Good afternoon, and a warm welcome from London to Stolt-Nielsen's Third Quarter Results Presentation. A reminder, as always, our earnings release, financial report, and a copy of this presentation are available on our website. We will also be recording this session, and it will be available on our website from tomorrow. Included in this presentation are various forward-looking statements. Such forward-looking statements are subject to risks, uncertainties, and we refer you to our press release and annual report.
I am Alex Ng, Vice President of Corporate Development and Strategy. Today, I will be facilitating our Q&A session at the end of the presentation. To ask a question, simply type into the bottom of the screen. You can also ask your questions live by the operator on the phone line. Please press star one one to get in the queue. Joining us on the call are Udo Lange, CEO of Stolt-Nielsen, and Jens Grüner-Hegge, CFO. Over to you, Udo.
Thanks, Alex, and good day to everyone on our Q3 earnings call. Before I talk about our positive outlook and our strong quarter, the second best EBITDA quarter in our company's history, I would like to thank our more than 7,000 employees for their excellent work and outstanding commitment to keeping us safe and delivering a superior customer experience in liquid logistics and agriculture. I'd also like to thank our thousands of loyal customers. Without their trust in us to safely handle their business, we would not be able to achieve the results that we have seen so far this year. Since joining Stolt-Nielsen just over a month ago, I've already met many members of our team, and I'm really impressed by their expertise, coupled with a genuine passion for our businesses.
I've been equally delighted with my first customer interactions, during which they told me that I'd be delivering a strong customer experience centered around our perfect blend of quality, reliability, and flexibility. I couldn't start this call without taking a moment to thank Niels Stolt-Nielsen for his outstanding leadership as CEO during the past 23 years, and Sam Cooperman for his wonderful stewardship as chairman since 2016. Under their guidance, Stolt-Nielsen has continued to evolve. It is a fantastic company with leading market positions and exceptional leadership team that is implementing robust strategies that are delivering historically high financial performance in an overall attractive market environment. I'm honored to join our wonderful company as the first non-family CEO after more than 60 years.
I'm enjoying working with Niels in his role as chairman of Stolt-Nielsen, and appreciate the trust that he and the board have placed in me. I also look forward to working with Sam and the whole of the Stolt-Nielsen board. Today, I will begin with a short introduction about myself, so that you can get to know a little bit more about my background. We will follow this with a presentation of our group and divisional highlights. Jens will then cover the financial highlights before handing back to me for some closing remarks. Alex will then facilitate our Q&A session. As you can tell from my accent, I'm originally from Germany, but I've also spent 15 years working in the U.S. After studying economics and engineering, I completed a Ph.D. on the strategy and organization of logistics providers.
Since then, I've worked in the logistics industry for more than 25 years, covering multiple aspects of supply chains. Overall, my career can be divided into two chapters. For the first 15 years, I held strategy, operational excellence, and customer experience roles on a country, regional, and global level. More recently, over the past decade, I've led large global businesses ranging from $1 billion-$10 billion in revenue, as COO, President, or Divisional CEO. During this time, I was able to drive significant improvements in shareholder value, employee engagement, and customer experience, as well as leading several digital transformations. Most recently, I was also a member of the senior management committee at FedEx, which allowed me to experience firsthand how to successfully run an iconic global company.
This boardroom experience, together with my recent graduation from the Harvard Advanced Management Program, has prepared me perfectly for my new role here at Stolt-Nielsen. When I was approached about the role at Stolt-Nielsen, I fell in love with this opportunity because the company and my experience, capability, and passion are a perfect match. Stolt-Nielsen operates a truly global business with excellent growth potential. We have exceptional market positions in all our businesses and are delivering leading financial results within the logistics industry. This is possible because the company has a very strong people-led culture with outstanding leadership. S tolt-Nielsen fits perfectly with my previous experience and my passion for logistics and food. I believe that exceptional shareholder value is a result of a culture that has both its people and customers at its center, which Stolt-Nielsen clearly has.
