Q1 2022 Star Bulk Carriers Corp Earnings Call
Yeah.
Thank you for standing by ladies and gentlemen, and welcome to the Star bulk carriers conference call on the first quarter. So that it went to two financial results. We haul bid ask Mr. Petros Pappas, Chief Executive Officer, Mr. Hamish Norton President Mr. D costs rescues Chief operating officer.
Mr. Steve about the Spiro and Mr. Christmas Big Larry's co Chief financial officers and Chinese block one to Lucky Chief strategy Officer of the company at this time all participants are in a listen only mode. There will be a question, but presents I should probably be a question and answer session at which time, if you wish to ask a question.
Please press the star and work on your telephone keypad and wait for the automated message advisors. Your line is open I must advise you the disclosure for instance, being recorded.
I'll pass the floor to one of your speakers today Mr. Seamless Spiro. Please go ahead Sir.
Thank you operator.
Cmos needle Coke Chief financial Officer of Star bulk carriers, and I would like to welcome you to our conference call regarding our financial results for the first quarter of 2022.
Before we begin I kindly ask you to take a moment to read the safe Harbor statement on slide number two of our presentation.
Yeah.
In today's presentation, we will go through our Q1 results cost evolution during the quarter.
Walk through of our dividend policy and another view of our balance sheet and operational update and ESG update and the latest industry fundamentals before opening up for questions.
Let us now turn to slide number three of the presentation for a summary of our first quarter 2022 highlights.
The company reported the strongest first quarter result in Star Bulks history.
Net income for the first quarter amounted to $170 4 million and adjusted net income of $175 6 million or $1 72 adjusted earnings per share.
Adjusted EBITDA was $225 9 million for the quarter.
For the first quarter I'll spend our existing dividend policy, we declared a dividend per share of $1 $65.
On June 16th 2022.
With the graph on the bottom of the page we wanted to highlight the community for four months over the last 12 months, which illustrates the strength of the platform in a rising dry bulk market.
Our last 12 months adjusted EBITDA is at 1.04 billion and adjusted net income of 831 million.
At the same time, we have returned a cumulative dividend of 576 million to our shareholders.
On the top right of the page you will see our daily figures per vessel for the quarter.
Our time charter equivalent rate was $27405 per vessel per day.
Our combined daily operating expenses and net cash G&A expenses per vessel per day amounted to $5812.
Therefore, our D C less opex and G&A.
$21600 per day per vessel.
Looking at the similar fleet wide adjusted P. C less operating expenses and G&A figure on a full year basis star bulk has been able to significantly outperform the adopted beer Amit.
By more than $5000 per day per vessel, implying an annual EBITDA over performance of more than $230 million on the 128 vessels fleet and demonstrating how assets are efficiently utilized in the star bulk platform.
Okay.
Looking at chartering Cabo that's for the second quarter of 2022, we have covered 74% of our fleets available days at a daily rate of $29760 per day per vessel.
Slide four graphically illustrates the changes in the Companys cash balance during the first quarter of 2022.
We started the quarter with $473 3 million in cash and generated meaningful positive cash flow from operating activities of $229 2 million due to the strong freight market.
After including debt proceeds and repayments capex payments for ballast water treatment systems installment and the fourth quarter dividend payment.
Is that the cash balance of 444 million at the end of the quarter.
Slide five has a walk through of our dividend policy with an example for the dividend calculation for the first quarter of 2022.
$1 $65 per share.
As of March 31, 2020, do we own a 128 vessels and our total cash balance was at $440 million.
With a minimum cash balance per vessel as of March 31st of 2.1 million per vessel.
On May 24, 2022 pursuant to our dividend policy, our board of directors declared a quarterly cash dividend of $1 $65 per share payable on June 16 to all shareholders of record as of June 32022.
The ex dividend date is expected to be June <unk> 2022.
In the last 12 months, our company has distributed dividends of $5 $6 per share.
We should note here that our dividend policy as announced is heavily dependent on changes in working capital.
In a rising freight and bankers market, our receivables and our inventories are increasing and this affecting our working capital.
Given the recent rally in the market and the increase in bunker prices. We currently estimate that our working capital will increase by approximately $40 million in the second quarter of 2022 negatively affecting our cash balance at quarter end and our dividend for the quarter by approximately 40.
<unk> per share.
This is a timing defense driven by the difference between what earnings are recognized and when cost comes in and we do it will reverse at some point in the future.
Please turn now to slide six where we highlight the continued strength of our balance sheet.
Our total cost today.
At $533 million.
Our total debt stands at approximately $1 47 billion.
Our next 12 month amortization is approximately 200 million.
We have six unlevered vessels and no debt maturities until the end of the third quarter of 2023.
We have fixed approximately 55% of our floating interest rate exposure to LIBOR.
Average rate of 45 basis points.
In slide seven we demonstrate the inherent operating leverage and cash flow potential of the company and they illustrative free cash flow per share as well as the potential cash flow yield.
For example, with approximately 46700 fleet available days per year based on the current 2022 FFA care Star bulk will produce 6.1 dollars of free cash flow per share and a yield of 19%.
