Q4 2020 Star Bulk Carriers Corp Earnings Call
Yeah.
[music].
Ladies and gentlemen, thank you for standing by your conference is scheduled to begin shortly please hold the line. Thank you for your patience.
[music] well can Peel Conference School. Please continue to stand by your conference will begin shortly.
Thank you for standing by and ladies and gentlemen, and welcome to the stop all carriers conference call on the fourth quarter 'twenty and 'twenty financial results, we have with US Mr. Petros Pappas, Chief Executive Officer, Mr. Hamish Norton President Mr. Nikos West Coast, Chief operating officer.
Mr. Cmos Spiro and Mr. Christian speak Larish co chief financial officers of the company at.
At this time all participants are in a listen only mode.
B of presentation, followed by question and answer session at which time, if you wish to ask a question. Please press star and one on the telephone keypad and wait for your name to be announced I must advise you that this conference is being recorded today, we now pass the floor to one of your speakers today Mr. Vic Larry. Please go ahead Sir.
Thank you operator.
The increase was Mcgladrey co Chief financial Officer of Starbucks carriers, and I would like to welcome you to the Starbucks carriers conference call regarding our financial results for the fourth quarter of 2020.
Total begin I kindly ask you to take a moment to read the safe Harbor statement on slide number two of our presentation.
Today's presentation will focus on and overview of our fourth quarter and full year results, our cash evolution during the quarter.
Our operational performance and our future Drydocking and ballast water treatment and see some expenses and the latest industry fundamentals before opening up for questions.
And it is now turn to slide number three of the presentation for a summary of our fourth quarter 2020 financial highlights.
And the three months ending December 31, 'twenty and 'twenty TCE revenues amounted to 140 and $47 million compared to 148 million for the same period in 2019.
Adjusted EBITDA for the quarter was $81 5 million versus $88 $3 million in the fourth quarter of 2019.
Net income for the fourth quarter amounted to $27 8 million for 2009 sales earnings per share versus $23 5 million net income or <unk> 25 earnings per share in the fourth quarter of 2019.
Our time charter equivalent rate during this quarter was $13415 per vessel per day.
Total cash today stands at $232 million with total debt at approximately 1.63 billion.
830 million revolving facility is currently Undrawn and these include the pro forma and we are both figures.
As far as our recent vessel acquisitions are concerned we have taken delivery of the 320 <unk> Capesize vessels acquired from <unk> capital and expect to take delivery of the saving the Scorpio bulker pesos in March 2021, reaching a total of the one.
126 vessels on the water on a fully delivered basis.
Turning to slide number four.
This is the summary of our full year 2020 financial highlights.
Adjusted EBITDA for 2020 was $229 1 million vs $237 3 million in 2019.
Yes.
Net income for 2020 amounted to $9 7 million or David sales earnings per share.
<unk> 2 million net loss or <unk> sales loss per share in 2019.
Yeah.
Slide five graphically illustrates the changes in the company's cash balance during the fourth quarter.
The company started the quarter with $222 1 million and cash.
And generated positive cash flow from operating activities of $58 1 million.
After including debt proceeds and repayments capex payments prescriber and ballast water treatment system installments.
We arrived at the cash balance of $195 5 million at the end of the quarter.
I would just highlight here that the reduction and our cash balance is due to the fact that during the fourth quarter. We prepaid was undoubtedly the $30 million revolving facility, which can be redrawn at any time.
Slide six we demonstrate the changes in the company's net debt over the past year.
And the early twenties way and be the company started with and adjusted net debt of 1.5 dollars 2 billion.
Speaking in May 2020 at 154 billion.
And then continuously decreasing until today.
Excuse me, ladies and gentlemen, the speaker's line of just disconnected. Please hold the line of already we connect the line. Thank you.
And then where we summarize our operational performance.
Opex was up 4000 per 106 and $9 per vessel per day for the quarter and 4001 hundred and since $2 per vessel per day for the whole of 'twenty and 'twenty.
The increase was primarily due to increased crew expenses throughout the year due to COVID-19 disruptions and crew changes otherwise on vessels have operated largely uninterrupted during the second half of 'twenty and 'twenty. Despite the COVID-19 pandemic.
