Q2 2023 Golden Ocean Group Limited Earnings Call

August 29, 2023

Okay.

Speaker 1: Good day and thank you for standing by. Welcome to the second quarter, 2023, Golden Ocean Group Limited Earning Conference call. At this time, our participants are in listen only mode. After this biggest presentation, there will be the question and answer session. To ask the question during the session, you need to press star, one, one, or your top one keypad. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star, one, one again.

Good day and thank you for standing by welcome to the second quarter at trying to trade for three Golden Ocean Group Limited earnings Conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be the question and answer session to ask a question get into session.

One one of the top and keep that you will then hear an automatic method you'd back when you had this race.

Do we draw a question. Please press star one again.

Speaker 1: Please be advised that this conference has been recorded. I would now like to hand a conference over to a speaker today, Lord Christiane Svenson.

Please be advised that this conference is being recorded.

I would now like to hand, the conference over to your speaker today lapsed Christians fencing.

Please go ahead Sir.

Speaker 2: Hello and good afternoon from Oslo. My name is Lars Kisdonsvensen and I'm the Interim CEO of GoldenO.

Hello, and good afternoon from all slope mine.

Has lost yourselves sensing and I'm, the interim CEO of Golden Ocean.

Speaker 2: Today, CFO , Petr Siemons and I will guide you through our Q2 numbers and share our views on the market going full.

Todays CFO Peter C malls, and I will guide you through our Q2 numbers and share our views on the market going forward.

Speaker 2: We start with the highlights for Q2. Our adjusted EBDA in the second quarter came in at 80.4 million compared to 54.7 million in the first quarter of 2020.

We start with the highlights for Q2 our.

Our adjusted EBITDA in the second quarter came in at $80 4 million compared to $54 7 million in the first quarter of 2023.

Speaker 2: The net profit amounted to 34.9 million and earnings per share of 17 cents.

The net profit amounted to $34 9 million and earnings per share of 17 cents. This compared to a net loss of $8 8 million and loss per share of four cents in the first quarter.

Speaker 2: This compared to a net loss of 8.8 million and lost per share of 4 cents in the first

Speaker 2: TCE rates for capes, and panomax vessels, then 1,100 per day, and 1,600 per day, risk-based.

Our TCE rates for Capesize and Panamax vessels with 19 100 per day, and 15 600 per day, respectively. This amounts to a fleet wide average net TCE of 17 660 per day.

Speaker 2: This amounts to Fleet Vide Average net TC of 17660 per day.

Speaker 2: For the third quarter, we have secured a net TC of 18,300 per day for 79% of the cap size base.

For the third quarter, we executed an FTC of 18300 per day, 79% of the Capesize stage.

Speaker 2: and $13510 for 98% of the Panama.

And 13 $510 for 98% of the Panamax days.

Speaker 2: For the fourth quarter, we have secured a net TCO 21,500 per day for 34% of the Cape site space and 16,500 per day for 26% of the panoply.

For the fourth quarter, we execute an FTC of 21005 hundred a day for 34% of the Cape side stays at 16, and a half thousand per day for 26% of the Panamax days.

Speaker 2: We also welcome new additions to the fleet with six of our 10, 85,000 deadweight campsar max new buildings being delivered and six modern new castle max vessels which have commenced long-term contract with a Brazilian eye-normite.

We also welcomed new additions to the fleet with six of our 10 to 85000 deadweight <unk> new buildings being delivered and six modern Newcastle Max vessels, which have commenced long term contract with the Brazilian iron ore miner.

Speaker 2: We entered into two credit facilities of an aggregate amount of 120 million, part financing the six new buildings at a highly competitive

We entered into two credit facilities of an aggregate amount of 120 million port financing the six new buildings at a highly competitive chips.

Speaker 2: and last but not least, we announced a dividend of 10 cents per share for the second quarter of 2023. I will now pass the word...

And last but not least we announced the dividend of 10 cents per share for the second quarter of 2023.

I will now pass the word over to Peter.

Thank you Lord system.

Speaker 3: If we move to slide five and our PNL, we can start with looking at our revenues. As Loshyus mentioned, we achieved the TCE rates of 19,100 for our cake.

If we move to slide five.

Our P&L, we can start with looking at our revenues, especially as you mentioned, we achieved a TCE rates of 19100 for capes.

Speaker 3: and 15,600 for a panimax and ultra-max.

And 15000, and 604, Panamax and Ultra Max fleet.

Speaker 3: Our total fleet YTC was 17,700 up from 14,900 in Q1.

Yeah.

Our total fleet wide TCE was 17700 up from 14900 in Q1.

Speaker 3: We had six ships dry docked in Q2 versus three ships in Q1, resulting in approximately 250 and 15 dead.

We had six ships dry docked in Q2 versus three ships in Q1, resulting in approximately 215 days.

Speaker 3: of a fire in Q2 versus 146 days in Q1.

Well before you in Q2 versus 146 days in Q1.

Speaker 3: We have one ship that we expect to dry docked for Q3 and this dry dock has been completed today.

We have one ship that we expect to dry docked for Q3 are on.

This dry dock has been completed at today's date.

Speaker 3: Just below 375 vessel days have been added through new ship deliveries, net of ships leaving them.

Just below.

375 vessel days have been added through new ship deliveries.

Net of ships, leaving the fleet.

Speaker 3: The sum of this resulted in TCE revenues of 153 million, which compares to 131.2 million in Q.

So some of this has resulted in TCE revenues of 153 million, which compares to $231 2 million in Q1.

Speaker 3: Looking at our operating expenses, we recorded 62.4 million in total uphacks compared to 61.6 in Q1.

Looking at our operating expenses recorded $62 4 million.

Total opex compared to 61 six in Q1.

Speaker 3: The increase is a result of higher dry docking costs due to more ships being dried up.

The increase is a result of a higher drydocking costs are due to more ships being dry docked.

Speaker 3: In addition, we incurred increased cost relating to the change of technical management for approximately 25 ships during the quarter.