I will now pass the floor to our COO Nicos would ask us for an update on our operational performance.
Thank you Mark.
Please turn to slide eight where we provide an operational update.
Opex, excluding nonrecurring expenses.
$747.
Per day for Q1 'twenty.
Net cash G&A expenses were $1065 per vessel per day for the same period.
Despite continued adverse COVID-19 related restrictions and inflationary pressures.
Impact on Opex.
Information of our in House management, and the scale of the group.
Enable us to sustain a very competitive cost base and maintain our position at the lowest cost operator amongst our peers.
<unk> will continue to rate among the top three of our listed peers in terms of rights.
Slide nine provides a fleet snapshot and some guidance on our future dry dock.
Ballast water system expenses for the next 12 months and they're relevant total off hire days.
Our expected Drydock expense for the next 12 months is estimated at $36 4 million for the dry docking on 35 vessels with another $60 million towards our vessel upgrade capex.
In total we expect to have an approximate 1200 off hire days.
For the forward 12 month period.
We anticipate that 98% of our fleet will be ballast water fitted by the end of Q4 2022.
The above numbers are based on current estimates around dry bulk and retrofit planning vessel employment and yard capacity.
On the scrubber utilization from Cabo has now surpassed 100000 days of scrubber operating experience.
Hi, five spreads have been volatile throughout the year and is currently hovering around $300 per tonne basis, Singapore spot prices, where we cater for 60% of our annual fuel demand.
We expect to have recouped, our scrubber investment in full by the end of Q2 2022.
With an estimated annualized consumption of 800000 pounds or heavy fuel oil across the fleet on a conservative price of $150 per tonne would be reducing our cash breakeven by $2600 per vessel per day.
94 of our vessels scrubber fitted vessels being scrubber fitted.
Continued increasing hi Fi spread can be a significant value generator for our company.
I'll now pass the floor tour Chief strategy Officer, Harriss like at the Nike So on ESG.
Thank you Nicole.
Please turn to slide 10, where we high.
Our continued efforts on ESG.
Consistent with historical Decarbonization strategy.
These efforts to phase out greenhouse gas emissions, we have signed and announced the conference for today.
And then I don't know Arkansas.
Along with three of our major charterers BHP Rio Tinto.
This partnership led by the Global Maritime Forum.
We create the framework for the development of the Green corridor.
The iron ore trade between Australia and stays yeah.
That accounts for more than 22 million tons of sealed with Google into Q1.
More than two and a half of global seating emissions.
The pharmacy the consortium we.
We don't see us says they can.
Infrastructure and logistics for the supply in banking or the green ammonia.
As well as the necessary commercial agreements and first mover mechanisms to enable a viable Australia, Italy, Spain, Ireland, Norway.
Through this work and with input from the wider value chain and the public sector. We aim to set the foundation and accelerate their real world implementation or zero emission shipping in this specific trade into.
And to catalyze Green culture development also in other parts of the world.
I will now pass the floor to our CEO Petros Pappas for a market update and his closing remarks.
Thank you Harris.
Please turn to slide 11 for a brief update of supply.
During the first four months of 2020 to a total of 11 million deadweight was delivered in one and a half million deadweight was sent to demolition for a net fleet growth of nine 5 million deadweight or three 4% year on year.
The supply outlook is the best we have seen in the recent history of dry bulk shipping.
The order book has decreased to a record low.
Six 6% of the fleet was just three and a half million deadweight reported.
As new firm orders between January and April .
Uncertainty on future propulsion, along with surgeon shipbuilding costs.
Help keep new orders under control.
While the strong increase in container ship orders is filling up shipyard capacity.
Net fleet growth is projected to drop below 5% in 2022.
As unlikely to exceed 2% during 'twenty, three and 'twenty four.
Furthermore, we increased global steel prices scrap prices to multiyear highs of more than $650 per LPT and may incentivize the demolition of average store notes during seasonal downturns.
We expect this to intensify after the implementation of the E site C. III regulations that will come into effect as of 2023.
The average speed of the dry bulk fleet has decreased by three 1% year on year to 11, four nuts as a result of a strong increase of bunker costs, we expect oil prices and subsequently banking costs to remain inflated for the next few quarters amid the sanctions imposed.
The western countries to Russia, and the gradual recovery of economies from the pandemic.
Port congestion stands close to record high levels and around four 3% higher than last year due to changes in trading patterns increased political tension quarantines and seasonal bottlenecks.
Let's now turn to slide 12 for a brief update of demand.
According to Clarksons total dry bulk trade and Thomas during 'twenty, two and 'twenty three is projected to expand by 0.3% and one 7%, respectively, but one six and 2% in ton miles.
What are your crane has negatively affected the economic outlook worldwide with the IMF projected.
GDP growth to slow down three 6% during 'twenty two.
'twenty three.
Inflationary pressures on the energy and food had a negative impact on end users demand, especially in low income regions.
During the first quarter of 2022 total dry bulk volumes were down by approximately 0.7%.
As a result of Indonesia export ban on coal, China Winter Olympics, and zero carbon policy.
