Growing in challenging times

Transcription

1 Growing in challenging times Annual Report 2010

2 Stolt-Nielsen Limited (SNL) is a leading provider of integrated transportation and storage solutions for chemicals and other bulk liquids. Stolt Sea Farm is a leading producer of turbot, sole, sturgeon and caviar. Stolt-Nielsen Gas focuses on the transportation of LPG. Stolt Bitumen Services distributes bitumen to the Asia Pacific market. SNL delivers value to its shareholders through its conservative approach to both its financial management and investments, and through its sustained focus on continuous improvement, innovation, quality, customer service and safety for both people and the environment ,000 Tankers: deep-sea, coastal and inland Production capacity of turbot (tonnes) 2.9m cbm Stolthaven s storage capacity 434,700 cbm Capacity of gas fleet 24,000+ Tank container fleet 5,900 dwt Capacity of Stolt Bitumen s first tanker

3 Group Overview USA CALIFORNIA KOREA TIANJIN CHINA NEW ORLEANS SHANGHAI HOUSTON OSLO NINGBO TAIWAN NORW AY INDIA JAPAN PHILIPPINES MALAYSIA COLOMBIA SINGAPORE UK SÃO PAULO BRAZIL NETHERLANDS GERMANY BELGIUM FRANCE LA CORUÑA AUSTRALIA TINA S PA I N PORTUGAL ARGEN Our diversified global operations ANGLET Our businesses Stolt Tankers Stolthaven Terminals Stolt Tank Containers Stolt Sea Farm Stolt-Nielsen Gas Stolt Bitumen Services What we do What we do What we do What we do What we do What we do Stolt Tankers (ST) is a leading global provider of high quality transportation services for bulk-liquid chemicals, edible oils, acids, biofuels and clean petroleum products. Stolthaven Terminals is a global provider of high quality storage services for bulk-liquid chemicals, edible oils, acids, biofuels and clean petroleum products. Stolt Bitumen Services is focused on the development of a bitumen distribution network to serve the fast growing Asia Pacific market. Key markets Stolt Sea Farm (SSF) is a leading high-tech aquaculture company focused on the production of premium fish species whose complex biologies require sophisticated know-how and technological expertise for successful cultivation. Stolt-Nielsen Gas owns 50% of Avance Gas Holding Ltd., which transports liquefied petroleum gas (LPG) with its fleet of very large gas carriers (VLGCs). Key markets Stolt Tank Containers (STC) operates the world s largest fleet of tank containers, meeting customer needs for door-to-door shipments of bulk-liquid chemicals, food-grade products and bitumen via road, rail and container ship. Key markets Key markets Global deep-sea transportation services. Four wholly owned terminals: Houston and New Orleans in the U.S., Santos in Brazil and Singapore. Key markets Key markets Middle East, Asia and Africa. Asia Pacific. STC serves customers worldwide through its global network of offices and depots. Western Europe with a focus on Spain, Italy and France. Regional transportation services in Europe, Asia Pacific, Indian Ocean, Caribbean and the U.S. Five joint ventures: Antwerp in Belgium, Westport in Malaysia, Ulsan in South Korea, and Ningbo and Tianjin in China. The Forest Stewardship Council (FSC) is an international network which promotes responsible management of the world s forests. Forest certification is combined with a system of product labelling that allows consumers to readily identify timber-based products from certified forests. Designed and produced by Black Sun Plc. Printed in England by the Pureprint Group.

4 Group Overview USA CALIFORNIA KOREA TIANJIN CHINA NEW ORLEANS SHANGHAI HOUSTON OSLO NINGBO TAIWAN NORW AY INDIA JAPAN PHILIPPINES MALAYSIA COLOMBIA SINGAPORE UK SÃO PAULO BRAZIL NETHERLANDS GERMANY BELGIUM FRANCE LA CORUÑA AUSTRALIA TINA S PA I N PORTUGAL ARGEN Our diversified global operations ANGLET Our businesses Stolt Tankers Stolthaven Terminals Stolt Tank Containers Stolt Sea Farm Stolt-Nielsen Gas Stolt Bitumen Services What we do What we do What we do What we do What we do What we do Stolt Tankers (ST) is a leading global provider of high quality transportation services for bulk-liquid chemicals, edible oils, acids, biofuels and clean petroleum products. Stolthaven Terminals is a global provider of high quality storage services for bulk-liquid chemicals, edible oils, acids, biofuels and clean petroleum products. Stolt Bitumen Services is focused on the development of a bitumen distribution network to serve the fast growing Asia Pacific market. Key markets Stolt Sea Farm (SSF) is a leading high-tech aquaculture company focused on the production of premium fish species whose complex biologies require sophisticated know-how and technological expertise for successful cultivation. Stolt-Nielsen Gas owns 50% of Avance Gas Holding Ltd., which transports liquefied petroleum gas (LPG) with its fleet of very large gas carriers (VLGCs). Key markets Stolt Tank Containers (STC) operates the world s largest fleet of tank containers, meeting customer needs for door-to-door shipments of bulk-liquid chemicals, food-grade products and bitumen via road, rail and container ship. Key markets Key markets Global deep-sea transportation services. Four wholly owned terminals: Houston and New Orleans in the U.S., Santos in Brazil and Singapore. Key markets Key markets Middle East, Asia and Africa. Asia Pacific. STC serves customers worldwide through its global network of offices and depots. Western Europe with a focus on Spain, Italy and France. Regional transportation services in Europe, Asia Pacific, Indian Ocean, Caribbean and the U.S. Five joint ventures: Antwerp in Belgium, Westport in Malaysia, Ulsan in South Korea, and Ningbo and Tianjin in China. The Forest Stewardship Council (FSC) is an international network which promotes responsible management of the world s forests. Forest certification is combined with a system of product labelling that allows consumers to readily identify timber-based products from certified forests. Designed and produced by Black Sun Plc. Printed in England by the Pureprint Group.

5 Contents p.4 p.8 p.12 Our Business IFC Group Overview 2 Chairman s Statement 3 Financial Highlights 4 Chief Executive Officer s Review 8 Stolt Tankers 12 Stolthaven Terminals 16 Stolt Tank Containers Financial Statements 51 Independent Auditors Report 52 Consolidated Income Statements 53 Consolidated Statements of Comprehensive Income 54 Consolidated Balance Sheets 55 Consolidated Statements of Changes in Shareholders Equity 56 Consolidated Statements of Cash Flows Stolt-Nielsen Limited Annual Accounts 106 Independent Auditors Report 107 Income Statement 108 Statement of Comprehensive Income 109 Balance Sheet 110 Statement of Changes in Shareholders Equity Shareholder Information 119 Shareholder Information 120 Offices and Facilities 20 Stolt Sea Farm 24 Stolt-Nielsen Gas 26 Stolt Bitumen Services 28 Social Responsibility 30 Board of Directors 32 Corporate Governance 38 Financial Review 57 Notes to the Consolidated Financial Statements 105 Responsibility Statement 111 Statement of Cash Flows 112 Notes to the Financial Statements Our Business Financial Statements Stolt-Nielsen Limited Annual Accounts Shareholder Information p.28 Stolt-Nielsen Annual Report

6 Chairman s Statement So 2010 was not too bad after all a year of modest economic growth and, I hope, a transition to better times ahead. Christer Olsson Chairman A year has now passed since I became Chairman of Stolt-Nielsen Limited, and I must say that it has been both an eventful and, in many respects, a successful year for the Company all things considered. From a global economic perspective, perhaps the most noteworthy feature of 2010 was not what happened, but what did not happen. In the U.S. and Europe, the much-discussed double-dip recession did not materialise at least not yet thanks largely to the strength and vitality of the world s emerging economies. So 2010 was not too bad after all a year of modest economic growth and, I hope, a transition to better times ahead. Last year was also a good year for SNL. As expected, the parcel tanker market continued to slide sideways in 2010, driven by downward pressure on freight rates due to excess tonnage. Stolt Tankers nevertheless managed an operating profit in what one industry analyst described as one of the most challenging years in modern times for chemical tanker operators. In addition, we secured a full refund of $340 million for the newbuilding contracts that we cancelled with SLS Shipbuilding. The refund was timely. We were able to quickly redeploy those resources to acquire seven high quality ships in the second-hand market. As a result, we were able to start the New Year having met our near-term tonnage needs on quite favourable terms. The performances of Stolt Tank Containers and Stolthaven Terminals perhaps better reflected the firming of economic conditions in These two businesses generated 75% of SNL s total operating profit in 2010, and the growth prospects for both continue to look attractive. As growing in challenging times is the theme of this annual report, I should point out that the Board of Directors, working closely with management, took significant steps to support the continued growth of SNL s businesses. During 2010, the Board approved investments totalling approximately threequarters of a billion dollars, distributed across the full spectrum of our businesses. This, I might add, during a year in which many shipping companies merely tread water, if not struggled for survival. In closing, while I will refrain from any attempt at economic forecasting, I will say this: The Board of Directors of Stolt-Nielsen Limited is committed to delivering increased shareholder value by supporting the continued growth of the Company, as conditions permit and as prudence dictates. Christer Olsson Chairman Stolt-Nielsen Limited February 18, Stolt-Nielsen Annual Report