In addition, we incurred increased costs relating to the change of technical management for approximately 25 ships during the quarter.

Speaker 3: This was offset by lower OPEX reclassified from charger higher as we record each quarter.

This was offset by lower Opex.

Reclassified from charter hire as we record each quarter.

Speaker 3: Our opaque X-Toy dock was 6200, which was largely unchanged from Q1.

Our Opex extra dock was 6200, which was largely unchanged.

From Q1.

Looking at our general and administrative expenses.

Speaker 3: We ended with a total expense of 5.2 million, which was up from 4.2 million in Q1.

ER ended with a total expense of $5 2 million.

This was up from $4 2 million in Q1.

Speaker 3: The increase is attributable to non-recurring personnel and espants mainly relating to profit cherry.

The increase is attributable to non recurring personnel expense.

Mainly relating to profit sharing.

Speaker 3: Our daily GNA came in at $566 per day, net of cost recharge to a few later companies.

Our daily G&A came in at $556 per day net of cost recharged to affiliated companies, which is up from 444 day dollars per day in Q1.

Speaker 3: which is up from $444 per day in Q1.

Our charter hire expense.

Speaker 3: was reduced from 16.8 in Q1 down to 10.2 in Q2, which is a result of fewer vessel days in our trading portfolio.

It was a.

Reduced from $16 eight in Q1 down to 10.2 in Q2, which is the result of fewer vessel days in our trading portfolio.

Moving to the net financial expenses.

Speaker 3: We recorded 23 million in net financial expenses versus 20.5 million in Q1.

We recorded 23 million and our net financial expenses versus $25 million in Q1.

Speaker 3: This is due to higher reference rates, both libo and software, and higher average depth during the quarter.

This is due to higher reference rates, both LIBOR and sulfur.

And higher average debt during the quarter.

Speaker 3: On our derivatives and other financial income, we recorded the gain of 14.3 million, which compares to the gain of 2.7 in Q1.

On our derivatives and other financial income, we recorded a gain of $14 3 million, which compares to a gain of $2 seven in Q1.

Speaker 3: On our derivatives portfolio we recorded the 9 million gain versus a 2.1 million loss in Q1 with interest rate swaps being the main positive contributor offset by a loss on FFA and bunker and we recorded the 9 million loss in Q1 with interest rate swaps being the main positive contributor offset by a loss on FFA and bunker

On our derivatives portfolio, we recorded a 9 million gain versus a $2 1 million loss in Q1 with interest rate swaps being the main.

Positive contributor offset by a loss on FFA and bunker derivatives.

Speaker 3: On our results from investments in associates, we recorded a gain of 4.9 million, which is unchanged, quarter on quarter, stemming from our investments in Swiss Marine, TFG, and...

On our results from investments and associates, we recorded a gain of $4 9 million, which says it's unchanged quarter on quarter stemming from our investments in Swiss Marine <unk> and UFC.

Speaker 3: A net profit of 34.9 million, 17 cents per share, and a dividend of 10 cents was declared for the quarter.

The net profit of $34 9 million 17 cents per share on a dividend of 10 cents.

CAD for the quarter.

Moving to our cash flow.

Speaker 3: We see a net decrease in cash of 15.9 million.

We see a net decrease in cash of $15 9 million.

On our cash flow from operations.

Speaker 3: We recorded a positive cashflow of 45.5 million, which includes a 1.6 million of dividend received from associated companies.

We recorded.

A positive cash flow of $45.5 million, which includes a $1 6 million of dividends received from associated companies.

On cash flow provided from financing.

Speaker 3: We recorded a 102.0 million drawdown relating to deliveries of three new Castle Maxwells.

We recorded a 102.0 million drawdown relating to deliveries of three new customer Max vessels.

Speaker 3: And we drew down 80 million relating to delivery of four camps of max new building.

And we drew down $80 million.

Relating to delivery of four <unk> new buildings.

Speaker 3: We also drew 25 million under our revolving credit for seal.

We also drew $25 million under our revolving credit facilities.

Speaker 3: leaving 75 million undrawn and available at quarter-end.

Leaving 75 million Undrawn and available at quarter end.

Speaker 3: We made a prepayment of 25.8 million relating to the sale of Golden Teng and Golden Shui.

We have made.

We made a prepayment of $25 8 million.

Relating to the sale of Golden Tingling Goldman Shri.

Speaker 3: And we recorded 30.3 million in scheduled death and lease repayment.

And we recorded 30.3 million in scheduled debt and lease repayments.

Speaker 3: We recorded a dividend payment of 20 million. And finally, we spent 6.9 million in payments under our share repurchase program, as announced during the quarter.

Yeah.

Recorded a dividend payment of 20 million.

And finally, we spent $6 9 million in payments.

Under our share repurchase program as announced.

During the quarter.

Speaker 3: On the cash flow used in investments, it totaled 184.6 million, which is mainly relating to 43.6 million in net proceeds received from the sale of Golden Feng in Golden Shui.

On the cash flow used in investments.

$184 6 million, which was mainly relating to <unk>.

$43 6 million in net proceeds received from the sale of Golden's hanging Goldman Shri.

Speaker 3: 130.1 million in asset investments, the majority relating to purchase price for three new couple of max results and payment of new building installments of 98 million.

131 million in asset divestments, the majority relating to purchase price for three new customer Mexican vessels and.

And payment of Newbuild installments of $98 million.

Moving to slide seven on our balance sheets.

We can see at other cash and cash equivalents.

Speaker 3: was 107.3 million, which includes 3.4 million of restricted cash.

$107 3 million, which includes $3 4 million of restricted cash.

Speaker 3: In addition, we have 75 million as mentioned, undrawn, unavailable, under our revolving credit facilities at court rent.

Okay.

In addition, we have $75 million as mentioned Undrawn and available under our revolving credit facility at quarter end.

Our debt and finance lease liabilities.

Speaker 3: Total 1.5 billion at the end of Q2 up by approximately 162 million since Q1.

