior year. The $84 million includes a $15.4 million one-off gain on the partial sale of Avenir LNG. Free cash flow was strong at $292 million as we benefit from the cash proceeds from Avenir, which we have since used to pay down term debt.
This had a positive impact on net debt to EBITDA, which improved to 2.86x from 2.94x a year ago, and 3.6x in the second quarter. Let's look at some of the key drivers of that performance. Average Deepsea TCE per operating day was $24,121, down 3% year-over-year, and up 3% quarter-on-quarter, with firmer average freight rates offset by lower volumes and higher bunker costs. Terminal utilization improved to 93.6%, up 1.8% on the same quarter last year, driven by stronger utilization in Singapore and Dagenham. At Stolt Tank Containers, shipment volumes were 48,036 for the quarter, up 25.6% year-on-year, predominantly reflecting the consolidation of Suttons. Rates through the period were stable year-over-year and meaningfully up quarter-on-quarter due to our ability to secure space on carriers despite supply chain constraints, given our scale and market reach.
Overall, non-tankers contributed 50% of the total EBITDA this quarter, up from around 45% a year ago, again, underlying the importance of the diversification within our portfolio. Alex, I'll hand over to you for the financials.
Thank you, Udo. Good afternoon and good morning to those of you joining us from the U.S. Over the next few slides, I'll run through the financial highlights comparing Q3 2026 against Q3 2025. As a reminder, our third quarter runs from beginning June to end August. Let's dive into the numbers. Revenue in the quarter was up 11%, or $77 million over the same quarter last year. Whilst we saw revenue increase across all businesses, the change mainly came from STC, which was up $52 million due to increased scale from M&A, and Stolt Tankers, which increased by $15 million, mostly due to higher average freight rates, partially offset by lower volumes. Operating expense was up 18%, or $78 million, mainly due to the larger size of STC post-Suttons and higher bunker costs in Stolt Tankers, partly offset by lower ship-owned expenses due to vessel sales.
Depreciation expense was $5.1 million higher than the quarter last year. This was due to lower residual values on our fleet following changes in steel prices and ship surveys, as well as higher asset base in STC. SG&A expense was up 13%, or $9.7 million, driven by the addition of Suttons staff in STC, integration costs, and profit-sharing accruals. These higher expenses were partially offset by a gain on sale of assets related to the sale of two ships during the quarter. Operating profit for the quarter was $101 million, down $9 million versus Q3 last year, but up $7 million from last quarter. The biggest changes year-on-year were lower profitability in Stolt Tankers and fair value adjustments in Stolt Sea Farm. Net interest expense was down $4.7 million compared to Q3 2023, as debt levels are now some $300 million lower.
We also booked a gain of $15 million in the quarter on the sale of the 50% in Avenir LNG, and going forward, our remaining 50% stake will be recorded as an equity joint venture. Overall, the net profit and EBITDA for the quarter was up versus the same quarter last year. Let's have a look at the cash flows. We saw strong cash flows during the period. Net cash flow generated from operations was broadly flat year-on-year at $181.5 million, and nearly $80 million better than last quarter, reflecting positive changes in working capital. Net cash used in investing activities saw a cash inflow of $63 million versus a $95 million cash outflow last year due to lower capital expenditures and $140 million of proceeds from the sale of Avenir and vessel sales, as mentioned on the previous slide.
Net cash used in financing activities was a negative $119 million, reflecting net repayments on debt and leases and no new issuance or drawdowns. As such, total cash flow for the quarter was a positive $121.9 million. As you can see, $116 million of liquidity. Turning to our capital expenditures in more detail, CapEx during the quarter totaled $63 million, mainly consisting of terminal expansions, life extensions on existing tonnage, as well as expansions in Stolt Sea Farm. Overall, for 2026, we expect to spend approximately $250 million, which is a lower level than 2025. This overall reduction is part related to timings of new build deliveries and also management of our balance sheet's flexibility.
