Q4 2020 Golden Ocean Group Ltd Earnings Call
Thursday Thursday
Good good afternoon. Ladies and gentlemen. Thank you for standing by and welcome to the Q4 Golden Ocean group conference call at this time participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session at which time if you wish to ask a question, you will need to press the star and one on your telephone keypad. I must advise you the call is being recorded today Thursday the 18th of February twenty Twenty-One, and I would now like to hand over to your speaker today. Mr. Anderson, please go ahead sir.
Thank you very much. Good afternoon. And welcome to Good Notions Q4 release presentation. My name is Eric Anderson. I'm the CEO of Golden Ocean. I am delighted to present our results today off but the community of people in a moment. I will talk about the highlights of the quarter here after Peter will present some details on how long the results and then we were round off to the session with the Market Outlook and by discussing the announced transaction of acquiring 18 modern vessels from healing after the presentation. We look forward to taking any questions that you may have.
So for the quarter, we achieved and a bit of 59.3 million this resulted in a satisfying net profit of 25.4 million or 18 cents per share wage was driven by a strong spot chattering performance and both keeps and panamax has combined with our CC book.
In the quarter. We also signed the Neptune Declaration on Seafair well-being along with some six hundred other companies and organizations, obviously COVID-19 has impacted the daily lives and well-being of see faith in unprecedented ways and it has caused what we believe to be a humanitarian crisis at Sea. Therefore. We are firmly behind any initiative that can alleviate the situation.
We also a disposing of two of our oldest vessels. Of course this trimming of the fleet has to be added in connection with the deal that we are currently working on with human and what we often focused on here is modern fuel-efficient Saanich it is yeah more efficient, but it's also amid meaning less CO2 and greenhouse gases. We see increasing record salary requirements from m o u and all this but also from our customers that have stronger and stronger desires to decarbonise the value chains. Therefore we think it's the right strategy to focus on modern Sonic
Looking at the estimated she rates for the first quarter of 2021. We are at the moment, but approximately at $18,800 a day for sixty percent of our Cape Fleet and $13,100 a day for 77% of our panoramic speed wage. Would that I would have the word over to Peter for the financials. Thank you every if we look at our profit and loss for the quarter, we bought a cheap the hundred and twenty four or five million time charge Revenue versus hundred forty-three in the previous quarter. This was due to slightly lower wage rate just down by $2,000 per day approximately on average for each of the segments, but also low to discharge adjustments particularly on the capesize birth.
ships
Or total was just below $16,000 per day in Q3.
This was also impacted by having three ships docked in the quarter which compared to zero ships in in Q3.
Which brings or 4 days a little bit up we have are having eight ships dry docking for for q1.
Regarding our operating expenses. They were due to mainly they dry docking mentioned up by approximately four million also impacted by some increased code. Costs which continue to impact our operations and and in particular or crew change expenses. We achieved an Opex of $6,100 on average for the fleet which compares to fully aerobics at the same level and slightly up from the previous quarter where we did not draw it up in the ship's
Origin aim for the for the fourth quarter was 4 million, which was largely in back by one of personal expenses.
Our truck driver expense was 17.1 which moves to a large extent in in line with with Freight rates as Thursday we have in the charger in ships on index-linked time charters.
Looking at or or financial expenses. We have a net Financial expense of 9.3 million, which is down which is a result of lower Library. It's in addition to a higher caste position in the quarter which generated higher interest income.
On the derivatives and other Financial income. We resulted a 6.7 positive change and this was largely due to change in our derivative position of two point six million across all derivative types. Both interest rates FFA suckers result from from investments in Associates of 1.2 million, which largely relates to Swiss marine life Investments with Marine Drive operator, and finally the sale of C team which we have reported which we recorded the gain of two point six million dead.
So the net profit as you mentioned was 25.4 and eighty cents per share and this resulted in a fully result of 137.7 loss which was largely due to the impairment that we did back in to this year going out to slide six wage. I mentioned the strong cash generation this quarter as you can see, we had a incoming balance of hundred thirty 1 million in cash on a 71.4 million cash increase. Other than that there was normal development on the on the deck and months on the lease sites and very limited investment activities, which then led to a cash position at the end of the quarter of 175 Million Dead.
and in
This we have a restricted cash position of twenty two million as mentioned previously which relates to our derivative position.
Moving to the next slide we have on our balance sheet cash position of 70 which home at 5. We have a deathly least liability of hundred twenty-two, sorry, 1.2 billion at the end of the quarter. I can mention that we are at the end of the during q1 have repaid our revolving credit facility with fifty million, which we on an annualized basis will save $1,000 in interest costs are total assets is 2.7 billion at the end of the quarter largely unchanged and also our own racial with 50% as largely unchanged quarter-on-quarter.
Oh you do worry about you very, thank you.
That's a to the market review and Outlook. Well Q for so long ago. So I'm not going to spend a long time looking back in a few quick remarks about the quarter. It's not out well and despite what the graph what the grab looks like a dramatic drop for The Capes the dog stayed up all the break even throughout the quarter the max Market developed more stable. What particular took notice of in the quarter was the continued strong Chinese appetite for iron off but also the increasing inefficient allocation of code due to the tensions between China and Australia. It's a tendency that we believe will continue well into this year.