1.5 billion at the end of Q2.

Up by approximately 162 million since Q1.

Speaker 3: Average fleet-wide loan to value under our debt facilities per quarter end was 45%.

Average fleet wide loan to value under our debt facilities for quarter end was 45%.

Speaker 3: and our book equity of 1.9 billion.

And our book equity of $1 9 billion.

Speaker 3: Let the ratio of equity to total assets of approximately 54%.

Led to a ratio of equity to total assets of approximately 54%.

And with that I give the word back to Lars Christian.

Speaker 2: Thank you, Pedder. We're moving over to the GDP growth. GDP growth is the leading indicator for dry bulk demand. The graph on the left shows the G20 diffusion.

Thank you Heather and moving over to the GDP growth GDP growth as the leading indicator for Drybulk demand. The graph on the left shows the G 20 diffusion index. This index illustrates a number of G. 20 countries that are growing about <unk> long term potential.

Speaker 2: This index illustrates a number of G20 countries that are growing about then long-term potential.

Speaker 2: As you can see, this correlates well with the historical cyclicality of the Baltic dry index and indicates another potential upsurn in the near future.

As you can see this correlates well with historical cyclicality of the Baltic dry index and indicates another potential upset in the near future.

Speaker 2: The global GDP outlook has been revised downwards over the course of the year, but shows healthy growth rates according to the IMF, with China and India remaining important contributors.

A global GDP outlook has been revised downwards over the course of the year, but shows healthy growth rates. According to the IMF with China and India remaining important contributors.

Well go to the market development.

Speaker 2: They have all seen and read the macro news over the last six months, which has created unusual volatility and a freight and trading month.

We have all seen and read the macro news over the last six months, which has created unusual volatility in the freight and trading markets, but it keeps that market, especially the physical story paints a solid picture iron ore exports from Brazil are up substantially from last year about 12 million tons to date Bulks.

Speaker 2: For the Cape type market, especially the physical story paint the solid.

Speaker 2: I know exports from Brazil erupts substantially from last year about spoiled million tons to date.

Speaker 2: Borkside from the South Africa increasingly so, and China's appetite for imported coal albeit record domestic production being high, has surpassed 2022 yet.

Bauxite from Mr Africa, increasingly so and China's appetite for imported coal, albeit record domestic production being high has surpassed 2022 yet to date.

Speaker 2: We also need to mention the extremely high fleet efficiency, currently well below five years average, where the Cape Site Market has a large upside. Much like what we've seen in the Panamax space of the last month, where sudden congestion in South American port and a dry Panama Canal has pushed a freight month.

We also need to mention the extremely high fleet efficiency currently well below five years average by the Capesize market has a large upside much like what we've seen in the panamax space over the last month with sudden congestion in South American ports, and a dry Panama Canal has pushed the freight markets.

Speaker 2: Panamax is so far trail behind the Cape Segment this year, however with the congestion, delayed soybean season and good corn crops from the US Gulf. People see more Panamax activity for the second half as well.

Panamaxes sofar trailed behind the Cape segment. This year, however, with the congestion delayed soybean season, and good corn crops in the U S. Gulf people see more panamax activity for the second half as well.

Speaker 2: Moving over to the steel and iron or inventories, the Chinese iron or and steel millimetres are also telling a very compelling

Moving over to the steel and iron ore inventories at Chinese iron ore and steel mill inventories are also telling a very compelling story.

Speaker 2: I know portimentaries are down 25% and 40 million tons since last since the heights are beginning of 2020.

I know port inventories are down, 25% and 40 million tons since last since the heights of beginning of 2022.

Speaker 2: The elementories has also been drawn down almost 30% and 34 million tons over the same.

And steel inventories has also been drawn down almost 30% and 34 million tons over the same period.

Speaker 2: This is well below the 30 day critical consumption level for the company.

This is well below the 30 day critical consumption level for the country. It also explains the vast amounts of I know volume is being shipped so far this year and does indeed indicate the China's continuing to utilize steel.

Speaker 2: It also explains the vast amount of iron oval that is being shipped so far this year, and thus indeed indicate the China's continuing to utilize.

Speaker 2: The I know price is currently trading around $115 per ton and has so far not shown weakness, volatility rather, on the back of macro news yet to be imposed.

The iron ore price is currently trading around $115 per ton and has so far not shown weakness volatility rather on tobacco macro news yet to be implemented finish.

Speaker 2: Finest deal, as in terms of rebar, long and flat steel, is also at normal levels. IE, steel in every shape and form is being absorbed and the underlying demand continues.

Fitness deal as in terms of Reebok long and flat steel is also at normal levels I E steel in every shape and form is being absorbed and the underlying demand continues.

Speaker 2: Brazilian I-NOR embolk site. The tonne mile in the Cape-size segment continues to increase. Last year, the I-NOR tonne mile was down about 3%. However, with the aid of other commodities, much thanks to Biny embolk site, the overall tonne mile for Cape's increased 3% in 2020.

Brazilian iron ore and bauxite the ton mile in the Capesize segment continues to increase last year, the iron ore ton mile was down about 3%. However, with the aid of other commodities much thanks to bunia in bauxite, the overall ton mile for Capes increased 3% in 2022.

Speaker 2: The traders become significant currently 10% of Cape Town model with analysts expecting 30 to 40% growth in 2020.

The trade has become significant currently 10% of Cape ton mile with analysts expecting 30% to 40% growth in 2024.

Speaker 2: So far in 23, with more volumes being shipped from both Brazil and Guinea, the ton mile will continue its positive today.

So far in 'twenty, three but more volumes being shipped from both Brazil and Guinea the ton miles will continue its positive trajectory.

Speaker 2: Another point we would like to raise in this call is the more structural impact of the bauxite.

Another point, we would like to raise in this call is to more structural impact of the bauxite trade if I can draw your attention to the bottom left graph you will see that seasonality in the Capesize market has experienced less volume during Q1 and also in turn lower freight rates. This has been due to the wet season and maintenance of the INO terminals in Brazil.

