Annual Review

Annual Review 2017

Q&A with Michael W. Kramer, President of Stolt Tank Containers

Q&A with Michael W. Kramer, President of Stolt Tank Containers

What were the major highlights – and challenges – for Stolt Tank Containers in 2017?

The number-one highlight in 2017 for STC was unquestionably the rising global demand for tank containers, and our strong reputation meant that we were well positioned to capitalise on that growth. While the increase was consistent across all regions, the main driver was China. We have seen some rather deliberate efforts by the Chinese government over the last few years to bring their economy back into balance. So, they had capped consumption, but at a certain point you must refuel and 2017 was the year when things started to rebound. We saw more cars being produced, spending was up, the real estate bubble that everyone was worried about moved to the back burner for the time being, and so on. So, China fuelled a lot of the demand, but we also saw other regions opening up too.

The success and growth of our food-grade business was another big highlight. This was a very difficult market for us to break. But we did it and we’re now the recognised market leader in food grade.

Why the demand in tank containers versus other modes?

It basically boils down to efficient use of capital – that’s what is driving the demand. With our tank containers, cargoes are delivered on-time more than 90% of the time. That makes for an extremely capital-efficient mode of transportation. Why tie up a million dollars or more of capital in product inventory when you can ensure a continuous flow of product? Tank containers are also extremely safe, flexible and environmentally friendly, which our customers value.

What were the challenges during the year?

Well, for starters we had to meet the rising demand against a backdrop of extremely tight space in a rising ocean freight market, which made it tough to keep customer service levels high. But thanks to our people and the systems we have in place, we were able to do that. One of the other issues we are wrestling with is access to quality truckers around the world. Managing that part of our business is now taking a lot more time and effort than previously.

So how does the market look for 2018?

I always approach this business one day at a time, and map the challenges or opportunities that arise both operationally and commercially against our long-term strategies in order to build competitive advantage, but my overall view of the market is that the ocean freight market-which is a primary driver of our business-is going to remain buoyant in 2018. STC’s business is really a microcosm of the steamship industry, and the outlook for 2018 is very solid. If you combine that with the signals we’ve been receiving from customers since late last year, then demand is going to be up in 2018. Granted, it’s going to be a very competitive environment, but, again, we expect it to be a very buoyant market.

What does STC need to do to fully capitalise on that market?

To make the most of the rising demand, we have to focus on our customers – customer retention and development need to be front and centre. STC must continue to find cost-effective ways of improving customer service and adding customer value – without adding costs or complexity to our organisation. Focusing on the right accounts and sending the tanks to the right destinations at the right prices is also critical to improving our results this year. We did a good job last year, but we need to build on that performance. I think there is more room for improved margins in 2018, but we’ll see.

We also need to increase the returns from investments in our depot network and systems. We’ve invested heavily in systems to increase our scale and productivity, and they’re paying off. Here I’m talking about constant efforts to innovate. For example, we’ve implemented new processes to handle so-called ‘swivel-chair activities,’ such as accessing websites, reading documents, filing, and so on. And when you add all of that up, it amounts to substantial reductions in man-hours. Streamlining our global documentation processes is another ongoing objective. Ultimately, it all boils down to one thing: delivering superior customer service at lower cost. That’s STC’s competitive advantage.

Stolt Tank Containers (STC) is the world’s leading provider of logistics and transportation services for door-to-door shipments of both bulk-liquid chemicals and food-grade products. With more than 35,000 chemical and food grade tanks including specialty tanks for aggressive or high purity products, compressed gases and cryogenic cargoes – STC’s global fleet is the world’s largest.

Stolt Tank Containers’ industry-leading fleet is complemented by STC’s unique global network of 21 owned and joint-venture depots, which gives STC direct control over the handling, cleaning and maintenance of its tanks. Customers who choose STC know that their cargoes – and the tanks carrying them – are continually subject to STC’s stringent operating standards – applied consistently worldwide. The result is unrivalled quality, reliability and safety for people and the environment.

STC’s assets – in combination with its global scale and focus on operational efficiency – enable STC to deliver capital-efficient solutions that minimise costs and increase supply-chain efficiency for its customers.

 

Review of 2017

After two relatively challenging years, demand for tank containers surged in 2017, and STC’s results reflect this increased demand. Full-year revenue rose by 7.8%, accompanied by a 13.1% increase in operating income. Total shipments for STC rose by 5.5% to nearly 127,000, with food-grade shipments climbing by 13.3%. Fleet utilisation rose by four percentage points to 72.5%.

Throughout the year, STC remained resolutely focused on its long-term strategic plan and actions aimed at enhancing its competitive advantage, while delivering added value to customers.

The number of depots in STC’s global network rose to 21 in 2017, with the opening of two new facilities, in Laem Chabang, Thailand and Vado, Italy. Construction also began on two new depots in Saudi Arabia – in Jubail and Dammam – with a third depot planned for Jeddah. In addition, STC’s depot in Kobe, Japan was renovated and expanded, while the Houston and Singapore depots added new loaded storage capacity. Every depot in the network posted improved operational results in 2017.

Safety for people and the environment remained STC’s first priority in 2017. STC is currently transitioning globally from the ISO 9001-2008 quality management standard to the ISO 9001 2015 standard, with its greater focus on risk management. During 2017, STC also recertified and improved the CDI-MPC assessment scores of its European offices and completed a major audit of its facility in Moerdijk, the Netherlands.

STC’s deployment of information technology, systems and solutions continued in 2017 on multiple levels. Actions included new modules to streamline key billing processes, the completion of STC’s new ‘paperless office’ initiative and expanded use of mobile technology for more effective depot management. In addition, mySTCtanks.com, the online tool that allows STC customers to better manage their tanks, reduce costs and drive supply-chain improvements, continued to add users in 2017.

Outlook

Demand for tank containers is expected to strengthen in 2018. STC continues to focus on delivering superior customer service at lower cost by leveraging its global scale, by using technology to drive continuous improvements in operational efficiency, and by operating in a manner that is safe for people and the environment.