Weather conditions in Brazil, and the war in Ukraine, However growth is expected to accelerate during the rest of the year supported by seasonality.
Chinese stimulus and restocking needs worldwide, while adjusting type stocks may be replenishing on adjustment case base use the.
Political uncertainty and the fear of future assumptions.
Furthermore, there is softening of coal grain and are still product trade patterns to longer haul routes are inflating ton miles and have helped moderate the Canadian volumes.
Iron ore trade is expected to expand by 0.7% both in tons and ton miles during 2022.
<unk> steel production decreased by eight 5% during the first quarter amid the huge uncertainty over the Kansas property market and production curves related with the Winter Olympics.
Nevertheless production has recovered significantly significantly during the last months and stands slightly below last year's record levels.
Going forward, we expect further improvements over the next quarters as Zane will promote infrastructure construction to boost domestic economic and social development, while iron ore stockpiles is declining at the high base and consumption stands at elevated levels.
Brazil iron ore exports the case by eight 5% during the first four months of the year, but viola has recently reconfirmed the annual guidance of 320 to 335 million tons, indicating inflated shipments for the rest of the year.
Yes.
Coal trade is expected to expand by 0.5% tons down 4% in ton miles during 2022.
Sanctions around by major importers in restaurant call limited capacity for expansion of Atlantic producers, ensuring gas prices have pushed coal prices to record high levels European buyers that netted us.
And is it commodities and are substituting imports from Russia, with Australia, and Indonesia, while Russia is exploring more call to India and other Asian countries as situations that is benefiting ton miles.
The last months, China, and India have increased their domestic production in order to help raise stocks reduce prices and be less dependent on imports. However, India is in the midst of an energy crisis as the stockpiles that are available for only eight days of consumption and the government is even urban utilities.
To increase coal imports in order to avoid last year's blackouts.
Grain trade is expected to contract by 3.8% in tons and 0.4% in ton miles during 2022.
Ukraine exports accounted for approximately 10% of total grain trade.
Since the invasion in late February exports have fallen dramatically.
Importers have turned to the U S, Australia and Europe for additional quantities U S. Outstanding sales are close to record high levels for this time of the year and indicate a healthy north American grain season during the second half of 2022.
Exports from Brazil have also decreased due to poor weather conditions, resulting in weaker than expected soybean production.
China's demand for grains. During the next few years is predicted to remain strong as the five year plan is focused on food security and inventory building.
Minor bulk trade is expected to expand by 1% in terms of 2% in ton miles during 2022.
Minor bulk trade has the highest correlation to global GDP growth and has received support from the strong containership markets shortages of steel products in the Atlantic and the positive price arbitrage should further inflate basketball flows from the Pacific and provide support for gears doughnuts.
Moreover.
Expanding West Africa bauxite exports continue to reflect on miles with year to date Capesize exports up by 15%.
Finally, our outlook for the dry bulk market remains positive and our company is well positioned to enjoy and take advantage of it.
Main driver remains the limited supply growth with a historically low vessel order book and the upcoming environmental regulations further suppressing or business speeds.
Was demanding tons may only two 0.3% during 2022 ton miles are expected to increase by one 6% heavily tilted towards the second half of the year due to longer distances arising out of severe dislocation.
Without taking any more of your time I will now pass the floor over to the operator to answer any questions you may have.
Yes.
Thank you we will now.
Begin the question and answer session.
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Azure.
The first question.
Your line is open. Please go ahead.
Yeah.
Hi, good.
This is Chris Robertson at Jefferies. How are you.
Hi, Chris Good morning, Ryan.
Again, so I was wondering if you guys could break down just on the vessel segment.
The average TCE rates, you burn quarter to date. So I know you talked about 74, 3% at the average of 29759, but if you could go into a little bit more detail on the various segments that would be helpful.
Hold on a moment, Chris creates you mean, the coverage for the first quarter or they cover the coverage for the second quarter.
The numbers are as follows.
Capes, we have covered approximately 69% at 26750.
For Panamaxes.
We have covered 78% at approximately 30000.
That's panamaxes and Ghansham axes, and then for <unk> and will drive US we have covered 81% at 32000.
And sorry that was Christoph.
That's super helpful.
Thanks, guys I'll hop back in the queue.
Yes.
Okay and your next question.
Your line is open please.
Please ask your question.
Hi, This is drew milligan them with the Woodward fun. So I just had a question for some additional clarification.
And it looks like you guys are having a.
They're doing very well congrats on that.
You mentioned there was a regulation coming in that you think is going to increase the scraps going forward.
Come 2023, I didn't quite catch what do you have any more detail on what that is that you are expecting.
Hydro each the environmental regulations that actually obliges vessels to reduce their their consumption.
The consumption of vessels there speed. So are the vessels will have to start performing better going forward and consuming less fuel oil.
And there is.
The older vessels some of the older vessels and especially the some vessels that are from the third.
Tier yards, they may not be able to do that without reducing the speed substantially.
And if the vessels reduces speeds substantially this means that the supplies cut and therefore, that's good for the market.
Okay. Thanks.
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