Speaker 2: If I can draw your attention to the bottom left graph, you will see that seasonality in the Cape size market has experienced less volume during Q1 and also in turn lower freight.

Speaker 2: This has been due to the wet season and maintenance of the iron autominals in risk.

Speaker 2: But as you can see, with the increased borks I've done six-fourth during the thin period, the ton-mile gap narrows every year. We are under the belief that a so-called traditional Q1 slow season can be challenged, and that people have a more steady trade flow all year round for the largest.

But as you can see with the increased bauxite tons exported during the same period the ton mile gap Narrows every year.

We are under the belief that the so called traditional Q1 slow season can be challenged and that people have a more steady trade flow all year round for the larger sizes.

Speaker 2: If you have a look at the favorable supply done at, as mentioned in the previous, previously in this presentation, we see limited downsides and larger sizes when it comes to efficiency.

If you have a look at the favorable supply dynamics as mentioned in the previous previously in this presentation, we see limited downside in the larger sizes when it comes to efficiency.

Speaker 2: There is simply put little room to turn the fleet faster during port operations than what we currently experience.

There is simply put little room to turn to fleet Foster during port operation than what we currently experiencing.

Speaker 2: If anything, with the new CII regulations coming in full force in 2024, large parts of the fleet are likely to slow steam even.

If anything we'd UCI regulations coming in full force in 2020 for large parts of the fleets are likely to slow steam even further.

Speaker 2: at the same time, the order book in supply dynamics for dry cargo vessels are encouraging and very much unchanged over the last 12.

At the same time, the order book and supply dynamics for dry cargo vessels are encouraging and very much unchanged over the last 12 months largely due to uncertainty surrounding propulsion technology and yard capacity restraints.

Speaker 2: largely due to uncertain disarrowing propulsion technology and yard capacity.

Speaker 2: Next slide here we go through the Resilient Business Model of Goldeno.

Next slide here, we go through the resilient business model of Golden Ocean.

Speaker 2: Bistribed to maintain opposition of having the lowest cash break even in the industry. Currently fleet wide around 13...

We strive to maintain a position of having the lowest cash breakeven in the industry.

Currently fleetwide around $13000 per day.

Speaker 2: But our premium fleet, hands on execution and good financing, we are continuing to outperform the markets every.

Premium fleet hands on execution and good financing, we are continuing to outperform the markets every quarter.

Speaker 2: For the first half of 2023, they have across both Cape and Panama segment outperform the market with $4,700 a day.

For the first half of 2023, we have across both Cape and Panamax segments outperformed the market with $4700 a day.

Speaker 2: We aim to continue our fleet renewal program and enhance further energy efficiency devices across our fleet to bring our cash break even down.

We aim to continue our fleet renewal program and enhance further energy efficiency devices across our fleet to bring our cash breakeven downturn.

Speaker 2: But our low cash break even, a fleet composition, we will float in almost any market, as seen on the graph on the right side.

But our low cash breakeven of fleet composition, we will float in almost any market as seen on the graph on the right side.

Now, let US guide you through our next two quarters the forward outlook from a market standpoint looks promising as discussed earlier in this presentation.

Speaker 2: The forward outlook from the market standpoint looks promising as discussed earlier in this presentation.

Speaker 2: We have for Q3 locked in 79% for the cave size available days at $18,300 per day, and 97% of the Panamax available days at $13,500.

For Q3 and locked in 79% of the Cape size available days at $18300 per day, and 97% of the Panamax available days at $13500 per day Q3 to date, we have outperformed the market by $5300 a day on a fleet wide average.

Speaker 2: Q3 to date, they're outperform the market by $5,300 a day on a fleet by day.

Speaker 2: Q4, we are locked in 34% of the available capesized days at 21,526% of the available Panamax days at $16,500 per day.

For Q4, we have locked in 34% of the available Capesize states at 21526% of the available Panamax days at $16500 per day.

Speaker 2: And this combined, we have contracted a TCE revenue of $181 million for the second half of the year. This couple will protect the healthy bottom line for the rest of the year and at the same time give us leverage needed to capture rising market going into two.

And this combined we have contracted a TCE revenue of 181 million for the second half of the year. This.

This coupled with protect a healthy bottom line for the rest of the year and at the same time give us leverage needed to capture rising market going into Q4.

Speaker 2: Cacheflow potential. To round off this presentation, we would like to show you the significant earnings potential in Golden Ocean as we move into the historical highs.

Cash flow potential to round off this presentation, we would like to show you the significant earnings potential and Golden Ocean as we move into the historical high season.

Speaker 2: The assumed freight rates set out in the graph are achieved rates and based on the best in class fleet efficiency and low cost model, the free cash flow can generate healthy dividend yields even at current freight levels. With that, a possible...

He assumed trade rates set out in the graph our achieved rates and based on the best in class fleet efficiency and low cost model to free cash flow can generate healthy dividend yields even if current freight levels.

With that a possible back to the operator, thank you.

Speaker 1: Thank you, dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad. And wait for a name to be announced.

Thank you Dear participants as a reminder, if you wish to ask a question. Please press star one on your telephone keypad and finance to be announced.

Speaker 1: To withdraw your question, please press star 11 again. Please send Bob over to compile the Kirin Aero set. These will take a few moments.

To withdraw your question. Please press Star one again <unk> said this will take a few moments.

And now we're going to take our first question.

Speaker 1: And the question comes to line of Umar Nocta from Jeffries. Your line is open. Please ask your question.

And the question comes from the line of Oman locked up from Jefferies. Your line is open. Please ask your question.

Speaker 4: Thank you. Thank thanks to our Christian and Petr. Good afternoon. Bye.

Thank you thanks, Thanks, Lars Christian and better.

Good afternoon.