Finally, my unwavering focus on strategy, paid, paired with straightforward execution, is a perfect match to lead the next chapter of our company. I'm delighted to share with you some key reasons for why I'm so excited about this business and what I saw in 2022 when I was doing my research during the hiring process. In my opinion, when I look at logistics stocks, Stolt-Nielsen currently has significant shareholder value upside. We have delivered, and will continue to deliver, a very robust financial performance in an ongoing supportive market environment. You will hear more about this in the segment highlights. Of course, this is subject to any sudden, significant, or unexpected economic or geopolitical changes. Compared to our logistics peers, we are delivering an industry-leading performance that is, in my opinion, not at all reflected in our comparably low P/E or our stock price.
With an EBITDA margin of 25.8% and ROCE of 10.4%, we are among the highest performing logistics companies. Our conversion ratio, which is defined as a percentage of gross profit that we convert to operating profit, was 70%. This is a benchmark for the whole industry. It clearly illustrates the high productivity of all our businesses in supportive, ongoing markets. In contrast to many other logistics companies, we are performing on a significantly elevated financial plateau compared to where we were pre-COVID. This all means that I see a very bright future ahead. We have a diversified portfolio of businesses with leading market positions, serving significant end user markets of global chemical, logistics, and agriculture. We are operating in large markets, each of which I believe has attractive growth fundamentals.
I'm also proud that our teams are providing customers with services and products that they genuinely value, as demonstrated by the many awards we receive from them, and the long-standing customer relationships that we have. I'm equally pleased to see that ESG plays a very important part of our strategy, and safety is our top priority. At Stolt-Nielsen, we have a shared commitment to protect both people and the planet. To support this, we have a very clear goal, which is to achieve zero harm across all our operations. We are signatory of the UN Global Compact, and are working to reduce our environmental impact in line with the UN's sustainable development goals, responsible consumption and production, climate action, and life below water. As you will have seen before, we also have clear ambitions about the impact of each of our businesses on our planet.
Now, to the main event of the day, the group highlights for the quarter. I'm extremely proud of what our people have accomplished this quarter. Amid an uncertain macro backdrop, we have delivered strong underlying performance compared to last quarter and Q3 last year. EBITDA came in at a very strong $201 million, a reduction compared to the record second quarter, mainly due to lower spot rates in Stolt Tankers and lower margins in Stolt Tank Containers. And if you compare the third quarter to the same period last year, we improved 9.1%, and you can clearly see our focus on execution is supported by solid market fundamentals.
Thanks to the strong cash generation from our businesses and lower CapEx in the quarter, I'm also very pleased to see our profitability translate to free cash flow, which increased year-on-year to $207 million from $160 million. Our focus on cash flow generation has helped us to deleverage the balance sheet, improve the net debt to EBITDA ratio, and we have managed our balance sheet by extending debt maturities. Moving on, we present a comparison of the main performance drivers year to date compared to this time last year. First up, Stolt Tankers. This business has continued to deliver strong results, as demonstrated by the significant increase of 3.8% in sailed-in revenue compared to 2022. This is underpinned by solid fundamentals in the chemical market.
Turning to Stolthaven, the utilization of our terminals has remained at high levels, close to full capacity, while we continue to focus on a strong commercial effort to secure better rates and contracts across our customer portfolio. Stolt Tank Containers had a remarkable performance in 2022 due to tight capacity from port congestion and supply chain disruptions. In 2023, we are experiencing margin pressure, but Stolt Tank Containers' global reach gives us a competitive advantage that enables us to drive shipment volumes and gain market share. Finally, Stolt Sea Farm is executing its strategy, achieving another record quarter with EBITDA of $9.1 million. This was driven by both strong sales and production volumes, supported by good prices for both turbot and sole. Ultimately, the long-term fundamentals are looking good for our businesses.
