Q3 2024 Golden Ocean Group Ltd Earnings Call
Good day and thank you for standing by welcome to the Q3 'twenty 'twenty four Golden Ocean Group Limited earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question are you in this session you will need to press.
Pizza cyber: So one one on your telephone you would've done here automated message washing their hands raced to waste of your question. Please press star one one again please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Pizza cyber and sign into M. C E O N C F.
Speaker Change: Oh. Please go ahead.
Speaker Change: Good afternoon, and welcome to the Golden Ocean Q3, 2024 release.
Patrick: My name is Patrick and I am the interim CEO and CFO.
Today, I will present, our Q3 numbers and forward outlook.
Speaker Change: In the third quarter of 2024, we have the fully main highlights.
Speaker Change: Our adjusted EBITDA in the third quarter ended up at $124 4 million compared to $123 million in the second quarter.
Speaker Change: We delivered a net income of $56 3 million and earnings per share of 28 cents compared to a net income of $62 5 million and earnings per share of 31 cents in the second quarter.
Speaker Change: Our adjusted net profit was $66 7 million and adjusted earnings per share of 33 cents.
Speaker Change: From $63 4 million and earnings per share or 32 cents in Q2.
Speaker Change: Our TCE rates were about $28300 per day per keeps sectors.
And about $16400 per day for Panamax vessels.
Speaker Change: In fleet wide TCE over around $23700 per day for the quarter.
Speaker Change: We have continued to execute on our fleet renewal strategy by selling one older Panamax on an older and new customer Max vessels at attractive prices.
Speaker Change: Further we continued to secure attractive financing supporting our industry low cash breakeven rates.
For Q4, we have secured a net TCE of about 26300 per day for 82% of Capesize dates on about 14600 per day for 83% of Panamax space.
Speaker Change: For Q1, we have locked in a net TCE of about 21100 per day for 27% of Capesize days.
Speaker Change: At about 17500 per day for 15% of Panamax days.
Speaker Change: And with a strong result, we're pleased to declare a dividend of <unk> 30 per share for the third quarter of 2024.
Speaker Change: Let's look a little deeper into the numbers.
Speaker Change: As mentioned, we achieved a total fleet wide TCE rate of 23700 <unk>.
Speaker Change: Like you up from Q2.
Speaker Change: We have five ships dry docked in Q3 compared to four ships in Q2 contributed to about 253 days a fire.
Speaker Change: In Q3 versus 193 days in Q2.
Speaker Change: We are entering into a period with frequent dry dockings.
Speaker Change: 13 ships scheduled to dry dock in Q4 2024.
Speaker Change: Which florida suits have completed.
Speaker Change: As of today and seven ships are expected to Drydock in Q1 2025.
Speaker Change: We recorded net revenues of $206 6 million nine.
Speaker Change: $9 2 million higher than Q2, mainly due to increased vessel days.
Speaker Change: Looking at our operating expenses, we recorded $69 4 million in Opex versus $66 3 million in Q2.
Speaker Change: Running expenses were largely unchanged quarter by quarter, while we had one more ship drydock in the quarter briefly.
Speaker Change: Reflected in the results.
Speaker Change: We had $2 4 million in decarbonization and digitalization investments.
Speaker Change: Our opex reclassified from charter hire.
Speaker Change: Was $2 4 million.
Just below $1 million up from Q2.
Speaker Change: On our general and administrative expenses.
Speaker Change: Ended at $5 3 million slightly up from Q2.
Speaker Change: Our daily G&A came in at $572 per day net of cost recharged to affiliated completely unchanged from Q2.
Speaker Change: Our charter hire expenses.
Speaker Change: $6 4 million versus $4 8 million in Q2.
Speaker Change: Reflecting higher number of vessel days for the trading portfolio.
Speaker Change: As well as profit sharing expense relating to our lease with <unk> Corp.
Speaker Change: Net financial expenses came in at $25 5 million.
Speaker Change: Largely unchanged quarter on quarter.
Speaker Change: Our derivatives and other financial income, we recorded a loss of $12 million compared to a gain of $1 9 million in Q2.
Speaker Change: On derivatives recorded a loss of $11 million.
Speaker Change: Of which $14 million was.
Speaker Change: Relating to the mark to market loss on interest rate swap derivatives.
Speaker Change: Offset by a $4 million realized cash gains on the same derivatives.
Speaker Change: Well as a 400000 loss.
Speaker Change: SFA FX and bunker derivatives.
Speaker Change: Four resulted in investment and associate we recorded a 700000 loss compared to a 400000 loss in Q2 relating to our investments in Swiss Marine PFG and UFC.