Speaker 4: What I wanted to ask about the the dribble market and I think you gave some interesting commentary about the box site trade potentially offsetting the typical wet season in Brazil. You think basically going forward we may be able to throw out the conventional idea that dribble is always that tweaked in the first quarter and and and and you look to capitalize on this.

Hi.

Wanted to ask about the dry bulk market and I think you gave some interesting commentary about the bauxite trade potentially offsetting the typical wet season in Brazil do you think basically going forward, we may be able to throw out the conventional idea that dry bulk is always that weakest in the first quarter.

And do you look to capitalize on this dynamic potentially here as we get into 'twenty four.

Speaker 4: potentially here as we get into 24, with maybe some charger ins or some SSAs, how do you think about playing the potential of box-side offsetting iron?

With maybe some charter ends or some FSA, how do you think about playing the potential.

Box offsetting iron ore.

Speaker 5: I think Walmart that when it comes to the Borgs hydrate, the growth there is growth potential.

I think Omar.

When it comes to the bauxite trade the growth there is the growth potential of this huge bulk.

Speaker 5: The volumes are there, the minds are there, and the infrastructure works very well. This is already contracted volumes going into a different trade than what the traditional eye in or.

<unk> are there Mike.

Mindset, there and the infrastructure works very well is already contracted volumes going into a different rate for traditional iron ore.

Speaker 5: We are quite bullish on this particular commodity that will drive it forward, build it on mode. If that increases 2, 3, 4% per year, next year and the year after, we're looking out to quite healthy Cape size rates going forward.

We are quite bullish on this particular commodity that will drive it forward with the ton mile.

That increases to three 4% per year next year and the year Ralph.

King at quite healthy Capesize rates.

Speaker 4: I guess in terms of the iron ore activity that we have been seeing, you mentioned that it's been relatively strong actually going into China and with a big step up out of Brazil so far this year. You know, when we think about the pace of activity, obviously the first half looks...

Yes, I guess in terms of the iron ore activity that we have been seeing you mentioned that it's been relatively strong actually going into China.

Step up out of Brazil.

So far this year.

When we think about the pace of activity obviously, the first half looked really good going into China. It looks like elsewhere. It was a bit softer.

Speaker 4: really good going into China, looks like elsewhere, was a bit softer. What's the pace been like, as we looked here, as we started the second half here, this were two months in, how is the pace of iron ore going into China in relation to the first half from your vantage point? And are there any shifts or promising signals for volumes outside of China?

What's the pace then like as we as we look here as we started the second half here I guess for two months and how is the pace of iron ore going into China in relation to the first half from your vantage point and are there any shifts or promising signals for volumes outside of outside of China.

Operator: Good day and thank you for standing by.

Operator: Welcome to the second quarter 2023 Golden Ocean Group Limited Earnings Conference call. At this time, our participants are in listen only mode.

Speaker 5: The second half was in terms of Ionort's story, it started a lot higher pace than the first half.

And the second half of that in terms of the iron ore story has started a lot higher pace than the first half.

Operator: After this biggest presentation, there will be the question and answer session. To ask the question during the session, you need to press star 1-1 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star 1-1 again.

Speaker 2: Just today the output from Brazil combined with all the miners are over 1.2 million tons per day. So compared that to January this year, this is a significant increase. They will drive these volumes forward. Wonderful.

Just two days the outputs from Brazil, combined with all the miners are over $1 2 million tonnes per day.

Compare that to January of this year.

Operator: Please be advised that this conference has been recorded.

Significant increase and will drive these walgreens hoped.

Speaker 2: In terms of also countries and places taking the iron ore, we see the European growth as well as slowly but surely increasing from what we see in from the second half.

Lars Christian Svenson: I would now like to hand the conference over to a speaker today, Lars Christian Svenson. Please go ahead sir.

Lars Christian Svenson: I would now like to hand the conference over to a speaker today, Lars Christian Svenson. Please go ahead sir. Hello and good afternoon from Oslo.

In terms of Ulster.

Countries and places taking the iron ore we see.

The European growth as well as slowly, but surely increasing from what we've seen from the second half.

Lars Christian Svenson: Hello and good afternoon from Oslo. My name is Lars Christian Svenson and I'm the interim CEO of Golden Ocean.

That's helpful.

Lars Christian Svenson: My name is Lars Christian Svenson and I'm the interim CEO of Golden Ocean.

Speaker 4: Okay, thank you. That's interesting. And maybe just want to find a one on the market. And in terms of coal, we have seen here jump in L&D prices of late, at least in relations where things were a couple months ago at the lows. Have you seen any effect on that on coal volumes or coal interests or activity, any shift or any sort of, I guess any impact of that on the culture?

Yes.

Okay. Thank you.

And maybe just one final one on the market in terms of coal we have seen here jump in LNG prices of late at least in relation to where things were a couple of months ago at the at the lows.

Peder Simonsen: Today, CFO, Peder Simonsen, I will guide you through our Q2 numbers and share our views on the market going forward. We start with the highlights for Q2. Our adjusted EBDA in the second quarter came in at 80.4 million compared to 54.7 million in the first quarter of 2023. The net profit amounted to 34.9 million and earnings per share of 17 cents. This compared to a net loss of 8.8 million and lost per share of 4 cents in the first quarter.

Have you seen any effect on that on on coal volumes of coal interest or activity any shifts or any any sort of.

I guess any impact of that on the coal trade.

Speaker 2: The cold trade has been active all year, especially from Australia, to China, since they reopen their relationship there. India has been active in the first Q1 this year, and now with it one soon season, over, we expect India to continue their import, that their stock prices are low as well. But against prices going up, we have seen in the market lately more cargos as well, going from east to west. Maybe that's a strong signal that the continent is starting to build a little bit more security to avoid what happened last.

Coal trade has been active all year, especially from Australia to China.

We opened there a relationship there.