7 Financial Highlights (in U.S.$ Millions, except per share data) Operating revenue $1,793.7 $1,645.1 $1,997.6 Operating profit $160.9 $123.6 $202.5 Net profit $106.1 $95.5 $177.3 Net profit per share: Basic $1.78 $1.60 $2.98 Diluted $1.77 $1.59 $2.97 Weighted average number of common shares and common share equivalents outstanding: Basic Diluted Our Business All $ throughout represent U.S. dollars. Operating Revenue* (U.S.$ Millions) 2010 Operating Revenue by Business (U.S.$ Millions) ,565 1,761 1,645 1,794 1, ,095 Tankers Terminals Tank Containers Stolt Sea Farm Corporate and other Operating Profit* (U.S.$ Millions) 2010 Operating Profit by Business (a) (U.S.$ Millions) Tankers Terminals Tank Containers Stolt Sea Farm Assets* (U.S.$ Millions) 2010 Assets by Business (U.S.$ Millions) ,514 2,487 3,082 3, Tankers Terminals Tank Containers Stolt Sea Farm Corporate and other 10 2,964 1,873 * 2007 income statements and balance sheet have been presented to reflect the adoption of IFRS from December 1, income statements and balance sheet have been presented in US GAAP. (a) Net of corporate and other Stolt-Nielsen Annual Report

8 Chief Executive Officer s Review Our conservative approach to managing our businesses and our finances, combined with the favourable effects of actions taken in recent years, continued to serve us well. Niels G. Stolt-Nielsen Chief Executive Officer Despite weak global economic conditions overall and challenging financial markets, 2010 turned out to be a relatively good year for Stolt-Nielsen Limited. Our conservative approach to managing our businesses and our finances, combined with the favourable effects of actions taken in recent years, continued to serve us well. For the full year ended November 30, 2010, we reported a net profit of $106.1 million, up from $95.5 million a year ago. Among 2010 s most significant highlights, several stand out. The first was Stolt Tankers quite respectable performance last year, when viewed in the context of overall market conditions and compared with the results of our competitors. Our decision in 2008 to go long on contracts and short on tonnage was a key factor in our performance. We were also pleased with the agreements that we reached last year on our contracts with SLS Shipbuilding Co. Ltd. of South Korea. As a result of those agreements, we were able to secure four new tankers at significantly reduced prices, while cancelling and obtaining a full refund of $295.8 million, plus interest, for progress payments made on eight ships that had been ordered in 2006 and To help make up for the tonnage lost on the eight cancelled ships, we entered an agreement to time charter six large, sophisticated stainless steel chemical tankers from JO Tankers for three years. Finally, we announced in November plans to acquire seven stainless steel parcel tankers in a series of separate transactions for a total consideration of $255.0 million terms we considered quite favourable. Ships of such quality and sophistication, I should note, are rarely available on the second-hand market. As a result of these actions, Stolt Tankers is now well positioned to meet its anticipated tonnage requirements for the next several years a goal that was achieved both cost effectively and without adding a single new ship to the market. The year also was highlighted by our results at Stolt Tank Containers and Stolthaven Terminals, which generated a combined operating profit of well over $100 million. The growth we have achieved in these businesses over the years gives us two other strong legs on which to stand, to mitigate the effects of periodic cyclical downturns in the parcel tanker business. We were also pleased with the creation of the joint venture between Sungas Holdings Ltd. and Stolt-Nielsen Gas (SNG). With the pooling of our assets in Avance Gas Holding Ltd., we have achieved 4 Stolt-Nielsen Annual Report

9 another step toward the consolidation of the highly fragmented LPG shipping segment our stated objective since we formed SNG in Stolt Sea Farm delivered another year of solid earnings, despite the recession in Spain, its largest market for turbot. Stolt Tankers Stolt Tankers operating profit increased to $31.4 million in 2010, up from $24.8 million in The average of the Stolt Tankers Joint Service Sailed-In Time Charter Index rose to 1.17 from 1.10 in Conditions in the parcel tanker market remained depressed in 2010, as expected, with a significant decrease in spot rates due largely to an oversupply of tonnage. Contract rate renewals in 2010 were lower on average by about 1%. Volumes from our contracts improved during the year, resulting in a relatively stable revenue base compared with the far more volatile spot market. In general for shipowners in the parcel tanker trade, the weakness in market conditions accelerated ship recycling schedules and when possible newbuilding orders were cancelled or delayed. In some cases owners walked away from contracts because of an inability to obtain financing. Even though volumes generated from our contracts are getting close to pre-crisis 2008 levels, the challenge we and the rest of our segment have is the overcapacity in supply generated by newbuildings delivered from 2008 until today. Even though most of the tonnage delivered during this period was relatively simple and smaller units, and therefore not suitable for the contract market we serve, there will be continued pressure on our segment as a result of this oversupply. Nevertheless, the market will ultimately turn and our objective is to position Stolt Tankers as best we can to make the most of the turn when it occurs. Stolthaven Terminals Stolthaven Terminals reported an operating profit of $56.9 million in 2010, up from $50.0 million in Results for the year reflected sustained strength in demand for storage, utilisation and volumes of product handled, combined with a year-over-year increase in global network capacity of 66,094 cbm, an increase of 2.4%. Among our wholly owned terminals, our U.S. facilities in Houston and New Orleans both performed well, as did our terminal in Santos, Brazil, which operated at 100% utilisation for most of the year. In China, both of our terminals are now licensed to store bonded products and we saw a significant increase in utilisation as a result. Stolthaven Westport reported record utilisation through the year, and our joint-venture terminals in Antwerp, Belgium and Ulsan, South Korea both posted record profits. In 2010, we continued to focus on the expansion of Stolthaven s global network. During the year the Board of Directors approved plans to add a further 1,025,900 cbm of new capacity, for the next coming years, bringing our total capacity when completed to 3,959,000 cbm, or a 42% increase in our worldwide capacity compared with year-end We are also adding a number of new jetties and berths to better accommodate the ships calling at our terminals. In Singapore, construction of our new terminal on Jurong Island is now under way. The terminal is expected to open in late 2011, with an initial planned capacity of 73,000 cbm, including gas spheres. We are grateful to the Economic Development Board of Singapore for its energetic support of this project. During 2010 we tried on several occasions to acquire existing terminals, but due to strong competition did not succeed. Even though we have the investment capacity, we felt prices were too high. Our project team is continuing to evaluate terminal opportunities in both emerging and developed markets, but with some caution due to the quite aggressive expansions that have been announced by operators in major ports. Stolt Tank Containers Stolt Tank Containers (STC) reported a record operating profit of $64.3 million in 2010, up from $54.2 million in Results for the year reflected an increase in shipments of nearly 15%. STC s tank container and flexitank operations benefited from higher volumes in both the chemical and food-grade sectors. Effective fleet management played an important role in STC s performance in STC maintained a balanced fleet among the regions, with tanks in the right places at the right times, without increasing the number of empty repositioning of tanks. The 15% increase in shipments in 2010 was due to healthy demand, but also because of a larger fleet as a result of the Taby acquisition, which we completed in 2008, though the effect of the added tanks was obscured in 2009 due to the impact from the financial crisis. 26.9% Increase in 2010 Stolt Tankers operating profit from m cbm Stolthaven terminal capacity 108,000+ Stolt Tank Container shipments in 2010 Our Business Stolt-Nielsen Annual Report

10 Chief Executive Officer s Review continued 350t Production capacity of first sole farm We believe that the growth prospects for Stolt Tank Containers are promising and we are investing accordingly. During 2010, STC took delivery of 900 units, with a second order of 1,100 units now being delivered. In addition, in late 2010, STC placed an order for 4,850 tanks, to be delivered between March of 2011 and the spring of The new tanks will support the growth of both our chemical and food-grade fleets. We are also focused on the expansion of our flexitank operations. A new manufacturing partnership reached in 2010 is allowing STC to control the quality and performance of its flexitanks, a growing mode of door-to-door transportation. The expansion of STC s global network of depots continues with two new depots in 2010 and more to come in Stolt Sea Farm Stolt Sea Farm (SSF) reported an operating profit of $12.6 million in 2010, up from $4.5 million in Results for the year reflected swings in demand and prices, driven by fluctuations in consumer sentiment and reduced supplies of turbot from competitors. During the holiday sales period at the start of the year, turbot prices fell to their lowest levels in more than a decade, as consumer spending retreated in the face of weak economic conditions. The impact was particularly severe in Spain, SSF s largest market for turbot. As the year unfolded, however, consumer demand began to firm, just as production from competing turbot producers declined both to SSF s benefit. Turbot prices reached a peak in late summer, rising by more than 50% from the lows recorded in December. Caviar sales were also up for the year, though prices and volumes were largely in line with expectations and seasonal patterns. SSF addressed the weak conditions early in the year by focusing on actions to improve operational efficiency and reduce costs. Recognising the weakness in Spain, SSF also worked to strengthen its sales efforts in the healthier economies of the UK, France, Italy, Germany and Scandinavia. SSF remains focused on growing its operations. The company s sole farm in Anglet, France has been a success and has now reached its production target of 350 tonnes a year. We now have the knowledge to move to the next stage of our development of sole production. In 2011, SSF believes it will be able to secure land for the building of an industrial-sized sole farm that will increase production of sole to the same level as that of our turbot operations. Stolt-Nielsen Gas Stolt-Nielsen Gas (SNG) reported loss of $6.7 million in 2010, compared with a loss of $1.2 million in 2009, reflecting a challenging market caused by new tonnage coming into the market ahead of the new supply of gas expected from the Middle East. Our strategy remains the same, which is to acquire second-hand tonnage and consolidate by mergers of smaller operators in preparation for the expected increase in gas production. Just after the end of the 2010 fiscal year, we announced that Stolt-Nielsen Gas and Sungas Holdings Ltd had become equal shareholders in Avance Gas Holding Ltd. (Avance Gas). Leveraging our four core strengths, we will continue to invest for growth, to diversify our business while maintaining a strong balance sheet. Experienced, talented people SNL s employees are recognised worldwide for their knowledge, experience and dedication. Our emphasis on training and career development benefits our customers, our shareholders and our employees themselves. 5,000+ Employees Strong market leadership positions SNL s operating units are recognised leaders in the markets they serve. The Stolt name is synonymous with quality, reliability, service and safety among our customers and suppliers. 24 Countries 6 Stolt-Nielsen Annual Report