We'll continue to invest strategically in our businesses and are completing meaningful investments in the coming months, including capacity expansions in Houston and New Orleans and the first of our 38,000 deadweight chemical tanker newbuilds, aiming to maximize long-term benefit for our customers and our shareholders. We expect CapEx spend to increase again in 2027 as deliveries under the new building program for tankers accelerates. However, given the current geopolitical uncertainties, we will continue to be disciplined for further capital commitments. From a debt perspective, we are well-positioned with no significant maturity spikes. Debt matured in the next couple of years is mainly scheduled loan amortizations, and our next bond matures in 2028. Our average long-term interest rate for the third quarter was 5.47% as we have sought to repay and refinance and continuing to reduce our debt during the quarter.
Gross debt in the third quarter was reduced by $120 million, and is now around $270 million less than our peak at the end of 2025. We've been also active in the bank market, capitalizing on strong bank market dynamics. We signed a new facility linked to our new buildings, and after the quarter, we also refinanced a $450 million RCF/term loan with a new $370 million six-year loan facility at attractive returns. The continued steady performance of the company supports our covenants, and a decrease in debt during the quarter helped reduce debt to tangible net worth to 0.89x . Net debt to EBITDA decreased during the quarter and sits at 2.86x . The biggest driver of that improvement being a $250 million reduction in net debt, which now sits at $2.1 billion. EBITDA to interest expense coverage moved slightly up to 5.37x .
Overall, we have substantial headroom on all covenants. And with that, I hand back to you, Udo.
Sorry, we have some technical challenges here today. Apologies for that. Thank you so much, Alex. I will now take us through the highlights from each of our logistics divisions. Let's start with Stolt Tankers. Revenue was up 4%, driven by Deepsea revenue, which was up $50 million, reflecting a 5% increase in freight rates overall, even as total volumes were down 3%. EBITDA was $97 million, down 8% year-over-year, and operating profit was $52 million, down from $57 million a year ago. TCE was down 3%, and average bunker price consumed was higher on a relative basis. We've been seeing increasing COA volumes, and for the third quarter, our COA mix touched 60%. COAs renewed in the quarter at an average rate decrease of 8%, all by on low volumes, a continuation of the softer renewal trend we have been navigating.
Operating days declined 2%, partly reflecting the vessel sales and the off-hire of Stolt Magnesium following the attack off Oman in July. And I'm so pleased to confirm all seafarers were accounted for with no physical injuries and the cargo was retrieved safely. We have insurance coverage and expect minimal financial impact. I want to take a moment to recognize how well the team handled the Stolt Magnesium incident this quarter, as it really highlights our steadfast commitment to safety at all times. Our well-trained crew and highly responsive shore teams worked seamlessly together to bring the event to a safe conclusion. That is a true testament to the professionalism of our Tankers team and Maren's leadership. My thanks to Maren and her team for continuing to execute strongly, delivering the quality, reliability, and flexibility our customers expect in a generally difficult operating environment.
Let's look at tanker rates in more detail. TCE for the quarter was just north of $24,000 per operating day, down 3% on the third quarter of last year, but up 3% on the second quarter. That's a reversal of the softening trend we had seen over the previous three quarters. For context, that remains above the 2018 to 2022 average of $19,825 per day and close to our longer run average since 2016 of $23,182 per day. When looking at this graph, it's worth noting that a $1,000 a day increase in the sailed-in rate equates to around a $6 million change in EBITDA per quarter. There's a lot of excitement about tanker markets as energy trade flows are adjusting to a world-focused and on resilience and security of supply. This dynamic is most prominent in the crude tanker market and, to a certain extent, the product tanker market.
It would be easy to conclude that chemical tankers must be benefiting to a similar degree. However, while some macro themes and market sentiment bleed through into our markets, the specialized product tanker market has its own trade flow fundamentals. We will go into more detail on the key drivers in our market section. As ever, in a market moving this quickly, what matters is not scale, but adaptability, staying close to our customers, reading the market, and reacting fast. Turning to Stolthaven Terminals, which had another excellent quarter. Revenue was $80 million, up 1.6% year-over-year, reflecting higher utilization in Singapore and Dagenham, as well as storage rate escalation, partly offset by lower ancillary revenue and utilization in the U.S. Average utilization at wholly owned terminals was 93.6%, up from 91.9% a year ago. We have seen utilization steadily climb over the last few quarters.