On the demand side, we previously expressed uncertainty on the demand for the chemical logistics moving into the second half. We have seen, in fact, summer volumes remain at robust level versus 2022. I also spent last week at a global chemical industry conference, speaking to many of our customers, and I believe that we should expect demand to grow slowly into 2024. On the supply side, the new building order book remains historically low, with some analysts predicting a reducing global fleet in 2024, 2025, depending on scrapping levels. We see a shortage of yard capacity across shipping segments, with lead times well beyond what we have seen over the past decade. Placing a new build order today means that you would expect to get a vessel delivered late 2026, early 2027.
This effectively puts a cap on new stainless steel tonnage for the next two to three years. In adjacent markets, MR rates remain healthy and above recent historic levels, which continues to be supportive for swing tonnage, continue to focus on the CPP market. To summarize, on the demand side, we remain optimistic heading into winter, and we continue to see favorable supply dynamics in our markets. Now, let's dive a little deeper into the performance of each of our businesses. First, we'll take a look at Stolt Tankers. I would like to start by thanking Lucas and his team for continuing to perform at a very high level. During the third quarter, we saw a softening of the chemical tankers' rates, which resulted in lower operating revenue versus last quarter.
We saw deep sea freight rates going down on average by 5.6%, although this was partially offset by the 3.9% increase in volumes. Stolt Tankers' regional fleets also continue to deliver strong results. Breaking the deep sea revenue down further, quarter-on-quarter, we saw spot rates fall by 14.3%. This was partially offset by a significant increase of 14.8% in spot volumes. Meanwhile, COA rates increased by 4.8%, offset by 6.9% lower volumes. Despite spot rates declining quarter-on-quarter, they remained above COA rates, where we achieved an impressive sailed-in revenue per operating day of $28,429 during the quarter. In terms of volume mix, COA volumes represented 45%, while spot was 55.
The third quarter was quite light on COA renewals, but the rates for contracts that we renewed were up 11.9% on average. EBITDA decreased quarter-over-quarter, explained by lower STJS trading results and JV income impacting up by approximately $40 million. We also saw some higher trading expenses and the higher cost of travel through the Panama Canal due to lower water levels. Moving to sailed-in rates, we have talked about softer chemical tanker spot rates during Q3 and how this has impacted our results. Sailed-in revenues were at $28,429 per operating day. This is a decrease of 7.7% versus last quarter. To comment on rate development, there are three key takeaways from this slide. First, as you can see by the Clarkson Chemical Index, there has been a pickup in spot rates moving into September.
Second, while the Sailed-in Revenue is down quarter-on-quarter, the tight supply-demand balance has resulted in approximately 50% higher rates this year versus the five-year average rate prior to 2023. And finally, based on the rates we have secured this quarter and our market outlook, we would indicate that the Sailed-in Rate for the first quarter will be up somewhere in the region of 1%-3%. When looking at this graph, it's worth noting that a $1,000/day increase in sailed-in revenue equates to around a $6 million change in net income per quarter, per quarter.
In conclusion, Stolt Tankers has faced a softer market in Q3 than in Q2, but we saw a significant improvement towards the end of the quarter and are confident that as spot market stabilize, and with a strong MR market, we will continue to deliver strong results. Moving on to Stolthaven Terminals. The terminals business continued to deliver consistent revenue growth during the quarter. Revenue was $74.7 million, flat versus last quarter, and up from $70.8 million compared to the third quarter of 2022. The improvement in revenue was mostly due to tight storage markets in the US and Brazil, which enabled higher storage rates. Our wholly owned terminals maintained a high utilization rate of 96.8%. The third quarter operating profit of $26 million decreased from the previous quarter's $27.8 million.
This was mainly due to higher operating expenses and lower equity income from our joint ventures. However, when you look back to the third quarter of 2022, operating profit is up by 25%, and EBITDA margin and profitability are improving quarter and quarter as the team works hard to fully utilize the tanks and deliver rate increases across the portfolio. Our focus is on continuing this trend, so steady as she goes for Stolthaven, with thanks to Guy and the team for their focus on commercial excellence, customer portfolio optimization, and cost control. Now, I'll take a closer look at Stolt Tank Containers. The team, under Hans' leadership, have put in a great performance this quarter, despite experiencing some significant headwinds. Following an exceptional performance in 2022, the market has since returned to a more usual operating environment.