11 As part of this transaction, Sungas sold three very large gas carriers (VLGCs) to Avance Gas. Including the former Sungas ships, Avance Gas now owns four VLGCs, operates a fifth VLGC under a time charter, and time charters a medium-sized gas carrier. Stolt Bitumen Services Stolt Bitumen Services (SBS) continued to focus on the development of a bitumen distribution network in Asia Pacific that will ultimately include terminals, bitumen tankers and bitutainers. SBS currently operates a fleet of over 100 bitutainers, serving the needs of customers in South East Asia, Australia and New Zealand. SBS took delivery of its first newbuilding a 5,900 dwt bitumen tanker in October 2010, which is now on long-term time charter to a leading energy company. Just prior to that, SBS signed an agreement with Nanjing East Star Shipbuilding Co. Ltd in China for the purchase of up to four 3,500 dwt bitumen tanker newbuildings, due for delivery from March Dividend and Employee Incentive Plans On December 16, 2010, SNL paid an interim dividend of $0.50 per Common Share to shareholders on record as of December 2, For 2010, the employee performance incentive plans for SNL and SSF, which includes the profit sharing plan and long-term incentive plan, will make payments of $14.3 million. Significant uncertainty remains in the global economy, however there are some positive signs. The slowdown in the U.S. and Europe has not had the same historical impact on the global economy, as Asia, India and South America continue to grow and become large enough to pick up the slack in consumption in the West. We intend to proceed prudently ahead, investing appropriately and strengthening our businesses to ensure superior competitive performance come what may. As always, the performance of our businesses is driven by our employees, who did an outstanding job in Our Business Niels G. Stolt-Nielsen Chief Executive Officer Stolt-Nielsen Limited February 18, 2011 Diversified business model SNL s diversified business model mitigates the effects of down cycles that periodically impact the global transportation markets that the Company serves. The value of SNL s diversification efforts was underscored by Stolthaven Terminals and Stolt Tank Containers record performance in Conservative approach to financing SNL s ongoing commitment to managing its businesses conservatively and maintaining a strong balance sheet enabled the Company to continue to invest in the diversification and growth of its businesses in ,000+ Number of tank containers $3.0 bn Total assets Stolt-Nielsen Annual Report

12 Business Review: Stolt Tankers 8 Stolt-Nielsen Annual Report

13 Stolt Tankers Capitalising on market opportunities Stolt Tankers added 15 sophisticated stainless-steel parcel tankers to its global deep-sea fleet in Seven of the ships, ranging from 23,000 dwt to 37,000 dwt, were acquired in the second-hand market for a total of $255.0 million. Our Business 2.5m dwt Stolt Tankers Fleet Stolt-Nielsen Annual Report

14 Business Review: Stolt Tankers Performance (U.S.$ Millions) Operating revenue $1,095 $1,035 $1,338 Operating profit $31 $25 $134 Strategy Continue to focus on our long-term contract business, our strong customer relationships, and our goal of zero incidents for the fleet. Outlook 2011 will likely be a transition year, as Stolt Tankers positions itself for the expected turnaround in Hans Feringa President of Stolt Tankers Operating profit (a) 19 % 19% Stolt Tankers 81% Rest of Group (a) Net of Corporate and other. Stolt Tankers took delivery of Stolt Groenland (above), the fifth of six 43,000 dwt stainless steel parcel tankers built under contract by STX Norway Florø AS, in December Stolt Breland, the last ship in the series, was delivered in March Safety for people and the environment is Stolt Tankers number-one priority. Setting a goal of zero incidents for the fleet, Stolt Tankers Excellence in Safety Part 2 builds on the experience the company has acquired since the Excellence in Safety programme was created four years ago. 10 Stolt-Nielsen Annual Report

15 Stolt Tankers (ST) operates the world s largest integrated marine transportation network for chemicals and other bulk liquids. With a global fleet of more than 60 sophisticated deep-sea parcel tankers complemented by regional fleets in Europe, Asia and the Caribbean, coastal fleets in Asia and inland barging services in Europe and the U.S. Gulf ST safely and reliably meets the exacting transportation needs of the world s premier manufacturers of chemicals and other bulk liquids was one of the most challenging years on record for the chemical transportation markets. Spot rates slipped below operating expenses at times during the year, reflecting both an oversupply of tonnage and still-sluggish economic conditions. Stolt Tankers, with its strategic focus on long-term contracts, managed a break-even performance that compared favourably with the results reported by most of its competitors. Highlights for 2010 Despite the difficult business conditions, 2010 was a year of significant progress for Stolt Tankers, in terms of information technology (IT) initiatives, safety and fleet replenishment. On the IT side, ST is now implementing both its new IMOS6 and BASSnet systems. IMOS (Integrated Maritime Operations System) provides a single window to the entire voyage management process, by integrating information on chartering, operations, financials, planning, trading, demurrage and pooling. In doing so, ST will benefit from better ship scheduling and matching, plus an improved contract-to-orders-to-invoicing process, that will increase efficiency and improve decision-making. ST s new BASSnet system focuses on shipowning. The system provides a master database for all aspects of fleet management for improved decision support and control. In 2006, Stolt Tankers launched the Excellence in Safety programme, which established safety for both people and the environment as ST s number-one priority. Building on the experience and knowledge gained over the last four years, 2010 witnessed the launching of Excellence in Safety Part 2, which introduced enhanced programmes targeting procedures and situational awareness. With the implementation of the programme, Stolt Tankers has set a goal of zero incidents for the fleet. Even the worst of years have something to recommend them, and so it was for Stolt Tankers in 2010, as prices for sophisticated second-hand tonnage dropped to their lowest levels in a decade. Stolt Tankers agreed to acquire seven stainless-steel parcel tankers ranging from 23,000 dwt to 37,000 dwt for $255.0 million. The acquisitions were made after having secured a refund of $295.8 million plus interest for progress payments that had been made on eight newbuildings that were cancelled last year. Stolt Tankers also negotiated more favourable prices for four 44,000 dwt coated newbuildings. In addition, ST took six large stainless steel parcel tankers on a three-year time charter from JO Tankers. The net effect of these actions enabled Stolt Tankers to meet its expected near-term requirements for tonnage. Strategy Stolt Tankers focus on long-term contracts over the last several years has generated benefits for both ST and its customers. By focusing on contract business, ST avoided exposure to plunging freight rates in the spot market. At the same time, long-term customer relationships enable partners to work together collaboratively toward mutual goals, particularly on such key issues as safety, quality and reliability. Despite the challenges of recent years and perhaps, in part, because of them Stolt Tankers relationships with its customers have never been closer. Outlook 2011 is expected to be a transition year for Stolt Tankers and the markets it serves. While business and economic conditions overall are expected to improve, the upturn is expected to be modest. As a result, the focus for Stolt Tankers will be on effectively managing through the transition in 2011 in order to best position the business for the turnaround that is likely to materialise in Stolt Tankers, with its strategic focus on long-term contracts, managed a break-even performance in a challenging market. Hans Feringa President of Stolt Tankers Our Business Stolt-Nielsen Annual Report

16 Business Review: Stolthaven Terminals 12 Stolt-Nielsen Annual Report

17 Stolthaven Terminals Building out its terminal network Stolthaven continued to expand in Stolthaven s ninth terminal on Jurong Island in Singapore is now under construction and expected to commence operations before the end of this year. The new terminal will service Singapore s growing chemical sector. Our Business 2.9m cbm Stolthaven s storage capacity Stolt-Nielsen Annual Report

18 Business Review: Stolthaven Terminals Performance (U.S.$ Millions) Operating revenue $128 $119 $116 Operating profit $57 $50 $35 Strategy Continue to enhance our global terminal network by expanding our existing terminals and developing new terminals in key growth markets. Outlook 2011 is expected to be another solid year, with sustained strength in demand for storage and rates holding steady or increasing modestly. Walter Wattenbergh President of Stolthaven Terminals Operating profit (a) 35 % 35% Stolt Terminals 65% Rest of Group (a) Net of Corporate and other. Construction of Stolthaven s new terminal on Jurong Island, Singapore commenced in The new terminal Stolthaven s ninth is expected to begin operations before year-end Stolthaven s wholly owned terminal in Houston will benefit from yet another expansion in 2011, with the addition of 36 new tanks representing a total of 103,000 cbm of additional capacity. 14 Stolt-Nielsen Annual Report