Into Q4, we will see some of the capacity in Houston and Nola come on stream. Whilst overall good for earnings, we may see some impact on utilization due to timing differentials between commissioning and utilization. EBITDA was $44 million, up 1% on last year, and operating profit was $27 million, up 3%, driven by the revenue improvement, with operating expenses broadly level and equity income from joint ventures also broadly flat year-on-year. Looking ahead, we expect the storage market to remain stable, with earnings supported by the expansion of our U.S. capacity later in the year as our Houston and New Orleans projects come on stream. My thanks to Guy and his team for these strong results. Here we can see Stolt Tank Containers, which returned to profit this quarter as they outperformed a challenging market due to their scale and flexibility.
Revenue was nearly $260 million, up 30% year-over-year, predominantly reflecting the ongoing consolidation of the Suttons business. Shipment volumes were 48,000, up 26% year-over-year. Underlying volumes, excluding the impact of the additional Suttons, were stable year-on-year, but up meaningfully quarter-on-quarter as STC were able to benefit to secure space on carriers given our scale and market reach. Demurrage was elevated given the supply chain constraints. EBITDA was $31 million, up 12%, and operating profit was $13 million, including $300,000 of Suttons integration costs this quarter. This is down from $4 million of integration costs in the second quarter, as these costs are almost fully worked through. We expect margins and demurrage revenue to remain broadly flat into the first quarter, despite seasonally lower volumes.
My thanks to Hans and his team for the continued work integrating Suttons and building Stolt Tank Container scale, which is helping us to ensure supply chain resilience for our customers despite the challenging market environment. I also want to thank John Sutton for his exemplary leadership and continuous support for the integration. We wish him all the best for his retirement. Let me pass you now to Alex to cover the market backdrop before I close with some final remarks, and we then move to the questions.
Thanks, Udo. In the current tanker markets, we see a growing divergence in earnings between crude and product tankers and chemical tankers. Crude tanker markets in particular have surged to all-time highs on ton mile inefficiencies, elevated risk premiums, and market sentiment. Middle East crude exports are now moving through alternative routes via pipelines or by whole new ship-to-ship transits, often on to longer trades to Asia. Over the past week, it has been reported that over 70% of Arabian Gulf crude exports are now getting access to market. These factors are benefiting the conventional tanker markets more than the chemical tanker market segments and explain the strong performance in crude and product tanker earnings that can be seen on the top left-hand side chart. Chemical tanker rates have improved only modestly versus pre-war levels, as you can see on the bottom chart.
Whilst risk premiums and market sentiment is shared with the other tanker segments, chemical volumes remain subdued, with the relatively low Middle East chemical leakage and feedstock constraints impacting volumes. On a positive note, we are beginning to see signs of improvement, as shown by the small uptick in the spot rates seen on the graph. We also observe sentiment in October loadings and observe a gradual pickup in production activity from the chemical producers. These early indicators should be supportive as we move into the winter contract renewal period. While chemical inventory data is imperfect, certain key commodity chemicals can be tracked and show inventory levels at multi-year lows. This reflects a period of inventory drawdowns over the past six months to partially compensate for lost Middle East feedstocks and trade flow gaps.
At the same time, elevated feedstock costs have constrained incremental production, and as a result, inventories have continued to decline as consumption has outpaced replenishment. With inventories approaching multi-year lows across many key products, there will be a need to have inventory restocking in the future. Timing for this remains uncertain and is linked to transit normalization, increased availability of feedstocks. However, when restocking begins, trade volume should benefit, which may serve as a catalyst for chemical tanker demand and ton miles. In summary, inventories are nearing depleted levels, and while the timing is uncertain, eventual restocking has the potential to drive a sustained recovery in chemical tanker demand and earnings. Turning to the supply and demand fundamentals underpinning our tanker outlook.
On the demand side, we expect a rebound in seaborne trade into 2027 as the trade decline we've seen for 2026 reverses with volume normalization and inventory restocking. As we just covered, wider product tanker market earnings and fundamentals remain strong, which is limiting swing tonnage availability to enter chemical trades. Furthermore, forward sentiment in product tanker markets remains firm, so we expect limited swing tonnage environment well into 2027. On the supply side, we're forecasting net fleet growth of around 6% in 2026 and averaging 4% annually through 2026 to 2028. The current order book stands around 17% of the existing fleet. Balancing that, 13% of the fleet will be 25 years old or older by 2028, which creates scrapping capacity should demand and earnings soften. If earnings do soften, we'd expect that pickup in recycling to happen.