Speaker Change: Our net profit of $56 3 million or 28 cents and adjusted net profit of $66 seven or 33 cents on a dividend of <unk> 30 per share declared for the quarter.
Speaker Change: Although our cash flow, we recorded cash flow from operations of $100 8 million up from $76 9 million in Q2.
Speaker Change: Our cash flow used in investments was $4 4 million.
Mainly due to installments and costs relating to our <unk> of $24 8 million offset by $20 8 million in sales proceeds from one older Panamax vessel.
Speaker Change: Cash flow used in financing came in at $81 8 million, mainly comprising of $35 million in scheduled debt and lease repayments.
Speaker Change: And $8 1 million in prepayment relating to the sale of one panamax vessel.
Speaker Change: $60 million in dividend payments relating to the Q2 results.
Speaker Change: It was offset by $21 6 million in drawdown in connection with the delivery of one <unk> new building.
Total net increase in cash of $14 6 million.
Speaker Change: On our balance sheet.
Speaker Change: We reported cash and cash equivalents of $117 6 million, including $1 4 million in restricted cash.
Speaker Change: In addition, we have $150 million in Undrawn available credit facilities at quarter end.
Speaker Change: Debt and finance lease liabilities totaled $1 4 billion in Q3 down by approximately 20 million quarter on quarter.
Speaker Change: Average fleet wide loan to value under the Companys debt facilities per quarter end was 34, 1%.
Book equity of $1 9 billion and a ratio of equity to total assets of approximately 56%.
Speaker Change: Looking at gold Gnosis fleet composition.
Speaker Change: Golden Ocean continues to renew its fleet as evidenced with the vessel sales announced in the quarter.
Speaker Change: Although we are optimistic we focus on our position in the Capesize new customer segments.
Speaker Change: Which represents over 80% of gold notions deadweight tons and thereby earnings capacity.
Speaker Change: We are the largest listed owner indicate segments.
Speaker Change: As I will discuss further in this presentation, we believe that both supply and demand dynamics favors the Cape size segment in the foreseeable future.
Speaker Change: As illustrated in the graph if you are to invest in the Drybulk space. We are the only listed company offering meaningful cap exposure and at the same time significant market cap and trading liquidity.
Speaker Change: In Q3, we saw cargo volumes continue at healthy levels from a seasonally strong first half despite geopolitical turmoil and a challenging trading sentiments.
Speaker Change: Brazilian iron ore volumes were up 13% quarter on quarter as driven by strong production and guidance from the largest Brazilian miner Vale.
Speaker Change: Trailer continued strong exports, although slightly down quarter on quarter.
Speaker Change: The West African bauxite volumes have grown to a healthy baseline of 10 to 12 million tons per month.
Speaker Change: And are now in the upper end of the range as they are approaching peak season exports in Q1.
Speaker Change: Coal volumes are up 3% quarter on quarter, mainly from Indonesia, and Australia to Southeast Asia.
Speaker Change: Colombian volumes, which were strong tone mile contributor for the first half of 2024 have decreased with 11% from previous quarter as they have struggled with onshore infrastructure issues.
Speaker Change: As for the first half China continue to import a large portion of the volumes representing 75% of the Brazilian iron ore and 83% of the Guinea bauxite exports.
Speaker Change: In line with healthy growth in volumes, both vault and Australian miners guide positively on production.
Speaker Change: Rating their strong full year production targets.
Speaker Change: Iron ore prices have been volatile, but stayed at historically healthy levels. Despite the negative macro backdrop.
Speaker Change: Current prices are above $100 per ton compares very favorably to the breakeven rate of the major miners of approximately $40 per ton delivered in Asia.
Speaker Change: Indicating continued profitable exports.
Speaker Change: Healthy iron ore price is assume that the demand for iron ore remains healthy.
Speaker Change: Following significant investments in mining and infrastructure in Guinea, the Simandou high grade Iron ore mine is expected to ramp up its production and exports from Q4 2025.
Speaker Change: Which will over two and a half years have an expected 120 million tons of export capacity annually.
Speaker Change: If assuming that the simandou volumes will replace Australian volumes.
Speaker Change: It will triple the sailing distance to Asia, boosting ton mile demand for Cape sizes significantly.
Speaker Change: Yeah.
In addition to Simandou, Brazil have several new expansion projects underway.
Speaker Change: The additional our new export capacity of around 50 million tons will come on stream during 2025, and 226 further adding capesize ton mile.
Speaker Change: Iron ore inventories increased to 2022 levels during the first half of 'twenty 'twenty four.
Speaker Change: Now stabilized during October November as steel production has balanced out iron ore imports.
Speaker Change: Whereas we throughout the year.