19 Stolthaven Terminals operates a global network of eight state-of-the-art bulk liquid storage terminals in key markets worldwide, with a ninth terminal currently under construction in Singapore. Each terminal is managed to the same rigorous standards, ensuring consistent high levels of quality, efficiency and safety for both people and the environment. Stolthaven s ongoing efforts to improve efficiency at the ship-terminal interface have measurably reduced both ship turnaround times and demurrage, resulting in mutual benefits for Stolthaven and its customers. Stolthaven achieved solid overall results in 2010, reflecting the impact of capacity expansions, increased demand for storage and strengthening rates. Stolthaven s wholly owned terminal in Santos and its joint-venture facilities in Antwerp and Ulsan benefited from strong market conditions and rising rates, while the division s wholly owned terminals in the U.S. have recovered more slowly. After becoming operational in 2009, the division s new terminal in Lingang posted a modest profit in 2010 and approval was received for an additional 104,500 cbm of capacity. At Ningbo, the first phase of tank construction was completed early in the year. Combined total storage capacity for Stolthaven s wholly owned and joint venture terminals increased to 2.9 million cbm from 2.8 million cbm at year-end For Stolthaven s wholly owned terminals, while utilisation slipped to 95.4% from 97.0% in 2009, total average capacity increased by 11% in 2010, driven by expansions in New Orleans and Santos. Total product handled rose by 14%, due to growing momentum in customer activity in the U.S. Highlights for 2010 After adding 830,000 cbm of total network capacity in 2009 an increase of 42% Stolthaven added 66,000 cbm in 2010, while focusing on its long-term growth strategy and implementing plans for substantial capacity expansions in 2011 and beyond. Among the division s wholly owned terminals, plans were approved for the addition of 103,000 cbm of capacity at Stolthaven Houston, and the addition of several new tanks at Stolthaven Santos. Ambitious expansion plans were also set for several of our joint venture terminals. A total of 1,096,000 cbm of additional capacity was approved in Early in the third quarter, Stolthaven broke ground for its new chemical storage facility on Jurong Island, Singapore. The terminal is expected to come online by year-end 2011, with an initial capacity of 73,000 cbm. The year was also highlighted by the performance of the Santos Terminal, which received for the fifth year in a row Dow Brazil s DOWGol award that celebrates the commitment of all suppliers to meet the stringent safety requirements established by Dow. Strategy Stolthaven remains focused on the long-term growth of its global terminal business by expanding its existing owned terminals, by developing new terminals in hubs frequented by the Stolt Tankers fleet, and by increasing Stolthaven s penetration of key emerging markets, including Brazil, India and the Middle East. Efforts are also under way to diversify Stolthaven s operations by adding storage capabilities for such products as gas, clean petroleum products and veg oils. Outlook Looking ahead, Stolthaven expects another good year in Current indicators point to continued strength in demand for storage, with rates likely to hold firm or to increase modestly overall. Stolthaven presented very good results in 2010 due to the impact of capacity expansions from previous years and increased demand for storage worldwide. Walter Wattenbergh President of Stolthaven Terminals Our Business Stolt-Nielsen Annual Report

20 Business Review: Stolt Tank Containers 16 Stolt-Nielsen Annual Report

21 Stolt Tank Containers Expanding its fleet and depot network Stolt Tank Containers made the largest newbuilding investment in its history, with the placement of an order for 4,850 new tank containers a 20% increase in the size of the fleet from year-end The new tanks will begin entering the STC fleet in the spring of this year, with deliveries continuing into Our Business 14 depots Seven owned and seven joint ventures worldwide Stolt-Nielsen Annual Report

22 Business Review: Stolt Tank Containers Performance (U.S.$ Millions) Operating revenue $498 $430 $469 Operating profit $64 $54 $50 Strategy Expand our core chemical tank container business by penetrating new geographic markets, grow our flexitank and food-grade businesses, and extend our global depot network. Outlook Market conditions are expected to strengthen during the year, driven by intra-regional activity in Asia Pacific, increased chemical production in the Middle East and growth in South America. Mike Kramer President of Stolt Tank Containers Operating profit (a) 39 % 39% Stolt Tank Containers 61% Rest of Group (a) Net of Corporate and other. Tank containers are today the preferred mode worldwide for door-to-door shipments of bulk liquids, surpassing all other modes. STC s expanding network of depots enables the company to maintain its fleet to the consistent high standards specified by STC and expected by its world-class customers. 18 Stolt-Nielsen Annual Report

23 Stolt Tank Containers (STC) is the leading global provider of door-to-door transportation services for bulk-liquid chemicals and food-grade products. STC s fleet of more than 24,000 tank containers the world s largest includes specialised tank containers for corrosive, high purity and cryogenic cargoes, as well as compressed gases. The division s rapidly growing flexitank services offer the cost benefits of flexitanks, while maintaining STC s standards for quality, reliability and performance. STC reported strong growth in its tank container and flexitank businesses in 2010, with increased volumes and utilisation, in both its chemical and food-grade operations. Competition, however, remained keen. STC focused on holding down costs and increasing efficiency through its sustained pursuit of business-process improvements. Highlights for 2010 STC s performance during the year was highlighted by a number of important events and developments making 2010 another record year. In May, STC announced a complete realignment of its global management structure. The reorganisation created a tightly knit and coordinated team with the ability to react quickly to market opportunities and challenges both locally and globally. The cooperative efforts of the new team assisted by STC s advanced fleet-optimisation technology played a critical role in STC s ability to maintain a balanced fleet amid striking shifts in geographic demand during Expanding STC s global presence is an ongoing objective and significant progress was made on this front in STC continued its efforts to expand its global depot network, particularly in key growth and emerging markets, to support the growth in the tank container business, to improve safety and meet the rising standards of our customers globally. STC has long emphasised the effective use of information technology to drive improvements in efficiency and cost control. Those efforts continued unabated in 2010 with the implementation of new software and management tools aimed at enhancing STC s performance and competitive advantage. During the year, STC continued to take steps to enhance its fleet. The division took delivery of 900 new units, with almost 6,000 more on order. Further significant additions to the fleet are under way. At the same time, STC off-hired more than 1,000 older higher cost and/or less efficient units, resulting in reduced fleet expense. STC s flexitank operations benefited from a new global supplier partnership with M&W Flexitank, a Hong Kong-based manufacturer of certified high quality flexitanks. The partnership ensures that flexitanks operated by STC are manufactured to the high standards for quality and reliability demanded by STC and its customers. To help address environmental concerns regarding flexitank usage, STC implemented both a bulkhead and bag recycling programme in STC also expanded its food-grade fleet in 2010, while aggressively stepping up marketing efforts on a worldwide basis. STC s growing food-grade fleet now includes more than 1,700 units. Strategy As volumes continue to flow into tank containers and flexitanks from other modes, STC s growth strategy is focused on expanding its core chemical tank container business by penetrating new geographic markets, growing its flexitank and food-grade businesses, and building out STC s global network of offices and depots, especially in developing markets, through wholly-owned or joint-venture facilities. Outlook While door-to-door markets are likely to be sluggish in the first few months of 2011, activity is expected to strengthen as the year unfolds. Key drivers include intra-regional growth in Asia Pacific, and increasing momentum in the Middle East, as more downstream production comes online, particularly in Saudi Arabia. Good growth is also expected in South America, with market activity in Europe and North America either remaining firm or growing. STC reported another record year with an operating profit of $64.3 million in Mike Kramer President of Stolt Tank Containers Our Business Stolt-Nielsen Annual Report

24 Business Review: Stolt Sea Farm 20 Stolt-Nielsen Annual Report

25 Stolt Sea Farm Sole: A species with substantial potential For Stolt Sea Farm, 2010 represented the culmination of 10 years of research, development and investment in the cultivation of sole, recognised as one of the world s most highly valued food fish. At its sole farm in Anglet, France, Stolt Sea Farm has now reached its planned production capacity of 350 tonnes a year, demonstrating conclusively its ability to successfully produce commercial quantities of sole. Our Business 13 SSF aquaculture facilities around the world Stolt-Nielsen Annual Report

26 Business Review: Stolt Sea Farm Performance (U.S.$ Millions) Operating revenue $54 $48 $70 Operating profit $13 $5 $8 Strategy Drive long-term growth by expanding our sole and caviar operations. Outlook Conservatively manage the business and hold down costs, given the uncertain conditions in SSF s key European markets for turbot. Pablo García President of Stolt Sea Farm Operating profit (a) 8 % 8% Stolt Sea Farm 92% Rest of Group (a) Net of Corporate and other. An SSF technician performs a routine quality check to make sure sole held in temporary cold storage prior to shipment are maintained at the optimum temperature. Stolt Sea Farm s sophisticated boxing system ensures that the fish never come into direct contact with the ice or melt water in which they are packed, which enables SSF to guarantee that the product meets the highest quality standard. 22 Stolt-Nielsen Annual Report

