Q4 2024 Genco Shipping & Trading Ltd Earnings Call

And go shipping and trading limited fourth quarter 2024 earnings conference call and a presentation before we begin. Please note that there will be a slight presentation accompanying today's conference call.

that presentation can be obtained from Django's website at

to inform everyone. Today's conference is being recorded and is now being webcast at the company's website, www.jo shipping.com

We will contact a question and answer session. After the opening remarks instruction will follow at that time. A webcast replay will also be available via the link provided in, today's press release as well as on the company's website.

At this time, I will now turn the conference over to the company. Please go ahead.

Speaker Change: Good morning. Before we begin our presentation, I note that in this conference call, we will be making certain forward-looking statements pursuing to the safe harbor provisions of the private Securities. Litigation Reform, Act of 1995, such forward-looking statements use words such as anticipate budget estimate, expect project, intent plan, believe, in other words, in terms of similar meaning and connection with the discussion of potential future events circumstances or future, operating or financial

Performance. These forward-looking statements are based on Management's, current expectations, and observations for discussion of factors that could cause results to differ. Please see the company's press release. That was issued yesterday. The materials relating to this call posted on the company's website and the company's filings with the Securities and Exchange Commission. Including without limitation, the company's annual report on form, 10K for the year ended, December 31st 2023 and the company's reports on form 10q and Form 8K. Subsequently filed with the SEC.

John Wobensmith: At this time, I would like to introduce John wobensmith, Chief Executive Officer of Genco, shipping, and trading Limited.

John Wobensmith: Good morning everyone. Welcome to jenko's, fourth quarter of 2024 conference call. I will begin today's call by reviewing our Q4 2024 and year to date highlights.

John Wobensmith: Additionally, we will provide an update on our value strategy discuss. Our financial results for the quarter as well as the industry's current fundamentals before opening the call up for questions for additional information. Please also refer to our earnings presentation posted on our website

John Wobensmith: Starting on slide 5 Q4, 2024 marked, another solid quarter for Genco, tapping up tapping off, what was a very good year for the company as we grew earnings and advanced our comprehensive value strategy, focused on 3 pillars, dividends deleveraging and growth.

John Wobensmith: Specifically during a time, when we continue to provide shareholders with sizable returns and take additional steps to lower our Financial Risk, we are pleased to have acquired another high, specification Cape size. Vessel in October. We took delivery of the Genco Intrepid, our third Cape size, acquisition over the last year, in our investment, in modern high-specification vessels to approximately 285 million since 2021.

John Wobensmith: Importantly, the acquisition of the Genco Intrepid is part of our broader Fleet renewal strategy earlier in the year. We completed our exit from the 4. Small and older 169,000 dead weight ton vessels. And if redeployed the sale proceeds and additional cash towards the acquisition of 3 201 Cape sized vessels notably, these accretive transactions enhance our earnings power. As we had premium, high-quality assets to the fleet and reduced dry docking capex in 202024 and 2025 by 13 million.

John Wobensmith: Turning the slide 6. We highlight, what was a strong 2024 for Genco our ebata exceeded 150 million dollars. A nearly 50% increase versus 2024 levels

John Wobensmith: 2023 levels, apologize. Let our led by our success increasing time chart, equivalent rates to 19,177 per day from 14,766. The prior year, in addition, to the strong Market, we continue to outperform our benchmarks adding approximately 1,600 hours per day. To our tce rates demonstrating the continued strength of our commercial platform.

John Wobensmith: Furthermore we also increase distributions to shareholders by 70% declaring, a dollar 46 per share in dividends during the year or an annualized yield of 10% on the current share price. We continue to provide sizable dividends to shareholders as highlighted on page 7, we are pleased to advance our track record of providing dividends to shareholders through Market Cycles. As we declared 30 cents per share dividend for the fourth quarter. This marks our 22nd consecutive dividend with which in aggregate represents 6 dollars, 661 and a half cents per share or 45% of our current share price as of February 18th.

John Wobensmith: The solid fourth quarter dividend follows our recent decision to enhance our dividend policy which is aimed at increasing cash. Distributable to shareholders while maintaining significant financial strength to grow and renew our Fleet and further strengthen our earnings power. Specifically, we remove the dry docking capex line item from the dividend calculation going forward. Turning to slide 8, We Believe Genco remains in a highly advantageous position moving forward. Specifically we have an industry low, net loan to value of 5%, a low cash flow rate, even rate and over 330 million dollars. In undrawn revolver availability. Coming off of a strong 2024, Drive bulk Market, the beginning of 2025,

John Wobensmith: Seeing downward volatility in part due to seasonal factors. Despite this near-term, softening of freight rates. We remain constructive on the longer term drywall. Fundamentals, which are led by a moderate new building order book and growth in cargo volumes from Long Haul Origins.