Net cash G&A expenses were $1068 per vessel per day for the quarter and $1035 per vessel per day for 2020.
The combination of our in house management, and the scale of the group and enable us to provide our service of very competitive costs complemented by excellent ship management capabilities with star bulk currently and number one amongst our peers in terms of right ship ratings.
Slide eight provide some guidance around the future of dry dock and ballast water treatment system expenses for 'twenty and 'twenty, one and they're out of and thought that off hire days.
The 2021 numbers are based on current estimates of our retrofit planning vessel employment and yard capacity.
These figures incorporate our current understanding of present and future shipyard congestion.
And at the beginning of the year 10 vessels have entered Drydock and five have already been retrofitted with ballast water systems are.
And our expected capex for 'twenty and 'twenty one existing.
The existing major of $20 9 million for the dry docking of 31 vessels with another 23 two for the bar.
And those water system Capex of 23 vessels.
In total we expect to have approximately 943 of hard days during the year.
I will now pass the flow through our CEO, the Petros Pappas for a market update and his closing remarks.
Thank you Nicole.
Please turn to slide nine for a brief update of supply.
During 'twenty 'twenty and total of $48 8 million deadweight the was delivered and.
The 15 4 million deadweight and was sent to demolition for the net fleet growth of $33 4 million deadweight or three 7%.
What are the themes related to the Corona virus outbreak and complications from the crude changes created strong supply and the efficiencies throughout the year while.
While the freezing weather conditions during the December disrupted the operations in the North Pacific and led to record high congestion.
And your environmental regulations and uncertainties around the future of vessel propulsion are expected to keep the dry bulk new building activity under control over the next years.
The other book decreased two of historical low five 8% of the fleet with just $14 7 million deadweight firm orders and reported during 2020.
The increase demand from C breakers boost scarp price is higher and made demolition of older tonnage and more attractive option for ship owners.
The I am more low sulfur regulation and suites, the more expensive real SFO led to a 0.3% decrease of average stemming speeds. During 2020, despite the strong correction and crude oil prices at the start of the year.
We expect that oil prices will increase as the global economy recovers from the pandemic and the higher bunker price environment to incentivize low steaming and improve scrubber savings as the result of the bulk of positive trends net fleet growth is projected to correct and average.
It's around one 5% per annum between 'twenty and 'twenty, one and 'twenty and 'twenty three.
Let's now turn to slide 10 for a brief update of demand.
2020 was a challenging year for trade as COVID-19 affected consumption and disrupted the supply chain of all dry bulk cargos.
And the Clarksons total dry bulk trade. During 2020 is estimated to have declined by two 1% and and tons with the negative effect concentrated in the first half of the year.
China led the recovery and during the second half reported record high volumes by of our own.
Iron ore grades and bauxite ex.
Gnomic activity from the rest of the world remains depressed for a prolonged period and slowly began to recover during the fourth quarter.
Yeah.
Iron ore ton miles during 2020 expanded by four 8%.
China crude steel production increased by six 2% to a new record high despite the pandemic, while the rest of the world contracted by eight 4%.
Dan Myers will receive strong support the next two years as the violate plans to raise capacity from 320 million tons at the end of 2020 to 400 million tons per year by the end of 'twenty and 'twenty two.
The recent strength in the iron ore prices and relatively low stocks are positive indicators that iron ore trade will continue to expand during the next years.
Coal was the worst performer among dry bulk cargos during 2020 with ton miles contracting by nine 7% the <unk>.
And then we can reduce global consumption, China finishes with Australia led to.
For a band of call the imports and Columbia supply was disrupted by strikes.
The combination and had the negative effect on long distance trade and ton miles as a result on the positive note of colder than average winter is taking place in the northern hemisphere that has helped.
Coal consumption recovery for.
The more of the rebound and international coal prices is providing an incentive to global coal producers to raise the exports and together with an industrial activity recovery is creating a favorable outlook for short term gold rates.
Grain and soybean trade during 2020 expanded by 10, 1% and ton miles on the back of a record high Latin America crop and the return of U S exports to China as part of the Phase one trade deal.
China's demand for grains is expected to remain strong going forward as the next five year plan will focus on food security and the Hog herd has now fully recovered from the African swine fever outbreak of 2018.