27 Stolt Sea Farm (SSF) is a leader in high-tech aquaculture and specialises in the production of turbot, sole, sturgeon and caviar. SSF focuses on premium species whose cultivation requires extensive scientific and technological expertise, ongoing research and development, and the engineering capability to design, build and operate unique and highly sophisticated production facilities. SSF, with its strictly land-based approach to fish farming, is recognised for its outstanding environmental friendliness and performance. After a dismal start, with turbot prices down to levels not seen in more than a decade, 2010 proved to be a relatively good year for Stolt Sea Farm. Prices strengthened as demand began to recover in Spain SSF s largest turbot market. At the same time, SSF took steps to reduce its dependency on Spain by expanding its marketing efforts in other European countries. Rising levels of demand were complemented by falling levels of turbot supplies, as production from other turbot suppliers weakened. For the full year, revenue from sales of turbot was up about 15%. Meanwhile the revenue from sales of caviar was essentially flat for the full year, in line with overall expectations for sales of luxury goods. Highlights Expectations for 2010 were not high and the strength of SSF s performance last year was a welcome surprise. The year was also highlighted by results at SSF s sole farm in Anglet, France, which met its initial production target of 200 tonnes. The Anglet farm is now operating at its planned commercial production capacity of 350 metric tonnes a year. During the year, SSF participated in a number of events that resulted in a significant increase in market visibility for the division s products. SSF s Prodemar turbot was selected as the key ingredient for the finale of the Trophée Passion competition, held in October by the Academie Culinaire de France in Paris. In January, SSF introduced its Prodemar sole at the Madrid Fusión Summit, the ninth edition of this international gathering focusing on gastronomy. SSF s sole is now being marketed in Europe, Russia and the U.S. Such exposure raises awareness among chefs and restaurateurs regarding the high quality of the Prodemar brands. Strategy SSF s long-term growth strategy focuses on the expansion of its sole and caviar operations. The viability of SSF s sole farm in Anglet has enabled SSF to move forward last year with plans for additional production capacity. SSF is currently the world s only aquaculture company with the capability to farm sole. SSF is also actively pursuing an expansion of its sturgeon and caviar production. These initiatives are aimed at establishing SSF as the leader in sole and caviar, premium products that will not only fuel SSF s future growth but reduce SSF s exposure to the cyclicality of the more competitive turbot market. Outlook Economic conditions in SSF s key markets for turbot in Europe remain both mixed and uncertain. Given the fragility of consumer sentiment, SSF is taking a conservative, patient approach to the year ahead, with continued emphasis on holding down costs, until key indicators point to greater strength in both consumer confidence and overall economic conditions. The viability of SSF s sole farm in Anglet enabled us to move forward last year with plans for additional production capacity. Pablo García President of Stolt Sea Farm Our Business Stolt-Nielsen Annual Report

28 Business Review: Stolt-Nielsen Gas Stolt-Nielsen Gas A partnership is formed 82,500 cbm Loading capacity for Stolt Avance 24 Stolt-Nielsen Annual Report

29 Performance (U.S.$ Millions) Operating revenue $21 $ $ Operating loss $(7) $(1) $(1) Our Business Stolt-Nielsen Gas (SNG) through its 50% owned subsidiary Avance Gas Holding Ltd. (Avance Gas) is a newly established player in the Liquefied Petroleum Gas (LPG) transportation market, operating five Very Large Gas Carriers (VLGC) and one Medium Gas Carrier (MGC). Highlights 2010 was a year of substantial progress in the implementation of its strategy to participate in the consolidation of the highly fragmented LPG transportation market. In January 2010, after having taken the Yuhsho on a three-year time charter in November 2009, Avance Gas purchased the Stolt Avance, a 2003 built, 82,500 cubic meter VLGC. Then in December 2010, after the end of the fiscal year, SNG merged its VLGC operations with that of Sungas Holdings Ltd. (Sungas) with both parties becoming equal owners of Avance Gas. As part of the transaction Sungas added three VLGCs to the Avance Gas fleet: Iris Glory, Thetis Glory and Venus Glory, all built in 2008 with a cargo capacity of 83,700 cbm each. With the addition of the three Sungas ships, the Avance Gas fleet now consists of six ships. In addition to the three Glory ships and Stolt Avance, Avance Gas operates the Yuhsho, built in 1999 with a capacity of 78,500 cbm, and the Navigator Taurus, built in 2009 with a capacity of 22,600 cbm, which was taken on time charter in October 2010 for the West African trade. Avance Gas trades its fleet primarily in the spot market, with four of its five VLGC loading in Middle East for destinations mainly in Asia. The spot market began the year at a historic low, and although the rates improved during the year, the market remained challenging throughout most of the year. Late spring last year, volumes started to improve as new LNG production trains came onstream, adding welcome volume to the market. Although freight rates fell somewhat back during the summer, the second part of the year also gave encouraging returns backed by increased production and export in the Middle East. Outlook The outlook for 2011 is promising with expected increased export volumes from the Middle East. The order book for VLGC is limited with about 10 ships on order out of an existing fleet of 143 ships. However, the market is still oversupplied and the market balance remains fragile. As a consequence of the merger with Sungas, Avance Gas was reported as a discontinued operation in 2009 and Henceforth, results from the partnership will be recorded as equity income for Stolt-Nielsen Limited. Christian Andersen President of Stolt-Nielsen Gas Stolt-Nielsen Gas took delivery of Stolt Avance, its first owned VLGC, on January 27, The ship, with a capacity of 82,500 cbm, was built in 2003 by Kawasaki Heavy Industries. The ship was named after the first time-chartered ship operated by Parcel Tankers Inc., after it was founded in Stolt-Nielsen Annual Report

30 Business Review: Stolt Bitumen Services Stolt Bitumen Services Expanding into new fields 190 Fleet of bitutainers 26 Stolt-Nielsen Annual Report

31 Performance (U.S.$ Millions) Operating revenue $13 $7 $ Operating profit/(loss) $ $(1) $ Our Business Stolt Bitumen Services (SBS) made continued progress last year toward its long-term goal of building a high quality, safe and reliable bitumen distribution network, equipped with modern bitumen tankers, bitutainers and storage terminals. Founded in 2007, SBS is currently focused on the development of Stolt-branded storage and distribution capabilities for bitumen in the growing Asia Pacific market, where extensive infrastructure investment is creating strong demand for bitumen across the region. The shipment of bitumen is complicated by the high temperatures required to maintain the product in liquid form to allow for pumping. The market for the storage and distribution of bitumen is highly fragmented. Highlights In October, SBS took delivery of its first newbuilding, Stolt Fuji, a 5,900 dwt bitumen tanker. The new ship was in turn delivered to a multinational energy company under a long-term time charter arrangement. In September, SBS signed an agreement with Nanjing East Star Shipbuilding in China for the purchase of up to four 3,500 dwt bitumen tanker newbuildings, due for delivery from March SBS placed firm orders for two ships and holds options to purchase two additional ships. SBS also operates a fleet of more than 100 bitutainers that are ISO certified for sea, road and rail transportation. The fleet includes units ranging in size from 21,000 litres which are ideal for small ports and rail transportation up to units with a capacity of 27,000 litres. Working with joint-venture partners, SBS is currently developing bitumen terminal projects in Vietnam and Indonesia, as well as a seaborne bulk bitumen distribution network in the Philippines. Andrew Pickering Managing Director, Stolt-Nielsen Asia Pacific Stolt Fuji, SBS s first newbuilding, was delivered in October The 5,900 dwt bitumen tanker is on long-term time charter to a major energy company. Stolt-Nielsen Annual Report

32 Social Responsibility 15 years Environmental excellence achieved by Stolt Vinland For Stolt-Nielsen Limited and its operating units, ensuring the safety of people and the environment is our first priority. We strive to achieve this objective by meeting or exceeding all applicable requirements and regulations. In addition, we are dedicated to a process of continuous improvement that is aimed at constantly enhancing our safety performance on a sustained basis in the future. In 2010, Stolt Tankers achieved ISO14001 certification, which provides a framework for driving continual improvements in environmental performance. The International Organization for Standardization defines ISO14001 as an environmental management system designed to reduce the environmental footprint of a business and to decrease the pollution and waste a business produces. ISO14001 helps an organization to develop an environmental policy, establish objectives and processes to achieve the policy commitments, take action as needed to improve its performance, and demonstrate conformity of the system to the requirements set forth by the standard. ISO14001 certification gives customers added confidence that the company is not only handling all of its waste streams appropriately, but also constantly striving to do better. Four years ago, with the launching of its Excellence in Safety programme, Stolt Tankers made safety its number-one priority. Based on the experience accumulated through that programme, and the latest industry research, Stolt Tankers rolled out Excellence in Safety Part 2 in The programme puts increased emphasis on procedures and situational awareness, which have been identified as key issues by root-cause analysis. Sophisticated parcel tankers are among the world s most challenging ships to operate, given the complexity of the ships and the sheer number of operations performed. A comparison of performance data shows Stolt Tankers compares favourably with its peers. Excellence in Safety Part 2 will help Stolt Tankers take its safety performance to an even higher level. While performance is in many ways its own reward, in May of 2010 the Chamber of Shipping of America presented its 2009 Environmental Achievement Award to 41 Stolt ships, for their outstanding environmental performance for at least the last two years. Stolt Vinland was singled out for achieving 15 consecutive years of environmental excellence, with Stolt Kittiwake and Stolt Sea each attaining 10 years of sustained performance. Stolthaven takes pride in operating a global network of terminals that operates to the same high standards of safety, quality and efficiency, regardless of location. In 2010, Stolthaven made substantial progress toward that objective at its two joint-venture terminals in China. The Lingang and Ningbo terminals both implemented the Stolthaven Terminals Integrated Management System (STIMS), which is designed to operate in compliance with ISO14001, the ISO9001 quality management system, and the OHSAS18001 standard for health and safety risk management. Certification is expected in early At the New Orleans terminal, a new Behaviour-Based Safety programme was implemented for testing. Meeting the challenges of sustainability at Stolt Tankers The Chamber of Shipping of America (CSA) presented the Environmental Achievement Award to 41 Stolt ships, in recognition of their outstanding environmental performance for at least the last two years. Stolt Vinland was singled out for achieving 15 consecutive years of environmental excellence, with Stolt Kittiwake and Stolt Sea each attaining 10 years of sustained performance. 28 Stolt-Nielsen Annual Report