During the third quarter, we saw growth in shipments, but a deterioration in margins. As anticipated in previous earnings calls, lower container rates and competition in all markets has led to margin pressure, which impacts the revenue generated from transportation. As port congestion has eased and there have been fewer disruptions in the supply chain, we've also experienced a decrease in demurrage revenue, as customers are no longer holding onto tanks for extended periods. These factors together have led to a decline of 12.1% in operating revenue, down from $189.3 million in Q2 2023, to $166.4 million this quarter. Looking at operating costs, ocean and land freight expenses have decreased from last year's levels, and our procurement teams are working diligently to secure favorable deals and freight space at competitive rates with our key vendors.
Looking forward, based on our shipment and quote trackers, we believe that the transportation rates are stabilizing across most regions, are currently close to the five-year average. We do expect some softer demurrage revenues coming into Q4, owing to customers returning tanks sooner. The competitiveness of the market has clearly impacted margin, therefore, we will continue to focus on expanding our market share. We will also invest in the digitalization of the business, improving our platform to better serve our customers and reduce costs. Finally, I'll give an update on Stolt Sea Farm, our sustainable aquaculture business. We saw strong demand for our products across all markets during the seasonally strong summer period. Volumes sold were up by 6.2 quarter to quarter, and 3% up year to date compared to 2022.
Revenue for the third quarter was $31 million, a significant increase from $25.3 million in the same period last year. This growth was supported by an increase in sales volumes and higher prices for turbot and sole. Turbot saw prices increase of 2.9% compared to last quarter, and strong demand for our sole saw average prices up 10.9% in the quarter. Our sole RAS facilities are performing exceptionally well, with production levels continuing above expectations. Higher production levels have enabled us to spread cost increases, such as energy and feed costs, helping us to maintain margins.
As a result, our EBITDA, excluding fair value adjustment, was a record $9.1 million, up from $7.8 million in the third quarter of 2022, and up from $6.8 million last quarter. Congratulations to Jordi and the rest of the business on this impressive feat. I expect Stolt Sea Farm to continue to drive growth and profitability as they follow their strategy of increasing production capacity and focusing on expanding our sales channels and geographic reach. That's all from me on our performance for the quarter. So now I'll hand over to Jens to take you through the financial highlights.
Thank you very much, Udo. Good afternoon, everyone, and good morning to those of you listening in from the U.S. Just as a reminder, our third quarter runs from June 1 through August 31. So, as Udo talked you through most of the numbers, I'll touch just on a few, and I'll focus a bit more on the cash flow and how this relates to our debt levels and debt covenants. But first, just to remind you what Udo said, revenue was down due to lower rates in STC and recently also lower spot rates in tankers, offset by improved prices and volume in Stolt Sea Farm.
Operating expenses were down on the back of falling ocean freight and trucking costs, and as a result, gross profit for the quarter was $256 million, down 7% from the prior quarter, but up 7% from the same quarter last year. As previously reported, in the second quarter, we recorded a loss provision of $155 million related to the MSC Flaminia lawsuit. This provision is in excess of claims covered by insurance. The net profit impact was $105 million after adjusting for an estimated tax credit of approximately $40 million and a reduction in profit share accruals of $10 million.
Hence, you can see that administrative and general expenses were very low in the second quarter, reflecting this profit share reduction, and that we are now back at a more regular run rate of just under $70 million per quarter. During the third quarter, we sold the Stolt Guillemot for a gain of $3 million, and operating profits absolutely came in at $127.5 million for the quarter, down from $155.1 million in the second quarter before the Flaminia provision, but up 14% from the same quarter last year. Interest expense was down as debt levels were reduced, countering the increase in interest rates.
At the bottom right, you can see that our debt reduced by about $300 million over the last four quarters, while average interest rate on our debt have increased by about 1% to 5.73%. Income tax expense was $12.7 million in the quarter, compared with a credit of $28.7 million in the second quarter, driven by the MSC Flaminia loss provision. In the third quarter, we also received $3.7 million in dividends on our investment in Odfjell and Golar shares, and net profit for the quarter, therefore, ended up at a strong $90 million, with EBITDA of $201 million. Year-to-date CapEx through the third quarter was $165 million, and remaining for the fourth quarter is $104-$131 million.