Speaker Change: Seen significant negative news flow relating to Chinese growth predictions.
Speaker Change: In October we saw Chinese government announcing stimulus packages, including stabilizing the week property sector, but more importantly, a clear signal that Chinese government is committed to achieving its growth targets.
Speaker Change: And the latest economic outlook published by IMF as expected that China will grow by four 8% and four 5% in 2024, and 2025, respectively supporting healthy long term demand for commodities.
Speaker Change: Despite elevated inventories China has continued to import high grade Brazilian iron ore, which supports the indication that the parks of inventories are of a lower grade.
Speaker Change: Further.
Speaker Change: The <unk> metals exchange in China has required traders to hold higher deposits of iron ore in order to trade, it's or further upping inventory levels.
Speaker Change: China has stated that it is aiming to reduce emissions in the steel industry.
To use higher grade iron ore and coal will reduce emissions per tonne steel produced.
Speaker Change: China is in the process of including the steel industry interests emissions trading scheme, which would make increased high grade imports even more beneficial.
Speaker Change: The new high grade ore in our mine in Simandou Guinea, partially funded by Chinese interests.
Speaker Change: Add to the sourcing of high grade commodities.
Speaker Change: The official statistics on reported steel production in China has remained muted in Q3, but has during October improved as steel margins have started to strengthen and PMI indicators improved.
Speaker Change: We have also seen the more optimistic tone from the large steel mills a significant change in narrative from what was presented during Q2.
Speaker Change: Outside China crude steel production has started recovering, but it's muted by weak demand and high interest rates.
However, as this constitutes 50% of global steel demand presents a significant upside once the rebound comes to underway.
Speaker Change: Analysts expect growth of five 7% in next couple of years as the world is recovering from inflation and higher interest rates.
Speaker Change: Despite weak steel margins Chinese steel mills continue to protect their market share.
Speaker Change: Steel exports from China has continued in Q3 and into Q4 with a 30% increase year on year in the first nine months of 2024.
Speaker Change: The stimulus targeting the real estate sector is highly positive stable as the property market and for the economy in general.
Speaker Change: Construction represents around 25% of steel demand, while infrastructure investments manufacturing and exports are in aggregate, representing approximately 60% of Chinese steel production.
Speaker Change: Guinea in West Africa has become a major exporter of hi, Ray come of this.
Speaker Change: As is the case for the new iron ore projects coming on stream. The Guinean bauxite is to a large degree controlled by Chinese interests, indicating ton mile support in the years to come.
Exports of bauxite, which is used in the production of aluminum <unk>.
Speaker Change: Is feeding the booming EV industry as well as other sectors in China.
The Guinean bauxite replaces volumes from Indonesia, which in addition to significant growth in demand and sailing distance represents the switch to Cape sizes from smaller vessel segments.
Speaker Change: The bauxite trade has on average growing by 22% annually since 2017 and is expected to grow by approximately 5% to 10% in 2025 further supporting Capesize demand.
As bauxite exports currently contributing 13% to 14% of ton mile for Cape sizes.
Speaker Change: This will represent a demand growth covering most if not all of the scheduled deliveries and capesize.
Speaker Change: For 2025.
Speaker Change: The order book remains favorable with Capesize being supported by shipyard capacity constraints.
Speaker Change: Cape sized in Newcastle Max compete.
Speaker Change: Compete with container ships, LNG vessels and tankers for capacity due to the Doc sites required.
Speaker Change: With capes, representing the lowest profit margins for the shipyards. They are generally out competed by other more profitable segments on the available capacity, leading to higher quarter prices and long dated delivery schedules.
Speaker Change: We have only seen marginal additions to the order book the past quarter and we remain at historically low levels illustrating that the restrictions imposed by yard capacity high new building prices and long lead times remain the key fundamental support.
Speaker Change: The Capesize fleet is aging and over half of the Capesize fleet will be above 15 years of age in 2010 to eight in a period, where environmental regulations are tightening.
Speaker Change: Also as seen from the fleet profile of the concentration of vessels required to dry dock into two coming years is expected to reduce fleet capacity further than normalized distribution over a docking cycle.
We largely see inflation and necessary investments to meet technical requirements.
Raising the bar for smaller operators of older tonnage.
Speaker Change: There has been unusually cool weather disruptions in the port operations during the fall, which normally leads to delays and tightening of the dry bulk markets.
Speaker Change: The dry bulk fleet continues to operate highly efficiently with low congestion only marginal Panama and Suez Canal exposure.
Speaker Change: The return of physical volumes setting the price of freight.
Speaker Change: <unk> seen a healthy rebound in rates in Q4, following a weaker period.