33 As with tankers, research has shown that terminal incidents can most often be traced to lapses in awareness and/or adherence to procedures. Following tests in New Orleans, the programme is expected to be implemented throughout the Stolthaven network. At Oiltanking Stolthaven Antwerp, surveys are being conducted to evaluate the potential effects of job stress and its impact on safety and operational performance. As a pioneer of door-to-door bulk-liquid logistics, Stolt Tank Containers proved that modern tank containers are among the safest, most reliable ways to transport bulk liquids. To ensure its operations consistently perform to the industry s most rigorous standards, STC s Security, Safety, Health, Environment & Quality Management System complies with the requirements of ISO9001:2000, ISO22000 (HACCP), ISO28000, ISO19011, OHSAS18001, CDI-mpc and SQAS-Transport services. Developments are also monitored at other organisations, such as ITCO, CEFIC, ECTA, IRU, EFTCO, IMO and USDOT, and incorporated into STC s best practices as applicable. In 2010, STC formed a new global supplier partnership with M&W Flexitank, a manufacturer of certified high quality flexitanks, with the goal of setting a new standard for flexitank reliability and quality. STC also implemented both a bulkhead and bag recycling programme in 2010, to address environmental concerns shared by STC and its global customers regarding flexitank usage. As it expands its global network, STC equips its new depots with state-of-the-art waste-management systems, while continually upgrading the capabilities of its existing depots beyond current regulatory standards. The unique methods and technologies applied by Stolt Sea Farm in its land-based fish-farming operations result in high levels of efficiency and low environmental impact. SSF is now capable of producing 1 kg of turbot with only 1.1 kg of dry feed. For sole, the amount is even lower at 0.8 kg. Such levels of efficiency result in negligible levels of organic waste. In fact, the organic material that SSF s farms provide to local farmers for fertilizer now consists exclusively of the organic filtrate, such as seaweed, that is removed from sea water upon intake before it is used by the farm. Efforts to reduce SSF s environmental impact are ongoing. At SSF s sole farm in Anglet, France the proving ground for commercial sole production new high efficiency water recirculation systems have substantially reduced the farm s consumption of both energy and water. Through its constant pursuit of such innovations, SSF continually raises the operational and environmental performance standards of its state-of-the-art fish-farming facilities. 12% Reduction in CO 2 emissions Our Business Regulatory compliance is obligatory and we take that responsibility very seriously. We also believe it s important to participate actively in the industry dialogue to seek continuous improvements, and we make a determined effort to do that. Bill Millar General Manager of the Vetting, Environmental & Regulatory Department Stolt-Nielsen Annual Report

34 Board of Directors Christer Olsson Chairman of the Board Mr. Christer Olsson has served as a Director of Stolt-Nielsen Limited since 1993 and since December 15, 2009 has also served as Chairman of the Board after Mr. Jacob Stolt-Nielsen stepped down. He is Vice Chairman of Wallenius Lines AB. He is a director of Transatlantic AB, Atlantic Container Line AB, United European Car Carriers (UECC) and Singapore Shipping Corporation. He received his Bachelor of Law degree from Stockholm University. He is a Swedish citizen. 2. Niels G. Stolt-Nielsen Director and Chief Executive Officer Mr. Niels G. Stolt-Nielsen has served as a Director of Stolt-Nielsen Limited since 1996 and as Chief Executive Officer since He served as Interim Chief Executive Officer of Stolt Offshore S.A. from September 2002 until March He held the position of Chief Executive Officer of Stolt Sea Farm from 1996 until September In 1994 he opened and organised Stolt-Nielsen Limited s representative office in Shanghai. He joined the Company in 1990 in Greenwich, Connecticut, working first as a shipbroker and then as a round voyage manager. Mr. Niels G. Stolt-Nielsen graduated from Hofstra University in 1990 with a BS degree in Business and Finance. Mr. Niels G. Stolt-Nielsen is a son of Mr. Jacob Stolt-Nielsen. He is a Norwegian citizen. 3. Jacob Stolt-Nielsen Director and Founder Mr. Jacob Stolt-Nielsen has served as Chairman of the Board of Directors of Stolt-Nielsen Limited since he founded the Company in 1959 until December 15, 2009 when he stepped down as Chairman. He still serves as a Director of Stolt-Nielsen Limited. He held the position of Chief Executive Officer of Stolt-Nielsen Limited from 1959 until He was trained as a shipbroker and worked in that capacity in London and New York prior to founding Stolt-Nielsen Limited. Mr. Jacob Stolt-Nielsen is the father of Mr. Niels G. Stolt-Nielsen and Mr. Jacob B. Stolt-Nielsen. He is a Norwegian citizen. 4. Samuel Cooperman Director Mr. Samuel Cooperman has served as a Director of Stolt-Nielsen Limited since Mr. Cooperman joined Stolt-Nielsen in 1974 and held a number of senior management positions, including Chairman and Chief Executive Officer of Stolt-Nielsen Transportation Group. He retired in Mr. Cooperman is Chairman of SeaSupplier Ltd. and New York Cruise Lines and was a member of the Executive Committee of the International Chamber of Shipping until May Mr. Cooperman is the chief executive of Cooperman Weiss Consulting LLC. Mr. Cooperman holds BS and MS degrees in Electrical Engineering from Columbia University and from the Graduate School at the University of Pennsylvania, respectively, and an MBA from Temple University. He is a citizen of the U.S. 30 Stolt-Nielsen Annual Report

35 Our Business Christina De Luca Director Mrs. Christina De Luca has served as a Director of Stolt-Nielsen Limited since November She is currently BP s Chief Procurement Officer, Refining & Marketing, a position she has held since Mrs. De Luca is a former board member of the Institute for Supply Management, the world s largest supply-management association, and Elemica, the leading supply-chain integration company with roots in the chemical and oil industries. Mrs. De Luca holds a BS degree in chemical engineering from Drexel University and an MS degree in management from Stanford University. She is a fully qualified Member of the Chartered Institute of Purchasing & Supply, and a Certified Professional in Supply Management. She is a citizen of both the U.S. and the United Kingdom. 6. Håkan Larsson Director Mr. Håkan Larsson has served as a Director of Stolt-Nielsen Limited since June He was the Chief Executive Officer of Rederi AB Transatlantic from 2003 to He serves as Chairman of Schenker and deputy Chairman of Bure Equity AB; a director of Ernströmgruppen AB, Rederi AB Transatlantic, Walleniusrederierna AB, Swedish Ship s Mortgage Bank, and Chalmers University of Technology. He also serves as Chairman of the Board of In Pension Asset Management AB and he is a member of the regional board of Handelsbanken. Mr. Larsson holds a Bachelor of Economics degree from the Gothenburg School of Economics. He is a Swedish citizen. 7. Jacob B. Stolt-Nielsen Director Mr. Jacob B. Stolt-Nielsen has served as a Director of Stolt-Nielsen Limited since He served as an Executive Vice President of Stolt-Nielsen Limited from 2003 to In 2000, he founded and served as Chief Executive Officer of SeaSupplier Ltd. until From 1992 until 2000 he held the position of President, Stolthaven Terminals, with responsibility for the global tank storage business. He joined the Company in 1987 and served in various positions in Oslo, Singapore, Greenwich, Connecticut, Houston, Texas and London. Mr. Stolt-Nielsen is a member of the boards of the following companies: Kridomini AS, Beta AS, Timms AS, New York Cruise Lines, Inc., Biomed Clinic AS, and The Teleport Group Ltd. Mr. Stolt-Nielsen graduated from Babson College in 1987 with a BS degree in Finance and Entrepreneurial studies. Mr. Jacob B. Stolt-Nielsen is a son of Mr. Jacob Stolt-Nielsen. He is a Norwegian citizen. John Wakely Executive Vice President and Secretary of the Board Mr. Wakely has served as Executive Vice President of Stolt-Nielsen Limited since January 2002, responsible for tax planning and legal structure. In addition, Mr Wakely is the Stolt-Nielsen Limited Board Secretary and also serves as Chairman of Stolt Tank Containers Leasing Ltd. He joined Stolt-Nielsen in 1988 and held various positions in the controllership, internal auditing and tax planning areas. He is also Chairman and a Director of Fiducia Ltd. Prior to that he was employed by BP. Mr. Wakely is a member of the Chartered Institute of Management Accountants. He is a British citizen. Stolt-Nielsen Annual Report