Taken together, the fundamentals in the chemical tanker sector remain constructive for the medium term, despite continued disruption and uncertainty. Udo, back to you.
Thank you so much, Alex. To wrap up then, our global logistics network has allowed us to keep supporting customers through a period of real disruption. I want to thank our teams across the businesses for the focus on the customer again this quarter. Our diversified earnings streams continue to provide cash flow stability. Non-tankers represented around 50% of group EBITDA this quarter, which demonstrates real resilience built through the breadth of our business. This quarter, we are focused on cost efficiency, capital management, and financial flexibility, including the leverage reduction that followed the deconsolidation of Avenir's debt this quarter. Looking to the fourth quarter, we expect the financial performance in Q4 to be modestly behind this quarter, predominantly as a result of softer performance in tankers.
Stolthaven Terminals should remain in line with its average performance over the past three quarters while the new capacity in the U.S. comes online and starts to fill, albeit with seasonally lower volumes. The conflict in the Middle East continues to create complexity and uncertainty for our business, and it's worth repeating a point we make often. We are not simply a chemical tanker business. We are the world's largest chemicals logistics company, and that diversification is what allows us to navigate periods like this. Our focus remains on the things we can control: supporting our customers across our logistics network, maintaining cost discipline, improving operation performance, and preserving financial flexibility. Now, over to the Q&A session.
Thank you, Udo. As a reminder, please submit your questions online via the Q&A function. The first question: can tankers benefit from the strong MR market, like opposite swing tonnage?
Alex, do you want to take this first?
Yeah, of course. I think there's two elements that we are able to benefit from the MR market. I think the first one is the competing tonnage aspect, which we kind of touched upon in the market outlook and how typically we're always well-correlated historically with the earnings in the alternative markets, as there's obviously an element of overlap in competing tonnage that we have for how we move the most commoditized products that we move within our chemical tanker fleets. The second element is could we and should we sail into clear product trades? I think this is something we are constantly evaluating, but I think it's really important to evaluate the time it takes for us to book our trades and select our cargoes, which is typically somewhat in a month in advance.
The sailings that we have, the turnaround times, where then also the cleaning aspects for changing of products between CPP and the chemicals that we typically move. All of these elements typically come together to evaluate whether these decisions are made. In a period where rates spike very quickly, what we see both in swing tonnage and also the evaluation that the likes of ourselves have to think about is will it be a sustained arbitrage between the chemical tanker markets and the MR markets to justify making that strategic move between one trade and another. Obviously, we're an industrial shipping company, and supporting our chemical customers with our traders is a key priority for us, whilst also optimizing for rates. As of today, we are not operating.
You haven't heard us mention that we're operating in that trade, but it is something that we continuously evaluate.
Yeah, maybe adding to Alex's very well-elaborated point there. I think what is also relevant is to look at what are the ship classes that we have. So if you take our larger Deepsea ship class that we have, that is still then at the lower end of the MR market. But of course, we are evaluating there. Is it then better to go, for example, in the handy market and trade one of our ships? And you know we have 60% COA, which means there is, of course, always flexibility to do that, but we don't have the ship classes to really participate in the full MR market.
Super. Thank you. For the next question then. Of the approximately $311 million of investment commitments you have at your joint ventures and associates over the next 12 months, how much cash do you expect Stolt-Nielsen itself to contribute?
Yeah. Thank you very much for the question. The large proportion of that CapEx mentioned is in relation to new build deliveries where we have a number of vessels being delivered into our 50/50 joint venture with NYK, which is called NST. And essentially, the way that we work with these is we typically are funding with equity for the initial deposits and then at the back end when the ship is delivered, then we are raising the debt in order to make the final payments, which are the large, more substantial ones. So the short answer is we've put the majority of the equity requirements in already. And then the back end of the CapEx spend will be done by debt raising. So it's relatively limited going forward.
But as you have seen last year, we made. Yeah, up in Q3 last year, some $35 million of joint venture investments. That is really reflective of the dynamic I just talked about.
Thank you. With respect to Q4 earnings, can you give us a bit more color on what modestly behind Q3 means, and also what the impact of Avenir LNG now being equity accounted for would be?