I expect a significant portion of this will roll over to 2024. And if you look at the 2024 amount, the STC CapEx of $49 million is mostly related to the acquisition of new tanks. Of the CapEx scheduled for 2024, the bulk of the Stolthaven CapEx relates to the expansion of our Houston and New Orleans terminals, and while the Stolt Sea Farm CapEx relates to the growth of our sole farms in Spain. As Udo mentioned, we had a strong cash flow generation during the quarter. Strong operating results drove a growing operating cash flow together with a favorable working capital move relative to the second quarter.
The higher interest payments reflect our loans with semi-annual interest payments, after which we generated net operating cash flow $214.1 million in the third quarter, up from $176.9 million in the second quarter. Capital expenditures during the quarter was limited, as mentioned, and including dry docking payments, we ended up spending $47.6 million. During the quarter, we issued new debt secured by the Singapore terminal of just over $200 million, as well as a loan secured by our new innovative shallow draft barge, Stolt Ludwigshafen. Tied to this was the retirement of the old loan on the Singapore terminal and the repayment of a bond, SNI-08, with $132 million. Also, during the quarter, we saw a further net reduction in debt and leases of $60.3 million.
This left us with net cash flow of $97.2 million, leaving us with cash and equivalents at the end of the quarter of $212.9 million. As you can see at the bottom right, we have therefore had a total liquidity available at the end of the quarter of over $500 million when including the availability of our revolving credit lines. The continued strong performance of the company has translated into a good performance on our various KPIs. The top two are bank covenants. The top left is showing our debt to tangible net worth, which has been on a steadily improving trend and ended the third quarter at 1.01, as the strong cash flow has allowed us to reduce our debt levels.
At the top right, you can see the improvement in our EBITDA to interest expense. This has been driven by the reduction in debt levels, offsetting the increase in interest rates, as mentioned earlier, while the improving EBITDA has seen this ratio climb to 5.7 times. At the bottom right is our EBITDA, and in the third quarter, we produced our second-highest EBITDA to date, as we have mentioned. At the bottom left, you can see that this strong EBITDA has translated into a net debt to EBITDA ratio of 2.65, resuming the downward trend. And with this, I would like to hand it back to you, Udo.
Thank you, Jens. Before we move on to the Q&A, I'd like to leave you with a few concluding remarks. As you have heard today, our third quarter results reflect the strong standing of our company and the strengths of our diverse portfolio of businesses. We are pleased to report our second-best EBITDA quarter in the history of our company. We believe that we are very, very positioned to capitalize on what seems to be positive markets for all our businesses, and we remain optimistic on the winter renewal period for Stolt Tankers. Nils has previously talked about the need for both a supportive tanker market and the IPO market to be available for Stolt Tankers listing. While we have started to see some activity in IPOs, we still view the IPO market as too soft. In addition, we want to see the IPO market appropriately valuing the tankers business.
While we are continuing to monitor markets closely, as of today, we see the strong cash flows of Stolt Tankers supporting the dividends of Stolt-Nielsen, rather than an IPO for the foreseeable future. During this call, I've outlined the positive outlook we have for our markets, and while it's not without some risk, we believe our businesses have unique positions in both liquid logistics and aquaculture. We have clear strategies in place, an exceptional leadership team, and are focused on executing our strategies as the best way to deliver value for our shareholders. One of the challenges that I saw before joining the company is that, in my opinion, we are not rewarded for being a diversified company in attractive markets. Too often, we are viewed as a shipping company only, and therefore compared only to other tanker companies.