Minor bulk trade. During 2020 is estimated to have declined by one 5% and ton miles. However, West Africa bauxite exports continued to expand and have a strong positive effect on Cape sized ton miles.
Vaccination against Covid, 19, together with favorable monetary and fiscal policies.
Globally has brought optimism to global markets with the IMF expecting five 5% economic growth and 'twenty 'twenty, one and for 2.2% in 2022.
Focusing on dry bulk clarksons expects dry bulk trade to expand during 2021 by three 7% in tons and ton miles.
And an environment, where on the macro side, we expect a world economic rebound.
A weak dollar.
Strong oil prices and low interest rates and.
On the micro side.
Low order book now and in the future and.
And grades of the Brazilian iron ore exports and the West African bauxite.
Strong long haul grain trades congestion and the positive of supply effect due to environmental regulations. We continue to remain very positive about the short and medium term prospects of dry shipping.
Without taking anymore of your time I will now pass the floor over to the operator to answer any questions you may have.
Thank you, ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone keypad and wait.
And to be announced please standby while the compile the Q&A queue. This will only take a few moments if you wish to cancel your request Please press star and Q1.
And once again, please press star and one if you wish to ask a question and star to.
And to cancel that request.
Yes.
And your first question comes from Randy given from Jefferies. Please go ahead. Your line is open.
Okay.
Oh, the gentlemen, how's it going.
Hi, Randy.
And.
Good pretty normal conditions for Houston, and Athens, where we're both getting some snow here, but.
Other than that.
Lazy times.
Can you provide a breakdown for <unk> 'twenty, one quarter to date rates by your asset class and.
And then also just kind of bigger picture.
Obviously Cape sizes, you know where are you.
Still relatively weak compared to the Panamaxes right and it's about 20000 of day Capes around 16000 for the forward curves are obviously pointing to an inflection where capes with the outperform them. So kind of if you can talk on the current market.
Why that is panamax outperforming capes and why you and the forward curve of confidence that that reverses here in the coming months.
Okay.
Thanks, Andy that's a lot of questions.
First of all of our coverage and our coverage for Q1 is around 50% for the Capes and.
The bit above 19000 net.
Or panamax is 92% coverage.
And about 13004 hundred net.
And our scope of our coverage of about 87, and the 5% at about 12000.
750.
Total covered 75% of 76%.
And at about $14 5000.
You asked why Panamax is doing better than Cape right now.
We think that.
This is happening because of.
The there is there is a stronger.
Soybean market in the U S.
Because of also because of the cold weather there is more coal in.
And.
Being being moved at present.
And especially because of the Australia China.
Situation.
There is more imports from Indonesia.
And these imports are carried mostly on panamax and not Cape size.
Also we see.
Coal from Colombia.
Lot of it on Panamax and therefore.
And we see a lot of trades on coal and panel and the grains that is usually a mostly panamax cargos and that is why we have seen this.
The squeeze, especially on the Panamax now.
Don't expect to see $25000 and $22000 on the Panamax Forever hope.
And hopefully it will happen and the future, but there is not going to be of continuous thing and and for that reason today you saw that the rates have gone down but generally.
It's a very positive situation and the reason for that positive situation is what we call and this office often imbalance RCM imbalance and.
And that is that.
And that is.
Due to the fact that.
The vast vast there is more exports from Europe from the Atlantic.
Two deposit Pacific.
And then the other way around and therefore.
When when a cargo when cargos.
The loaded in in the Atlantic and go to the far East these vessels have to come back.
During the last couple of months, there's been very few vessels and the Atlantic.
And that has squeezed the atlantica law and the charter is instead of finding of vessel in the Atlantic to be able to.
Low debt and get to the Pacific and 60 days and now they have to source vessels for example from the Indian Ocean earnings and the three but that will take 60 days for a certain of cargo actually takes 90 or 100 days and therefore that creates.
A huge squeeze and we think that and main reason for.
For the risk weighted for these rates that are taking place right. Now is is that squeeze, which we think will continue perhaps not to the same degree.