Yep. I can cover that. Yeah. We obviously choose our words carefully when we are evaluating how we are phrasing things in the earnings releases. We do not really want to comment more granularity on percentage-wise. But we do expect it to be slightly softer due to the elements that we have communicated. When we are talking, we tend to talk more around the elements we have in our control, which is on an underlying business basis. It is kind of the voyages that we have booked, the fish that we sold, the shipments and volumes that we have delivered. The market outlook that we are booking for the future. Those are really driving it. A lot of the fair value adjustments, that are made in the final reported numbers, are things that are impacted by the year-end or the quarter-end, the prices or the steel prices.
We are talking mainly on an underlying basis. Then, if you quantify the EBITDA impact on Avenir LNG, we were already in Q3, had it as assets held for sale. So you will not see a material impact to EBITDA, on that basis, because of that.
Thank you. Now the question here on Suttons, is quarter-on-quarter improvement a result of an improved market, or is there anything fundamentally changed following the first quarters of the Suttons integration?
Udo, do you want to comment on the Suttons integration? I can cover on financials.
Yeah, of course. The Suttons integration is going really, really well. Businesses are coming, integration costs are going down. But of course, there's still work to be done on the Suttons integration. The key driver for this improvement, however, is the improvement in the market, and they are both on a margin side as well as the elevated level on demurrage. But again, it shows they are, because we can deliver supply chain resilience thanks to our steel during the time, that we can actually deliver value for our customers, and we also see that in recent contract renewals.
Okay. Udo, another question here for you, I think. Could you please provide some more color on your view of the chemical tanker market going forward in a scenario of a prolonged Middle East conflict?
Well, that of course is challenging. There is multiple scenarios that are possible. The key I think is really in a prolonged Middle East conflict, what will happen to restocking of supplies? If you think about where we are right now, the part of the reason where we are where we are is because, the supply bases have really been a good buffer and still keep supply chains afloat. But they are now really depleted. The question is, what does the conflict do, and is there then enough supply going out to support that? And then there's multiple scenarios. There are scenarios where the supply drive can, of course, lead to an increase in ton mileage. But on the other hand, if there should be a shortage on supply, then you also can result into more challenging economic environments, which can have a different outcome.
Very, very early to tell. We of course have different scenarios, but we are really, as mentioned previously, the visibility is very short right now. What we are more focused on is how can we deliver value for our customers right now, and how do we adapt to the ever-changing market conditions. Alex, anything to add there from your side?
No, you covered it well.
Super. Thank you. As a reminder, you can submit your questions via the question function on your screen. I think we've got one more at the moment. This one, I think, for Alex. You explained that the decline in average core rates largely reflects cargo mix. Looking at comparable businesses, how is the underlying pricing developing, and what is the main driver of your softer tanker outlook for Q4?
Thanks, Kirsty. As Udo just mentioned, the visibility that we have is relatively limited. The main driver around the softer tanker outlook is, essentially the voyages that we have already begun, and the bookings that we have in our business, overlapped with the discussions and what we can see in the market today. That forms the core of how we evaluate and have commented that it will be slightly softer into Q4. I think that is really important to connect with. The increases that we have seen in the spot markets in the last week or so in the chemical tanker spot rates, that is not necessarily reflective of bookings that we have booked a month prior and are already active in our fleet.
They will then be reflecting in revenues that may be happening in the back end of this quarter, but may be also flowing into Q1 also. I think that is worth evaluating. The second part to remind people of is that we are entering into the typical period where we are contracting, the winter period where we are contracting a meaningful proportion of our contracts of affreightment. This is the period which will set then the contract rates, which will be impacting for the next 12 months or so. In that regard, it will be a really important process, and the sentiment that we have today and the discussions that we have with our customers in the coming months will be setting that base of COA volumes that we will be having for the following period as well.
I think it is more reflective of the dynamics that we have had historically in the last few months that is driving the Q4 commentary and outlook rather than necessarily what we are seeing in the last week or two.
Thank you. Okay. That completes the questions. We will post a recording of the call on the website tomorrow. Udo, back to you for some final words.
Yeah, thank you so much for joining us today. I look forward to talking to you all again when we present our results for the final quarter and full year results in early February. Again, thank you, and wish you all a good day.