36 Corporate Governance Relevant legislation and Codes of Practice for Corporate Governance Stolt-Nielsen Limited ( SNL ) maintains high standards of Corporate Governance. Corporate Governance addresses the interaction between SNL s shareholders, the Board of Directors and management. The Companies Act of 1981 of Bermuda ( Bermuda Companies Act ) governs the incorporation, organisation and management of SNL. In addition, relevant Bermuda and international law also applies to the operation of the business of SNL. Norwegian securities law and Oslo Børs Continuing Obligations apply as a result of SNL being listed on the Oslo Børs. Being incorporated in Bermuda and listed on the Oslo Børs, SNL is subject to the Norwegian Code of Practice for Corporate Governance (the Norwegian Code of Practice ). Adherence to the Norwegian Code of Practice is based on a comply or explain principle, whereby companies are expected to either comply with the Norwegian Code of Practice or explain why they have chosen an alternative approach. SNL was incorporated on June 11, 2010 with the purpose of merging and amalgamating with Stolt-Nielsen S.A (SNSA). The merger and amalgamation became effective November 18, The Group corporate structure and business operations of SNL is identical to that of SNSA. SNL is, and SNSA has historically been, under the majority control of Fiducia Ltd, a company that indirectly represents the Stolt-Nielsen family. As such, the Company s Corporate Governance reflects this majority control and therefore will not necessarily comply with all recommendations of the Norwegian Code of Practice for Corporate Governance. 1. Implementation and reporting on Corporate Governance SNL has a Code of Business Conduct which applies to all Directors, officers and employees. Any waivers of the Code of Business Conduct for Directors or executive officers are approved by the Board and shall be disclosed in the Annual Report. The Company s overarching business conduct guidelines, including ethical and social responsibility guidance, are set out in its Code of Business Conduct and where appropriate, more specific policies have been developed to provide more detailed guidance. 2. Business In compliance with the Bermuda Companies Act and common practice, SNL s Memorandum of Association describes its objects and purposes as unrestricted. 3. Equity and dividends The Board of Directors is of the opinion that the Company currently has sufficient equity to meet its objectives, strategy and risk profile. The authorised share capital of SNL is 65 million Common Shares with par value $1.00, and million Founder s Shares, with par value $ As of November 30, 2010, 64,133,796 Common Shares and 16,033,449 Founder s Shares were issued and 59,659,309 Common Shares and 14,914,828 Founder s Shares were outstanding. The authorised share capital of SNL may only be increased, reduced or otherwise altered by resolution of the shareholders. The Board of Directors is authorised to increase the issued share capital within the limits of the authorised capital. The Common Shares available for issuance within the authorised share capital is intended to be available for the exercise of stock options under the Stolt-Nielsen S.A. (SNSA) 1997 stock option plan as continued by SNL. SNSA s stock option plan was approved at the 1997 Annual General Meeting. The stock option plan was established to create a long-term common interest among the Directors, the employees, and SNSA s shareholders. The Compensation Committee oversees SNL s share option programme. The last awards under the 1997 stock option plan were made in January It has been replaced by a long-term incentive plan which pays cash awards to management for meeting defined corporate financial objectives related to Return On Capital Employed ( ROCE ) and the ratio of Earnings Before Interest, Taxes, Depreciation, Amortization and Rent ( EBITDAR )-to-revenue. The Board of Directors has established a dividend policy that is available on the SNL website ( Under Bermuda law, a company s Board of Directors may not declare or pay dividends if there are reasonable grounds for believing that the company is, or would after the payment be, unable to pay its liabilities as they become due or that the realisable value of its assets would thereby be less than the aggregate of its liabilities and issued share capital and share premium accounts. The Company may purchase its own shares for cancellation or acquire them as treasury shares in accordance with the Bermuda Companies Act on such terms as the Board of Directors shall think fit. Historically, the General Meeting of Shareholders of SNSA has authorised the Company, or any 32 Stolt-Nielsen Annual Report

37 wholly-owned subsidiary, to purchase Common Shares of the Company, from time to time in the open market, provided: (i) the maximum price to be paid for such Common Shares shall not be higher than the higher of the price of the last independent trade and the highest current independent bid on the Oslo Børs and shall be in conformity with applicable standards, if any, concerning such purchases that may be established by the regulatory regimes in such countries where the Common Shares are listed or admitted for trading; (ii) the minimum price to be paid for such Common Shares shall not be less than the par value (i.e. U.S. $1.00 per share) thereof; and (iii) other conditions for trading shall be in conformity with applicable standards, if any, concerning such purchases that may be established by the regulatory regimes in such countries where the Common Shares are listed or admitted for trading, and further provided such purchases are in conformity with applicable law, such authorisation being granted for purchases completed on or before the following August 31. The Board of Directors of SNL has resolved to continue share purchases, if any, on the foregoing terms. 4. Capital structure, equal treatment of shareholders and transactions with close associates SNL has two classes of shares, Common Shares and Founder s Shares. Only the Common Shares will be listed on Oslo Børs. Except for matters where applicable law requires the approval of both classes of shares voting as separate classes, Common Shares and Founder s Shares vote as a single class on all matters submitted to a vote of the shareholders, with each share entitled to one vote. Under the Bye-laws, holders of Common Shares and Founder s Shares participate in annual dividends, if any are declared by the Company, in the following order of priority: (i) $0.005 per share to Founder s Shares and Common Shares equally; and (ii) thereafter, all further amounts are payable to Common Shares only. Under the Bye-laws, in the event of a liquidation, all debts and obligations of SNL must first be paid and thereafter all remaining assets of SNL are paid to the holders of Common Shares and Founder s Shares in the following order of priority: (i) Common Shares rateably to the extent of the par value thereof (i.e. $1.00 per share); (ii) Common Shares and Founder s Shares participate equally up to $0.05 per share; and (iii) thereafter, Common Shares are entitled to all remaining assets. As of November 30, 2010, Fiducia Ltd., a company owned by a trust established for the benefit of certain members of the Stolt-Nielsen family, together with certain members of the Stolt-Nielsen family, controlled 59.47% of the outstanding shares of SNL entitled to vote generally on matters brought to a vote of shareholders of SNL. As a result, the Stolt-Nielsen family currently directly and indirectly exercises a controlling influence over SNL s operations and has sufficient voting power to control the outcome of matters requiring shareholder approval including: the composition of SNL s Board of Directors, which has the authority to direct SNL s business and to appoint and remove SNL s officers; approving or rejecting a merger, consolidation or other business combination; raising future capital; and amending the Bye-laws which govern the rights attached to SNL s Common Shares. This control may also make it difficult to take control of SNL without the approval of the Stolt-Nielsen family. Additionally, the interests of the Stolt-Nielsen family may conflict with the interests of SNL s other shareholders. The Board of Directors reviews at least annually the financial and other relationships between Directors and SNL. SNL conducts an appropriate review of all related-party transactions for potential conflict of interest situations on an ongoing basis and all such transactions are approved by SNL s Audit Committee and shall be disclosed in the Annual Report. Any transactions SNL carries out in its own shares are carried out either through the Oslo Børs or at prevailing stock exchange prices if carried out in any other way. Directors and the executive management must notify the Board of Directors if they have any material direct or indirect interest in any transaction entered into by SNL. Following such declaration, Directors with such a direct or indirect interest may participate in voting for such transactions unless disqualified by the chairman of the relevant board meeting. Our Business Stolt-Nielsen Annual Report

38 Corporate Governance continued The Board of Directors and the Board Committees may retain independent advisors, as they deem appropriate and at their discretion. SNL shall be responsible for the expenses of any such advisor. 5. Freely negotiable Shares Only the Common Shares are listed on the Oslo Børs. Bye-law 74.1 of the Company s Bye-Laws limits individual shareholdings of Common Shares to 20%, single U.S. person shareholdings to 9.9% and shareholders of any single country in aggregate to 49.9%. While the Board of Directors is authorised to restrict, reduce, or prevent the ownership of shares if it appears to the Board of Directors that such ownership may threaten SNL with adverse consequences, including but not limited to adverse tax consequences, hostile takeover attempts or adverse governmental sanctions, it is the intention for the Board of Directors to assess any takeover offer for SNL or a substantial portion of SNL s assets, make a recommendation on any such offer, and call for a General Meeting of Shareholders to vote on the acceptance or rejection of such an offer. 6. General Meetings The Board of Directors or the Chairman is responsible for calling both Annual and Special General Meetings of shareholders. At any general meeting, two or more persons present in person throughout the meeting and representing in person or by proxy issued voting shares in the Company, shall form a quorum for the transaction of business, except for those matters under the Bermuda Companies Act for which a specified super majority vote is required, in which case a quorum representing one-third of the issued and outstanding shares entitled to vote is required. The Board of Directors is obligated to hold an Annual General Meeting every year at such time and place as the Board of Directors or Chairman shall designate. A shareholder or group of shareholders representing at least one-tenth of the outstanding voting shares may request a Special General Meeting in writing indicating the agenda thereof. The Board of Directors will be obligated to hold the meeting forthwith. Notices for both Annual and Special General Meetings shall be sent by mail to all holders entitled to attend and vote there at no later than 21 days before the date set for the General Meeting. Notices should provide sufficient information on all matters to be considered at the General Meeting, voting instructions and opportunity to vote by proxy. Matters at the General Meetings are restricted to those set forth in the agenda. 7. Nomination Committee Bermuda law does not require that a nomination committee is established. Members of the Board of Directors identify and evaluate proposed candidates for nomination to the Board of Directors. Individuals are selected for nomination to the Board of Directors based on their business or professional experience, the diversity of their background, and their array of talents and perspectives. 8. Corporate Assembly and Board of Directors: Composition and Independence The business affairs of SNL are managed under the direction of the SNL Board of Directors. The Board of Directors may delegate authority to the Chairman, specified committees of the Board of Directors, or to SNL s management. SNL does not have a corporate assembly. As provided in SNL s Bye-laws, the Board of Directors shall be composed of at least three and not more than nine Directors. The Board of Directors believes that the optimal size for the Board of Directors should be six to eight Directors. The Board of Directors size is flexible depending on the circumstances and the qualifications of proposed candidates. The composition of the Board of Directors shall ensure that the SNL Board of Directors can attend to the common interests of all shareholders and meets the Company s need for expertise, capacity, diversity and independence. The Directors are elected at the Annual General Meeting of Shareholders. Directors shall hold office for such term as decided by the General Meeting, or in absence of such determination, until the next Annual General Meeting or until their successors are elected or appointed or their office is otherwise vacated. Directors may be removed only for cause by the vote at a Special General Meeting held for that purpose. In the event of a vacancy on the Board of Directors, the remaining members of the Board of Directors can fill such vacancy and appoint a member to act until the next General Meeting of shareholders at which the Directors so elected shall be confirmed. 34 Stolt-Nielsen Annual Report