Peder Simonsen: Our TCE rates for capes size and pandamax vessels were 1,100 per day and 1,600 per day respectively. This amounts to a fleet wide average net TCE of 1,660 per day. For the third quarter, we have secured a net TCE of 1,800 per day for 79% of the capes size days and 1,510 dollars for 98% of the pandamax days. For the fourth quarter, we have secured a net TCE of 21,500 per day for 34% of the capes size days and 16,5,000 per day for 26% of the pandamax days. We also welcome new additions to the fleet with 6 of our 10,85,000 dead weight cancer max new buildings being delivered and 6 modern new castle max vessels which have commenced long-term contract with a Brazilian eye-normyna.

India has been active in the first Q1 this year and now with the monsoon season we.

We expect India to continue their important that their stockpiles are low as well.

But the gas prices going up we have seen in the market lately more cargoes as well going from the east to west. So maybe that's a strong signal that the confidence of this audience.

Build a little bit more security to avoid what happened last year.

Speaker 4: Got it. Thank you. Thanks, our scourcine. That's good color. I'll hand it over. Thanks, Omar. Thanks, Omar. Thank you.

Got it. Thank you thanks, Lars Christian that's good color.

I'll hand it over.

Thanks Omar.

Thank you.

Okay.

Speaker 1: The participants as the reminder, if you wish to ask a question, please press tar 111 on your telephone keyboard.

Yeah participants as a reminder, if you wish to ask a question. Please press star one one on your telephone keypad.

Peder Simonsen: We also welcome new additions to the fleet with 6 of our 10,85,000 dead weight cancer max new buildings being delivered and 6 modern new castle max vessels which have commenced long-term contract with a Brazilian eye-normyna.

Speaker 1: They speak as a runner for the questions at this time and what not to kind of conference over-trabber management team for any closing remarks.

Dear speakers there are no further questions at this time and whatnot to hand, the conference over to the management team for any closing remarks.

Peder Simonsen: We entered into two credit facilities of an aggregate amount of 120 million part financing the six new buildings at a highly competitive terms. And last but not least, we announced a dividend of 10 cents per share for the second quarter of 2023.

Speaker 3: Well, thanks a lot for the styling in and have continued great week.

Okay.

Well, thanks, a lot for dialing in and have.

Continued.

Great week.

Peder Simonsen: I will now pass the word over to Peter.

Thank you very much bye bye.

Speaker 1: That concludes our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.

Peder Simonsen: Thank you, Lord Houston. If we move to slide five and are at PNL, we can start with looking at our revenues. As the Lord Houston mentioned, we achieved the TCE rates of 19,100 for our capes and 15,600 for our pandamax and ultramax fleet. Our total fleet by TCE was 17,700 up from 14,900 in Q1. We had six ships dried up in Q2 versus three ships in Q1 resulting in approximately 215 days over fire in Q2 versus 146 days in Q1.

That does conclude our conference for today. Thank you for participating you may now all disconnect have a nice day.

Okay.

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Okay.

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Peder Simonsen: We have one ship that we expect to dry docked for Q3 and this dry dock has been completed today's date. Just below 375 vessel days have been added through new ship deliveries. Net of ships leaving the fleet. The sum of this resulted in TCE revenues of 153 million, which compares to 131.2 million in Q1. Looking at our operating expenses, we recorded 62.4 million in total off-axis compared to 61.6 in Q1. The increase is a result of higher dry docking costs due to more ships being dry docked.

Peder Simonsen: In addition, we incurred increased costs relating to the change of technical management for approximately 25 ships during the quarter. This was offset by lower off-axis reclassified from charter hire, as we record each quarter. Our opaque X-dory dock was 6200, which was largely unchanged from Q1. Looking at our general and administrative expenses, we ended with a total expense of 5.2 million, which was up from 4.2 million in Q1. The increase is attributable to non-recurring personnel expense mainly relating to profit sharing.

Okay.

[music].

Okay.

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Uh huh.

Okay.

[music].

Peder Simonsen: Our daily GNA came in at $566 per day, net-of-cost recharge to affiliated companies, which is up from $444 per day in Q1. Our charter hire expense was reduced from 16.8 in Q1 down to 10.2 in Q2, which is a result of fewer vessel days in our trading portfolio. Moving to the net financial expenses, we recorded 23 million in net financial expenses versus 20.5 million in Q1. This is due to higher reference rates, both liable and software and higher average depth during the quarter.

Peder Simonsen: On our derivatives and other financial income, we recorded the gain of 14.3 million, which compares to gain of 2.7 in Q1. On our derivatives portfolio, we recorded the 9 million gain versus a 2.1 million loss in Q1, with interest rate swaps being the main positive contributor offset by a loss on FFA and bunker derivatives. On our results from investments in associates, we recorded the gain of 4.9 million, which is unchanged, quarter on quarter, stemming from our investments in Swiss Marine, TFG and UFC.

Peder Simonsen: A net profit of 34.9 million, 17 cents per share and a dividend of 10 cents was declared for the quarter. Moving to our cash flow, we see a net decrease in cash of 15.9 million. On our cash flow from operations, we recorded a positive cash flow of 45.5 million, which includes a 1.6 million of dividend received from associate, on cash flow provided from financing. We recorded a 102.0 million drawdown relating to deliveries of three Newcastle Maxwell's and we drew down 80 million relating to delivery of four Kamsamax New Buildings.

Peder Simonsen: We also drew 25 million under our revolving credit facilities leaving 75 million undrawn and available at quarter-end. We made a prepayment of 25.8 million relating to the sale of Golden Teng and Golden Shui and we recorded 30.3 million in scheduled debt and lease repayments. We recorded a dividend payment of 20 million and finally we spent 6.9 million in payments under our share repurchase program as announced during the quarter. On a cash flow used in investments it totaled 184.6 million which is mainly relating to 43.6 million in net process received from the sale of Golden Teng and Golden Shui.