This prevents Stolt-Nielsen from being valued for our quality of net profit and our position as a leader in logistics and aquaculture, which consistently pays out dividends. Two ways I want to help the investment community to understand the true value of our company is to provide full year guidance for 2024, and invite you to our Capital Markets Day, where we can deep dive into our businesses, reaffirm our strategy, and explain our approach to capital allocation. We will provide more details of our Capital Market Day plans during our Q4 results. Now, I'd like to thank you for your attention and pass you back to Alex, as we open up for questions.
Thank you, Udo. That completes our presentation, and now we begin the Q&A. First, I will go to those submitted in the chat, and then we get to questions on the phone line. As a reminder, please click star one one to get into the phone queue, and please use the chat box at the bottom of the page for the online questions. Thank you. Okay, our first questions from the online chat. One for you, Udo, from Paul Holderdal: "What do you think are the key KPIs that will decide the returns which SNI can deliver over the next three to seven years?
I think you pretty much saw that on the page, that I showed as the key drivers for the business. So if you think about Stolt Tankers, of course, you're looking at the sailed-in revenue that we have for the business. When you think about our Stolt Sea Farm business, of course, it's the prices and the tonnage that we're achieving there. If you think about our Stolthaven Terminals business, of course, you want to have a high utilization at a nice price level.
And finally, our Stolt Tank Containers business is really a network business, so you're looking at volume growth and high asset utilization. And what I'm really excited, I joined the company, and if there's one thing which is happening at Stolt-Nielsen, it's detailed KPI management across all businesses. We have BI management dashboards in each area, and each business leader, and each operator down in the field, has on their fingertips, at any point in time, what are the key success drivers in the business, and I was so excited to see this, Alex. It's just a wonderful company, which has embraced digitalization to drive performance.
Thank you, Udo. Next question goes to you, Jens, from Petter Haugen : Hi, the 11.9% higher COA rates, does that compare - how does that compare to Q2 2023 or Q3 2022?
As we go on, you will have this measure of COA increases. It's always back to the same quarter that was 12 months ago, so as we continue to renew our contracts, you will expect that the COA increases will decline. That being said, in the second quarter, the COA increase was 55%, and in the first quarter of 2023, we're at 53%. If you go back to the third quarter of 2022, I seem to recall we were in the region of about 10%.
Thank you, Jens. Thank you. Good grasp of the numbers. Okay, so next question is to you, Udo, from Eivind Kolsgaard. Can you elaborate on your record low COA ratio? Is there any level that you deem too low?
Hi, Evan, thank you so much for that question. I think we need to think about the COA and spot quotes a little bit differently. The spot-COA to spot freight quote ratio is really a mirror of how you are executing a strategy in the market, and what is the market allowing you to do? So I think the team is picking right now the right strategy, because you have a high volume of spot quotes, which are coming in at nice price levels, and on the other hand, the COA level and pricing has not yet fully picked up. We are seeing increases now, and I expect we continue to see increases in the winter season as part of the renewals, but we need to have that rate level on COA increase so that it overall shifts more back.
So there's really not this, "Oh, this is the optimum mix." It's the optimal mix in the market environment that you are in, and I have confidence that Lucas and the team are executing that in a perfect way. And yeah, it appears low, and we expect to increase COA going forward, but it's really our customers who also decide if they want to pay the higher spot quote prices, while maybe it is prudent to agree to higher COA rates at this point in time.
Very good. Thank you. And then, the next question we have comes from David O'Brien, and it relates to Avenir. The question he has is, "The gas market is good, but what do you see the prospects for Avenir going forward?
Thank you so much, David. Of course, with our commitment to ESG, we are really excited that we have a business like Avenir in our portfolio, and Peter Mackey and his team are doing excellent work in bringing our business forward in this space. So of course, at the end, this is a question of how is the LNG price developing versus what is happening on fossil fuels? But if you see how many dual fuel ships are coming into the market in the coming years, I think there's a very bright future ahead for LNG, and we are at the center of this bright future with our Ave- Avenir business.
Very good. Thank you very much. So that concludes the Q&A. I'll pass you back to you, Udo.
Yeah, thank you so much for joining us today. I look forward to talking to you again in the new year when we present our first quarter. Again, thank you, and wish you all a good day.