So if we look ahead which is more interesting and starting with looking at the demand side, then what we see is that yeah, 2012 or like no other we had Global GDP drop in GDP across the board only China managed to to to show a positive GDP growth. We believe that sentence she is now reversing we think that the GDP growth is rebounding strongly in 2021. What we had calls particularly take notice of this China and India the two largest importers of Commodities, they stand to grow more than eight and 11% respectively monthly that bodes well for demand
If we look at the supply side, it's also shaping up very positively. In fact, we're looking at the lowest net growth in the fleet in in more than thirty years. So standing at just a mere 1.6% this year and 1.6 next year. If you place an order today, it would mean the fact to delivery at the end of 2022. So we are looking at around two year minimum Runway below influx of new vessels. We have question marks hanging over technology. We have question marks hanging over new regulatory requirements. I do not expect the order to grow substantially in The Newsroom.
If we put together and compare the demand growth and the supply growth and we believe that's a good reason for optimism the next two years demand will Farm Supply and that should all other things equal of course lead to a stronger afraid environment. If we look at twenty twenty, we had a massive demand destruction yet took average rates for The Capes into the round gold Notions cash Breakeven. So with the supply-demand balance shipping now and the favor of the illness, it is a logical expectation that we are going to be in the years to come.
if we
Turn to slide number 14. We would like to address the recent order these potential recent acquisition of assistance from the from hidden in short what we see what we believe is that we are buying the right versus at the right time at the right price. Thursday is a modern and very fuel-efficient Fleet. It is performing well above a standard capes due to the larger intake and and fuel efficiency. So we think that it's the right fit for us. It's in the same segments that we believe that the largest Ops others namely on the on the larger sizes. So if we drill down a little bit off into the transaction what we can see here is that the ten new cars are Max's are highly competitive. They are here described that index hundred and Thursday.
As we have had these vessels in management for healing or see Tangles previously. We have actually managed to fix them and it takes hundred and thirty-eight at times but this but conservative describe the index page 130 on top of that. Of course, we achieve a scrubber premium. So we believe these are the right lessons. We have the same story for the campuses top of the efficiency. We also have eyes Cloud premium because Ford MRIs class so all in all this is a fleet that size well in with our strategy of being placed in a statement and being present in the growing and expanding as class segment.
What is worth noticing of course as well is that this transaction will create instant new revenue streams fifteen of the vessels are already on water and we will take them over within a short where else the last three will deliver in March April and June respectively. This is of course a positive.
If we turn to the next slide and talking about why this is the right time we think this graph very well illustrates that what it shows is that as a price has hardly has have been cheaper since nineteen ninety nine except for a few occasions. If we look at the expectations, we have four rebounds off in the drive bogged demand combined with buying it. Maybe twelve year low. We think this is the right the right timing again, when we look at our potential we see upside for the last segment not only on freight but also on a surprises
Turning to slide number 17. We have the pitched here another benefit of the transaction when we take this off to say if we take the split over we will end shop we will be able to lower our cash Breakeven with $600 US dollar per day for the capesize fleet. This is obviously attractive we maintain a very low cash Breakeven for a concert around 8500 per day. So on the right hand side, we have Illustrated the Casper given and as it as it is, it's a it's extremely attractive already on a on a normal basis. However, if you compare it to the efficiency of the fleet our new combined Fleet job after the transaction would be around index hundred and twenty on top of that. We have a big number of Scrabble fitted vessels, which at the moment gives around $2,000 Extra Innings per day. So if yep
Count for that. We are actually facing you're looking at a cash break-even when you compare it to the standard Baltic versus just above 10,000 per day. We believe that put us in a very good position.
So what does all that mean in terms of cash flow potential and I think it's fair to say that it puts a golden ocean a new league. We are try to illustrate that on Thursday at number eighteen what we see is the cash flow generated potential is especially significant. I don't want to put a number on where the market goes this year off. But if we look at the current one yet CC Market, which I guess is sort of a a reasonable thing to look at it's in the middle and it's around 21,000 on that. We are looking at generation $280 over and above our cash Breakeven that would correspond to a cashier of 22%
So the potential here is is is quite large.
Yeah, so to sum up a little bit. We think this is a Transformer transformational acquisition to Golden Ocean. We are increasing our Fleet size with 25% off going to have just shy of hundred old versus at the same time. We are bringing down our average age and our market cap is improving the 35 million. Obviously a large market cap will will give us more investor interest and more liquidity. So we think this is a a huge benefit as well.
All in order and to summarize we feel that the stars are shining not only supporting the transaction, of course for the 18 vessels, but also supporting the prospect Golden Ocean as a whole we have high demand growth. We have low Fleet growth, and we believe that Golden Ocean is ideally positioned to capture this page that concludes today's session will now hand the word over to the operator and we will be happy to take any questions that you may have. Thank you very much.
As a reminder, if you wish to ask question, please press the star and one on your telephone keypad and wait for name their name you wish to cancel your request. You can use the hash key and that's the start off the question.
What's the nation from star one on your telephone keypad if you wish to ask a question?
All right, no questions at this time, sir. Thank you. Okay. Thank you very much for calling in.
Are you canceling that does conclude your call for today? Thank you all for participating and you may not have disconnect.
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