Peder Simonsen: 130.1 million in asset investments the majority relating to purchase price for three Newcastle Maxwell's and payment of new building installments of 98 million. Moving to slide 7 on our balance sheet we can see that our cash and cash of equivalent was 107.3 million which includes 3.4 million of restricted cash. In addition we have 75 million as mentioned undrawn and available under our revolving credit facilities at quarter-end. Our debt and finance lease availities totaled 1.5 billion at the end of Q2 up by approximately 122 million since Q1. Average fleetwide loan to value under our debt facilities per quarter-end was 45%. And our book equity of 1.9 billion led to a ratio of equity to total asset of approximately 54%.

Lars Christian Svenson: And with that I give the word back to Lushkrisson. Thank you Peter. We're moving over to the GDP growth. GDP growth is the leading indicator for dry bulk demand. The graph on the left shows the G20 diffusion index. This index illustrates the number of G20 countries that are growing above then long term potential. As you can see this correlates well with historical cyclicality of the Baltic dry index and indicates another potential upsurn in the near future. The global GDP outlook has been revised downwards over the course of the year but shows healthy growth rates according to the IMF with China and India remaining important contributors.

Lars Christian Svenson: Over to the market development. We have all seen and read the macro news over the last six months which has created unusual volatility and a freight and trading month, for the capeside market, especially the physical story paints a solid picture. I know or exports from Brazil are substantially from last year, about 12 million tons to date. Borkside from the South Africa increasingly so, and China's appetite for imported coal albeit record domestic production being high has surpassed 2022 year to date.

Lars Christian Svenson: We also need to mention the extremely high fleet efficiency, currently well below 5 years average, where the capeside market has a large upside. Much like to what we've seen in the Panamax base of the last month, where sudden congestion in South American port and a dry Panama Canal has pushed to freight markets. Panamax has so far trailed behind the capesagment this year, however with the congestion, delayed soybean season and good corn crops from the US Gulf, people see more Panamax activity for the second half as well.

Lars Christian Svenson: Moving over to the steel and iron ore inventories, the Chinese iron ore and steel millimentories are also telling a very compelling story. Iron ore port inventories are down 25 percent and 40 million tons since last since the heights of the beginning of 2022. And steel inventories has also been drawn down almost 30 percent and 34 million tons over the same period. This is well below the 30 day critical consumption level for the country.

Lars Christian Svenson: It also explains the vast amounts of iron ore volumes being shipped so far this year and thus indeed indicate the China's continuing to utilize steel. The iron ore price is currently trading around $115 per ton and has so far not shown weakness, volatility rather, on the back of macro news yet to be implemented. Finest steel, as in terms of rebar, long and flat steel, is also at normal levels, i.e, steel in every shape and form is being absorbed and the underlying demand continues.

Lars Christian Svenson: Brazilian iron ore embarksite, the tonne mill in the capesite segment continues to increase. Last year, the iron ore tonne mill was down about 3 percent. However, with the aid of other commodities, much thanks to Binion Borksite, the overall tonne mill for capes increased 3 percent in 2022. The trade has become significant currently 10 percent of caped tonne mill with analysts expecting 30 to 40 percent growth in 2024. So far in 2023, with more volumes being shipped from both Brazil and Guinea, the tonne mill will continue its positive trajectory.

Lars Christian Svenson: Another point we would like to raise in this call is the more structural impact of the Borksite trade. If I can draw your attention to the bottom left graph, you will see that the seasonality in the capesite market has experienced less volume during Q1 and also in turn lower freight rates. This has been due to the wet season and maintenance of the iron ore terminals in Brazil. But as you can see, with the increased Borksite tons exported during the thin period, the tonne mill gap narrows every year.

Lars Christian Svenson: We are under the belief that a so-called traditional Q1 slow season can be challenged and that people have a more steady trade flow all year round for the larger sizes. If you have a look at the favorable supply dynamics, as mentioned in the previous previously in this presentation, we see limited downsides and larger sizes when it comes to efficiency. There is simply put little room to turn the fleet faster during port operation than what we currently are experiencing.

Lars Christian Svenson: If anything, with the new CII regulations coming in full force in 2024, large parts of the fleet are likely to slow steam even. At the same time, the order book and supply dynamics for dry cargo vessels are encouraging and very much unchanged over the last 12 months, largely due to uncertainty surrounding propulsion technology and yard capacity restraints.

Lars Christian Svenson: Next slide here, we go through the resilient business model of Golden Ocean. We strive to maintain our position of having the lowest cash break even in the industry. Currently fleet wide around $13,000 per day. With our premium fleet, hands-on execution and good financing, we are continuing to outperform the market's every quarter. For the first half of 2023, we have across both Cape and Panama segment outperform the market with $4,700 a day.

Lars Christian Svenson: We aim to continue our fleet renewal programme and enhance further energy efficiency devices across our fleet to bring our cash break even down further. With our low cash break even and fleet composition, we will float in almost any market as seen on the graph on the right side.

Lars Christian Svenson: Now let us guide you through our next two quarters. The forward outlook from the market's standpoint looks promising as discussed earlier in this presentation. We have for Q3 locked in 79% for the Cape size available days at $18,300 per day and 97% of the Panamax available days at $13,500 per day. Q3 to date, we have outperformed the market by $5,300 a day on a fleet wide average. For Q4, we are locked in 34% of the available Cape size days at $21,500 and 26% of the available Panamax days at $16,500 per day.

Lars Christian Svenson: And this combined, we have contracted a TCE revenue of $181 million for the second half of the year. This couple will protect the healthy bottom line for the rest of the year and at the same time give us leverage needed to capture a rising market going into Q4.

Lars Christian Svenson: Cash flow potential. To round off this presentation, we would like to show you the significant earnings potential in golden ocean as we move into the historical high season. The assumed freight rates set out in the graph are achieved rates and based on the best in class fleet efficiency and low cost model, the free cash flow can generate healthy dividend yields even at current freight levels.

Operator: With that, I pass the word back to the operator. Thank you. Thank you, dear participants.

Operator: As a reminder, if you wish to ask a question, please press star 111 on your telephone keypad and wait for a name to be announced. To withdraw your question, please press star 111 again. Please, the Bible will compile the Q&A rules that these will take a few moments.