Lately because of the dry docks, the scrubber installations and the new buildings that are being delivered the ballast water treatment plants that most of us actually retrofit in the far east we have been obliged to have more vessels and the far east.
And therefore.
On the Atlanta, the Atlantic squeeze the takes place.
Now.
If you want me to complete this.
In general we.
We are extremely positive about the market going forward.
For a number of reasons.
There are macro reasons and micro reasons.
The macro reasons have to do for example, with the economic rebound we expect once the Covid is is dealt with.
And the low dollar of at the low dollar is very important because.
It makes.
And our commodity prices cheaper in in the local currencies and also makes freight cheaper and local currencies and also it makes the vessel price cheaper and local currencies and therefore it makes it easier.
For for the receivers to pay for them.
And that also makes us believe that we will see higher prices of AR.
Vessels going forward.
And then we have low interest rates for the foreseeable future.
And we believe and stronger oil prices of oil prices are important because if the.
And if crude oil is high then.
And then banker prices are high and that.
<unk> vessels to slow steam and therefore the.
Credit supply of vessels. So it is a positive for us and these are the macro side the micro side is.
When we focus in our own business.
<unk>.
At the very low order book below 6%, the best and the last one five years.
The fear of ordering vessels going forward, because we don't know what engines, we will we will need.
<unk>.
The IMO regulations are important because they will.
It will encourage the slow steaming and on.
Other too.
Be able to.
Achieve the efficiencies that.
There will be demand demanded of especially of the older vessels that will be per have potentially more scrapping. So that's positive.
We see more iron ore from Brazil, more bauxite from West Africa.
We see more more grain trade all of these are long ton miles extremely important.
We see congestion as a consequence of all of that.
And of course.
Never never never forget.
As I said before the auction in balance this is extremely important and lastly, the sentiment there is positive sentiment and I think psychology is also very important so I hope I didn't hear you, but I and I hope I answered your.
The question in full.
Yes, more than full of that was very impressive.
Thank you for that.
And now I guess following up on that briefly how have the asset values been impacted by this kind of current market strength as well as in your view and others. The optimistic outlook based on the strong at the cohort curves for the back half of this year and even into 'twenty, two and then any appetite from <unk>.
Star bulk specifically for additional acquisitions and maybe ships for shares now that your share price is closer to NAV.
Oh.
We're always looking at our attractive fleet acquisitions, if we can arrange that.
And as you've seen us do in the path.
Yes.
And also if we if we find and opportunity.
We will take advantage of it we see of very very positive future going forward and.
As far as prices I think they have gone up by like 10 and 15%.
And I expect them to go further up going forward.
And just on a completely separate note. Let me just correct one error that we made and the presentation, we talked about $29 million of capex relating to dry docking and that should be $29 million of projected drydocking expense.
In 2021.
Got it okay. Thank you for that.
And it sounds good yeah the asset.
And certainly kick tires still a pretty big disconnect between new builds and second hand so.
Hopefully you continue to focus on the secondhand, but thanks again and that's it for me I'll go back to burning my furniture for warrants.
Scott.
Thank you Randy.
Okay.
Thank you. Your next question comes from Amit Mehrotra from Deutsche Bank. Please go ahead. Your line is open.
Thanks, Hi, everybody I guess petros the the.
First quarter bookings were.
Especially on the capes stronger than I would've expected.
Imagine the scrubber.
Benefits and there if you can just kind of help us.
About that dynamic.
Yes, there is some of scrubber benefit in there.
And for going forward, the seems that it's going to be higher because there was a part of the year that the differential was like 50 to $60 right now it seems it around the 120 to 125, so I think it's going to be higher going forward.
So I mean.
It depends how much of a vessel burn so vessels of the bearings for example of 30 tons.
And may make.
The times, a 123006 hundred times about.
70% of <unk> should be.
Two and $5000 a day.
So <unk> more.
The smaller vessels less.
It will take us a few years to repay I think about three.
Three years, two and half of the years, probably is as things stand right now with Swift.
It's a decent.
The return also one thing I want to say is that.
During the last quarter as we usually do we did the hedge part of Q1 and a little bit of Q2 as well and.
And the.
And of course at at lower levels than what we're seeing today, but.
But Q1 this year has been totally different from the last 11 years 10 years.