39 Whereas the Board composition meets the requirements according to the Norwegian Code of Practice for independence from major shareholders and main business associates, only three of the current seven SNL Directors, Christer Olsson, Håkan Larsson and Christina De Luca, are considered to be independent from executive management according to the Norwegian Code of Practice. The composition of the Board of Directors ensures continuity and experience, and together with the Board Committees is, in the view of the SNL Board of Directors, suitable to represent interest of the minority shareholders. Our Business The Chairman of the Board of Directors is elected by the Annual General Meeting of Shareholders. The CEO is a member of the Board of Directors. 9. The work of the Board of Directors Board meetings The Board of Directors holds at least four regularly scheduled meetings a year. Meeting schedules are approved by all members of the Board of Directors. SNL does not have a deputy Chairman as this has not been considered necessary. The Board of Directors may appoint a Board Secretary who does not need to be a member of the Board of Directors. Decisions of the Board of Directors shall be taken by a majority of the votes cast by the Directors present and represented at the meeting provided a quorum is present. A majority of the Directors then in office shall constitute a quorum. The Board of Directors may also act by unanimous written consent. Board meetings executive sessions Management is available to discuss matters of concern to the Board of Directors and the Board of Directors has regular access to senior management. The basic duties and responsibilities of the Directors include attending Board of Directors meetings, preparing for meetings by advance review of any meeting materials and actively participating in the Board of Directors discussions. Directors are also expected to make themselves available outside of the Board of Directors meetings for advice and consultation. The Board of Directors ensures that SNL has effective internal controls in accordance with the regulations that apply to its activities, including SNL s corporate values and ethical guidelines. Board committees The Board of Directors has established an Audit Committee and a Compensation Committee. The Board of Directors periodically reviews the size, structure and function of the Board Committees. The Audit Committee and Compensation Committee have written charters. These charters are reviewed and reassessed by the Board on an annual basis. The Audit Committee is composed of at least two members; preferably each of whom is independent pursuant to all applicable regulatory requirements. The Compensation Committee is composed of at least two members of whom at least one shall be deemed independent pursuant to all regulatory requirements applicable to SNL. Each Committee has a Chair who reports the activities of such Committee at meetings of the full Board of Directors. 10. Risk Management and Internal Control The Board of Directors is responsible for SNL s system of internal control, which covers financial, operational and compliance controls as well as the risk management processes. SNL s system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and provide reasonable assurance that SNL is operating legally, ethically and within approved financial and operational policies and procedures with sufficient safeguards against material financial statement misstatements or loss of assets. The Board of Directors, through the Audit Committee, oversees the monitoring of compliance with its internal control system, including SNL s Code of Business Conduct. The Audit Committee meets on a quarterly basis to review and discuss results of internal audits performed by the Operational Audit Department. This also includes matters of an ethical nature. All employees, customers, suppliers and other parties have direct access to the Audit Committee, through the whistleblowing system, to report any potential illegal or unethical matters. SNL s business heads conduct an annual review of SNL s most significant areas of exposure to risk and the related internal control system. Stolt-Nielsen Annual Report

40 Corporate Governance continued 11. Remuneration of the Board of Directors The Board of Directors, on an annual basis, reviews the Directors compensation. The review includes a comparison of SNL s Directors compensation practices against the practices of comparable U.S. and European companies. Members of the Board of Directors and/or companies with which they are associated shall not in principle take on specific assignments for SNL in addition to their appointment as a member of the Board of Directors. If they do nonetheless take on such assignments this shall be disclosed to the full Board of Directors. The remuneration for such additional duties shall be approved by the Board of Directors. The remuneration awarded to SNL s Board of Directors for their service as Directors is disclosed in aggregate at the Annual General Meetings and in the Annual Report. Any remuneration in addition to normal Directors fees shall be specifically identified. 12. Remuneration of the executive management The performance and compensation of the CEO is reviewed periodically by the Compensation Committee and annually by the Board of Directors in an executive session, and not by the general meeting as recommended in the Norwegian Code of Practice. Following the latter s review of performance and consultation with the Chairman, the Committee will recommend any changes in compensation and/or benefits for decision by the Board of Directors in executive session. The Compensation Committee approves the principles for compensation policy in SNL and further approves the individual remuneration of the members of Executive Management. The Company has in place a long-term incentive plan aimed at tying the Executive Management s compensation with the performance of the Company. This is a cash-based plan which sets future payouts based on Company performance relative to targets for Return On Capital Employed and EBITDAR-to-Revenue. All performance-related compensation is capped at a maximum percent of the salary of the Executive Management. 13. Information and Communications All information distributed to SNL s shareholders is published on SNL s website. SNL promptly submits all material press releases to Oslo Børs, disseminates such material press releases through an approved newswire service that provides simultaneous and broad distribution. Copies of audited financial statements of SNL are distributed to shareholders prior to the Annual General Meeting of Shareholders and filed with the Oslo Børs in accordance with its requirements. SNL publishes an overview each year of the dates for major events such as its Annual General Meeting of Shareholders, publication of interim reports, public presentations and dividend payment date if appropriate. This overview is available on SNL s website. After each quarterly earnings release, SNL holds a conference call to discuss the results and respond to investor and analyst questions. The conference call is open to all those who wish to participate. Twice per year the results conference call is held in front of a live audience. All conference calls have a telephone dial-in and are webcast with playback options available. 14. Take-overs The Board of Directors will publicly disclose any serious offer for SNL or a substantial portion of the assets of SNL and will follow the recommendation in the Norwegian Code of Practice if any serious offer is received. The Board of Directors will also obtain a fairness opinion or valuation from an independent third party for any material transactions between SNL and affiliates such as: members of the Board of Directors, members of the executive management or close associates of any such parties; and between companies in the same group where any of the companies involved have minority shareholders. 36 Stolt-Nielsen Annual Report

41 15. Auditor The Audit Committee is responsible for the appointment and supervision of independent external auditors. Under Bermuda law the independent external auditor is appointed by the General Meeting. The Audit Committee may only propose the name of the independent auditor. The Audit Committee has established guidelines in respect of the use of the Independent Auditors by the Company s executive management for services other than the audit. The Audit Committee shall receive annual written confirmation from the Independent Auditors that such firm continues to satisfy the requirements for independence. In addition, the Independent Auditors shall provide the Audit Committee with a summary of all services in addition to audit work that have been undertaken for the Company. The Independent Auditors shall submit the main features of the plan for the audit of SNL to the Audit Committee annually. The Independent Auditors shall participate in meetings of the Audit Committee that deal with the annual accounts and quarterly results. At these meetings, the Independent Auditors shall comment on any material changes in the Company s accounting principles, comment on material management estimates and judgements, and report all matters on which there has been disagreement between the firm and the executive management of the Company. The Independent Auditors shall at least once a year present to the Audit Committee commentary on any significant internal control findings arising during the audit. The Audit Committee shall hold a meeting with the Independent Auditors at least once a year at which neither the CEO nor any other member of the executive management is present. Our Business Stolt-Nielsen Annual Report

42 Financial Review Net profit attributable to equity holders of SNL was $106.1 million for 2010, an increase of $10.9 million from Jan Chr. Engelhardtsen Chief Financial Officer Management s Discussion of Operating Performance This section discusses SNL s operating results and financial condition for the years ended November 30, 2010 and This discussion consists of: Results of Operations; Business Segment Information; Liquidity and Capital Resources; Critical Accounting Estimates; Principal Risks; Treasury Shares; and Subsequent Events. Results of Operations Below is a summary of SNL s consolidated financial data for November 30, 2010 and 2009: For the years ended November 30, Operating Revenue $ 1,793,668 $ 1,645,135 Operating Expenses (1,510,331) (1,369,313) Gross Profit 283, ,822 Gross margin 15.8% 16.8% Share of profit of joint ventures and associates 24,710 19,748 Administrative and general expenses (158,016) (171,518) Restructuring charges (32) (649) Gain on disposal of assets, net 7, Other operating income 3,757 1,273 Other operating expense (71) (1,470) Operating Profit 160, ,645 Operating margin 9.0% 7.5% Non-operating income (expense): Finance expense (72,557) (30,658) Finance income 47,735 5,343 Foreign currency exchange gain 2,577 7,703 Non-operating (loss) income (5,372) 186 Profit from Continuing Operations before Income Tax 133, ,219 Income tax expense (20,493) (9,467) Net Profit from Continuing Operations 112,758 96,752 Loss from discontinued operations (6,681) (1,226) Net Profit $ 106,077 $ 95,526 Attributable to: Equity holders of SNL $ 106,096 $ 95,233 Non-controlling interests (19) 293 $ 106,077 $ 95,526 Consolidated Income Statements Net profit attributable to equity holders of SNL was $106.1 million for 2010, an increase of $10.9 million from This was primarily due to an increase in operating profit, which increased to $160.9 million from $123.6 million, or $37.2 million. The most significant factors affecting SNL s performance in 2010 were: 38 Stolt-Nielsen Annual Report