Operator: As a reminder, if you wish to ask a question, please press star 111 on your telephone keypad and wait for a name to be announced. To withdraw your question, please press star 111 again.

Operator: Please, the Bible will compile the Q&A rules that these will take a few moments. And now we're going to take our first question.

Operator: And now we're going to take our first question.

Omar Nokta: And the question comes through line of Omar Noctaf from Jeffries. Your line is open. Please ask a question. Thank you. Thanks for our question and better. Good afternoon. I wanted to ask about the drive-up market and I think you gave some interesting commentary about the box site trade, potentially offsetting the typical wet season in Brazil. Do you think basically going forward, we may be able to throw out the conventional idea that drive-up is always that tweaked in the first quarter and do you look to capitalize on this dynamic, potentially here, as you get into 24 with maybe some charter ins or some SSAs?

Omar Nokta: Do you think basically going forward, we may be able to throw out the conventional idea that drive-up is always that tweaked in the first quarter and do you look to capitalize on this dynamic, potentially here, as you get into 24 with maybe some charter ins or some SSAs? How do you think about playing the potential of box site offsetting?

Omar Nokta: How do you think about playing the potential of box site offsetting? I think, Omar, that when it comes to the bauxite trade, the growth there is growth for pencil this huge. The volumes are there, the mines are there, and the infrastructure works very well. This is already contracted volumes going into a different trade than what the traditional iron ore could do. We are quite bullish on this particular commodity that will drive it forward, build it on mine.

Lars Christian Svenson: I think, Omar, that when it comes to the bauxite trade, the growth there is growth for pencil this huge. The volumes are there, the mines are there, and the infrastructure works very well. This is already contracted volumes going into a different trade than what the traditional iron ore could do. We are quite bullish on this particular commodity that will drive it forward, build it on mine. If that increases to two, three, four percent per year next year of the year after, we are looking at the quite healthy capesized rates going forward.

Omar Nokta: If that increases to two, three, four percent per year next year of the year after, we are looking at the quite healthy capesized rates going forward. I guess in terms of the iron ore activity that we have been seeing, you mentioned that it has been relatively strong actually going into China with a big step up out of Brazil so far this year. When we think about the pace of activity, obviously the first test looked really good going into China, looks like elsewhere, was a bit softer.

Lars Christian Svenson: I guess in terms of the iron ore activity that we have been seeing, you mentioned that it has been relatively strong actually going into China with a big step up out of Brazil so far this year. When we think about the pace of activity, obviously the first test looked really good going into China, looks like elsewhere, was a bit softer. What's the pace been like as we looked here as we started the second half here, this were two months in, how is the pace of iron ore going into China in relation to the first half from your vantage point?

Omar Nokta: What's the pace been like as we looked here as we started the second half here, this were two months in, how is the pace of iron ore going into China in relation to the first half from your vantage point? Are there any shifts or promising signals for volumes outside of China? The second half has had, in terms of iron ore story, it started a lot higher pace than the first half of the year.

Lars Christian Svenson: Are there any shifts or promising signals for volumes outside of China? The second half has had, in terms of iron ore story, it started a lot higher pace than the first half of the year. Just today the output from Brazil combined with all the miners are over 1.2 million tons per day. So compared that to January this year, this is a significant increase. It will drive these volumes forward, 100 percent. In terms of also countries and places taking the iron ore, we see the European growth as well as slowly but surely increasing from what was being from the second half.

Omar Nokta: Just today the output from Brazil combined with all the miners are over 1.2 million tons per day. So compared that to January this year, this is a significant increase. It will drive these volumes forward, 100 percent. In terms of also countries and places taking the iron ore, we see the European growth as well as slowly but surely increasing from what was being from the second half. So that's not so.

Lars Christian Svenson: So that's not so. Okay, thank you. That's interesting. And maybe just one final one on the market. In terms of coal, we have seen here jump in L&D prices of late, at least in relations where things were a couple months ago at the lows. Have you seen any effect on that on coal volumes or coal interests or activity? Any shift or any sort of, I guess, any impact of that on the coal trade?

Omar Nokta: Okay, thank you. That's interesting. And maybe just one final one on the market. In terms of coal, we have seen here jump in L&D prices of late, at least in relations where things were a couple months ago at the lows. Have you seen any effect on that on coal volumes or coal interests or activity? Any shift or any sort of, I guess, any impact of that on the coal trade? The coal trade has been active all year, especially from Australia and to China since they re-open their relationship there.

Lars Christian Svenson: The coal trade has been active all year, especially from Australia and to China since they re-open their relationship there. India has been active in the first Q1 this year and now with it one soon season over, we expect India to continue their imports. That their stock price are low as well. But against prices going up, we have seen in the market lately more cargos as well going from east to west. Maybe that's a strong signal that the continent is about to build a little bit more security to avoid what happened lost it.

Omar Nokta: India has been active in the first Q1 this year and now with it one soon season over, we expect India to continue their imports. That their stock price are low as well. But against prices going up, we have seen in the market lately more cargos as well going from east to west. Maybe that's a strong signal that the continent is about to build a little bit more security to avoid what happened lost it.

Lars Christian Svenson: Got it. Thank you. Thanks, R. Scursion. That's a good color. I'll hand it over. Thanks a lot. Thank you. The participants as reminded, if you wish to ask a question, please press star 1-1 on your telephone keyboard.

Omar Nokta: Got it. Thank you. Thanks, R. Scursion. That's a good color. I'll hand it over. Thanks a lot. Thank you. The participants as reminded, if you wish to ask a question, please press star 1-1 on your telephone keyboard.

Operator: The speaker's runner for the question said this time and what allowed to hand the conference over travel management team for any closing remarks. Well, thanks a lot for dialing in and have continued the great week Thank you very much.

Operator: Bye-bye That's concludes our conference for today. Thank you for participating. You may now all disconnect. Have a nice day

Q2 2023 Golden Ocean Group Limited Earnings Call

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