And we always we always have a little bit the towards the last quarter to be on the safe side last year of the rates were like 3000. This year the rates are 15000 and so.
So we missed out the little bit but.
And you cannot go all out.
And total and make it so.
That's why you'll see average of 14 and the half or the west.
And the coverage would be at 17 or 16 and a half right.
And we do that on the first quarter yeah. Okay.
Christos Cmos can.
Can you just update us on the like the.
The actual current share count.
And that's the only reason outside of obviously you've done a few ship for share of deals and I just want to make sure that we're having the actual exact pinpoint and share count and then the other thing I wanted to help.
Help on you gave us the dry docking days and the first quarter, but can you actually give us the total revenue days and the first quarter and the entirety of 2020, just because theres. So many moving parts on the on the asset side.
Hi, Amit and Cmos.
We have as we speak today and 99.2.
And 2 million shares outstanding.
And we have announced that on delivery of.
The seven score.
Scorpio vessels.
We will issue another 3 million shares.
So pro forma for the delivery of the investment is going to be 102 million shares.
And the $2 2 million shares outstanding.
And this one.
Okay.
Okay and the revenue days.
The revenue days.
And you should assume on a fully delivered basis 45 day 45000 a day.
And.
<unk>.
Hum.
How do we provide the nickel.
The guidance for the.
And the price.
The evolution over the year for fires.
Okay.
And we've taken offline if you meet the esophageal and yes, it's about 42000 days for the 116 vessels then about the 1000 days. In addition for the three <unk> vessels.
And.
If we assume that everything is delivered.
For the Scorpio vessels by March 31 the.
And then it's another nine months.
<unk> seven times 30, 25, so it's another almost 2002 thousand days for the for the score fuel vessels and Thats, how we get to the 45000 debt Cmos mentioned before and we have provided guidance on the off hire days, which are 462 days in Q1.
270 days in Q2.
The 183 days in Q3, and 30 days in Q4.
Great. Thank you couple of.
Quick quick other ones if I may the amortization is the amortization schedule changed from last quarter on the debt or no is it still the same.
So basically with the acquisition of the <unk> vessels.
We basically add approximately $7 5 million.
Of amortization per quarter.
Yes.
And then the.
Scorpio.
And then on the score of two vessels, we add approximately $10 million more on.
And on an annualized basis.
So EBITDA 17 million more on an annualized basis from what were before.
Got it okay. Thank you and then the last one I guess the more important question.
I think your stock is now trading at or above NAV.
I know every of these are moving target with respect of gross asset value is you've obviously done.
These really great share per share deals have been pretty small when your stock was trading at a discount to NAV struck at MTV arent those deals now.
More frequent and given your public equity value is actually add any day or even above and EV and.
And we just assume that youre going to.
Gross significantly more as the result of this currency that you're benefiting from.
Well on.
Making predictions and hard, especially about the future.
5%.
And we'll do our best.
Yes.
I mean, I'm going to press you a little bit on that have you guys more inquiries related for chip for share deals as a result of this.
Valuation of <unk> gotten relative to maybe because I feel like we've been trying and get to this point for a long time. We are at this point now even even a little bit earlier than maybe we would of all expected are you getting more inquiries on sellers that are looking to.
Half of liquidity now you guys can provide and advantageous way.
Well look we're always getting inquiries in fact.
In the past it's been challenging the.
And these inquiries into deals.
On.
We would hope debt.
And now we might be better able to turn and inquiry into a deal but again you know there are many many obstacles always to doing a deal and so we'll just have to think of what happens we may get lock year now that our share price is higher but the wait and I will for sure.
Except for Brian on the sellers, maybe the sellers want more money now than they did a few months ago to the bid ask spreads have widened out but is that fair to say too.
And I look at all kinds of all kinds of things can happen.
As you can and can't plan on deals happening.
Try to do our best.
Okay, Alright, thank you very much everybody I appreciate it.
Thank you Amit.
Thank you.
Thank you. Your next question comes from Ben Nolan from Stifel. Please go ahead. Your line is open.
Hey, guys.
I want to start with.
The quarter.
It was I think pretty good.
And the guidance is I think pretty good for the <unk>.