Speaker Change: Very much as seen in 2023.
Speaker Change: It illustrates the underlying supply and demand balance in the freight market.
We will round off with a reminder of our robust business model low cost base and.
Speaker Change: Our modern fleet, which continues to support the free cash flow and dividend potential and Golden Ocean.
Speaker Change: The accumulated dividends paid has surpassed $1 1 billion by good margin representing about 90% of net profit for the period.
Speaker Change: Although we expect volatility with ongoing geopolitical uncertainty we continue to remain fundamentally positive on the market outlook.
Speaker Change: I would now pass the word back to the operator and welcome any questions.
Speaker Change: Hi.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced two.
Speaker Change: So we still your question. Please press star one I'm going again.
Speaker Change: Once again Thats star one on one if you wish to ask a question.
Speaker Change: Okay.
Speaker Change: We will now take the first question.
Speaker Change: From the line of Omar <unk> from Jefferies. Please go ahead.
Omar: Thank you.
Speaker Change: And.
Thanks for the update.
Speaker Change: Good detail on the market outlook and I guess, just wanted to get maybe a sense of in terms of Golden Ocean, and where you sit in terms of capital deployment from here you sold an older Newcastle Max and a panamax prices looks fairly solid and you've got some big gains on those I guess, how would you characterize where you sit today.
Speaker Change: Company Wise or do you view Golden Ocean being kind of more of a seller in this market take advantage of perhaps lofty pricing or your buyer.
Speaker Change: In terms of perhaps asset values are coming under pressure or even either any kind of color. You can give I guess in terms of what youre seeing in S&P market and then what that means for you.
Mark: Yes, Hi, Mark.
Speaker Change: Thanks for the question I think.
Speaker Change: First of all we.
Speaker Change: You have sort of done our heavy lifting when it comes to fleet growth.
Speaker Change: Earlier in the cycle. So we grew by 30% over the last.
Three years.
In line with the increased prices I think the current point in time, we don't see the real value in acquiring modern tonnage.
Speaker Change: The current prevailing prices so I think we're more.
So we're selling off older tonnage.
Speaker Change: In line with our strategy to replace the sort of.
Two two.
Speaker Change: The balance out the or the fleet that we have and.
Rich.
Rich: The fleet age and I think.
Rich:
Rich: When it comes to capital deployment I think.
Rich: <unk> been pretty clear that we favor.
Rich: Dividends.
Rich: At the current point in time nothing care.
Rich: Even though if you look at current share prices plummeting.
Might be tempting to to deploy some of this into the buyback program we announced.
Speaker Change: New love, but.
Speaker Change: I think as for the rest of the group.
Speaker Change: With the same main shareholder we do preference dividends over over buybacks in general terms.
Speaker Change: Okay. Thank you that's clear and I guess, maybe just in terms of the dividend as you just highlighted.
Speaker Change: In page 30.
Speaker Change: Declared 30 stands and you paid that I believe the past four quarters earnings per share has generally been in that range plus or minus a couple of cents.
How would you think about let's say the next quarter or.
Speaker Change: Our following quarter.
Speaker Change: <unk> falls into say the 20 to 25, not saying don't want to hold you to it but when you think about 30 dividend threshold is that something you expect to maintain if earnings don't deviate too far away from what you have achieved or do you shift back towards that.
Speaker Change: Percentage payout of earnings.
Speaker Change: I think we've always been a percentage payout of earnings.
Speaker Change: But we have also tried to balance out the sort of.
Speaker Change: The peaks and troughs and then obviously, we have a cost base, which enables us to pay out dividends if the market.
Speaker Change: Temporarily.
Speaker Change: And I think we are very much.
Speaker Change: Repeating what we've set up a positive to the market.
Speaker Change: Fundamentals of the market.
Which means that we intend to pay dividends throughout.
Speaker Change: And the weaker periods.
Speaker Change: A nominal amount I think.
Speaker Change: We'll have to see.
Speaker Change: And.
Speaker Change: We are also opportunistic.
Speaker Change: I've shown but I think in general.
Speaker Change: So we intend to continue where we are.
Speaker Change: What we have been doing since 2021.
Speaker Change: Okay very good thank you I'll turn it over thank.
Speaker Change: Thank you.
Speaker Change: Thank you as a reminder, if you wish to ask a question. Please press star one on one on your telephone.
Star one on one if you wish to ask a question.
Speaker Change: There are no more questions at this time.
Speaker Change: Okay.
Speaker Change: Then.
Speaker Change: I will thank you all for listening in and we.
Speaker Change: Sure.
Speaker Change: Peaceful holiday season, when the time comes.
This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
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