And that you have fixed and the first.
First quarter at least.
On the Capesize vessels, and obviously, you're optimistic with respect to the outlook.
The the dividend program that you had was ended up being a little bit short lived but sort of given the fact that you are now back to or solidly within the positive earnings and sounds like you expect to be there how are you thinking about that.
Possible I don't know of reinstatement or getting back on track with respect to the dividend or a heavier capital allocation thoughts shifted at all.
Well you know.
And then the fact is our dividend policy is still in force.
On and.
The only real question is something Thats, a matter of board discretion, which is how to treat the $115 million of cash that we added to our balance sheet basically through refinancing of debt and effectively additional borrowing on.
And the board has discretion to treat that as counting towards our cash minimum level for the dividend or not so far they have elected not to treat that cash is counting towards the minimum balance for the dividend, but they have the.
The capacity to change their mind.
And.
Let's see what happens with the market.
Alright fair enough.
And and and Patrick.
Patrick I wanted to ask a little bit of a.
The U.
Ex bounded quite a lot on on range sort of market related question.
Wanted to dig in on one of the areas a little bit if I could you have these.
Seems like increasingly everybody's talking about the E X I regulations that are coming and and first of all.
Do you envision there being any direct impact on your fleet of I suspect not but.
But ultimately can you maybe walk through.
How you would envision that playing out.
And in terms of given takes on the supply side.
The.
<unk> I don't think is going to have much effect on on the global fleet, the CIO and I will have more of on.
Of an effect and.
The only solution there for a big and number of vessels is going to be not the only but the easier solution is going to be to slow steam now whether some vessels will have to slow steam so much for that.
That the charters will not want them and therefore, there won't be usable.
This is possible, but it's going to be probably is a small number of vessels in the my view.
And there is going to be slow steaming.
And the.
That is going to help a lot of the market now regarding our fleet, we're going through every single vessel and the we're taking.
Whether it needs to slow steam and to and to what extent.
And we.
We will be ready for for this for for it in 2023 when it comes interaction and of course do you have anything to add on debt.
And the investigation is ongoing and as Petro said, we're examining obviously the slow steaming and impact on each of the vessels and other operational measures and especially and optimizing.
Assuming mortgages and what gets planning that's going to play a big part and many of the future.
And obviously, it's very bullish for charter rate that you have much of the fleet low steaming to perhaps the greater extent and it is today.
Right and and forgive my ignorance on this and I appreciate that the scrubbers are primarily implemented for the for sulfur, whereas what we're talking about here is carbon.
But.
Under the new regulations would there be any change and sort of fuel specs and and would there be any knock on implications to the need or.
Usage of.
The of scrubbers.
We don't expect any change on the use of scrubbers for multiple reasons, one is regulation and the.
The systems are being installed.
And the enjoy grandfathering otherwise on specification of fuel HSA for what's been the widely available and.
And there have been some sort of the just during the pandemic, but the.
Everything is coming back on line also we fell of oil prices going up.
And what is required these continue monitoring the performance of the systems, but we don't foresee and kind of change and the utilization of the systems on board.
I mean, the only change and fuel stack is that in theory, you can use bio fuel too.
To help meet your carbon emissions requirements.
But of course, when everybody is required to meet carbon emissions requirements. The supply of Biofuels is likely to be woefully insufficient.
And it's available now because basically you are not required to use it.
Alright.
And it's interesting Okay and then the last lastly for me just sort of the.
Uh huh.
Record keeping.
As it relates to the two most recent transactions.
Are there any lockup periods on the shares that are being issued.
No lockup period, Ben for the for the for the new shareholders.
Although the the share amount of Theyre getting are relatively small compared to our total number of shares.
Alright.
Alright, and that does it for me thanks, guys.
Thank you Ben.
Thank you and no further questions at this time once again, ladies and gentlemen, if you wish to ask a question. Please press star and one on your telephone.
Yes.
Yeah.
Okay.
And we seem to have no further questions at this time I would now like to hand back the floor to management for closing remarks.
Okay.
No closing remarks, so operator.
Stay safe and thank you very much.
Okay.
That does conclude our conference for today. Thank you for participating you may now disconnect.
Okay.
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Yes.
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