Speaker Change: The same time given our strong balance sheet, favorable risk reward balance and significant access to Capital. We built, Genco to capitalize on diverse Freight Market environments to both opportunistically grow. The fleet through the dry bulk cycles and continue to provide sizable returns to shareholders. I will now turn the call over to Peter Allen our Chief Financial Officer.

Peter Allen: Thank you, John on slides, 10 through 12, we highlight our fourth quarter Financial results, Genco recorded net income of 12.7 million or 29 cents, basic and diluted earnings per share adjusted ibido for Q4, total of 32.7 million, bringing the yearly total to 251.29% year-over-year.

Peter Allen: During Q4 our tce increased on a year-over-year basis. Led by our capesize vessels which earned a TC rate of over 25,000 per day during the quarter or approximately 3,000 dollars per day greater than the same period of last year. Highlighting the significant operating leverage of the cape size sector.

Peter Allen: On slide 13. We showed the trajectory of our debt outstanding and our continued voluntary debt repayments over the last 4 years. We have paid down 80% of our debt or nearly 36060 million which has resulted in net loan to value ratio of only 5%.

Peter Allen: In 2024 specifically, we voluntarily paid down million dollars of debt under our revolving credit facility. And we estimate that this will reduce interest expense by approximately $6 million on annualized basis or $400 per vessel per day on our cash flow, make even rate.

Peter Allen: Voluntarily paying down, debt highlights the importance and significant flexibility that our 100% revolving credit facility structure offers us and that we can pay down debt to actively manage interest expense without losing borrowing capacity to capture a creative growth opportunities.

Peter Allen: Turning to slide 14, we will present a current snapshot of jenko's financial position as of December. 31st 2024

Peter Allen: We have a cash and debt balance of 44 million and 900 million respectively. Resulting in a net debt position of 46 million and an industry loan. Net loan to value ratio of approximately 5% on our 42 vessel Fleet.

Peter Allen: Additionally, we have 337 million of undrawn revolver availability that we can utilize for growth opportunities among other uses moving to slide 15. We highlight our quarterly dividend policy which targets a distribution based on 100% of quarterly, cash flows, less a voluntary Reserve

Peter Allen: for the fourth quarter, our formula resulted in a 30 Cent per share dividend or an annualized yield of 8% nearly double the 2-year, treasury rate of approximately 4%

Peter Allen: Looking ahead to q1 2025, we currently have 75% of our available days fixed at a rate of 12,366 per day as compared to our anticipated cash flow, Break Even rate, excluding dry docking related capex of 8,873 per vessel per day. We note that while Genco, like, much of the industry has a high dry docking year in 2025, we plan to frontload these dry dockings during the first half of the year and seek to maximize Fleet wide utilization in the second half of the year, which tends to be seasonally stronger from a freight rate perspective.

Peter Allen: I will now.

Speaker Change: Turn the call over to Michael Orr our drywalk Market. Analysts to discuss industry fundamentals.

Speaker Change: Thank you. Peter, you getting on slide 17, the dry bulk Market, experienced a strong 2024, led by the Baltic capesize index, which averaged 22,593 per day. Last year was atypical from a seasonality perspective, in the sense that the market was strong from the start of the year and through Q3 with an eased into year end so far in 2025 today, the market has seen traditional seasonal, Trends return in q1 such as weather, disruptions in both the Atlantic and Pacific basins. Impacting cargo availability the front-loaded. Nature of the new building deliveries particularly from minor bulk vessels as well as the timing of the Chinese New Year.

Specifically as highlighted on page 18, due to poor weather conditions and scheduled maintenance, Brazilian or exports, have pulled back since the highs of Q3 but January exports approximately 11% lower than the second half of 2024.

Speaker Change: These reduced Long Haul, iron ore trade volumes together with an easing import congestion have temporarily thrown off the supply and demand balance for the sector, impacting Freight rates to the downside.

Speaker Change: During the slide, 19 2024, Mark and other your record year for both Chinese, iron ore and coal Imports. Iron ore Imports grew by 5% year-over-year, some of which replenished inventories while current Chinese stock piles, are below 2022, highs in absolute terms, these levels are approximately 19% higher than this time last year. China steel production declined,

Speaker Change: Line to 2024, while steel exports increased by 25% highlighting reduced domestic demand.

Speaker Change: Trying to continues to export over 10% of the steel. It produces mostly going to other Asian Nations as well as the Middle East with its proportion of exports to Steel output growing over recent years.

Speaker Change: China's excess. Steel has remained a point of contention inducing. Protectionist measures globally.

Speaker Change: Turning to Pages 20 and 21. We highlight the Long Haul iron ore in Block side trade growth expected from Brazil and West Africa in the coming years.

Speaker Change: While growth this year is expected to be marginal. There is significant growth volumes expected in 2026 and 2027, which can absorb over 200, Cape sized vessels, which is more than the current Cape size new building order book.

Speaker Change: Apply constraints and Cape size new building activity. Combined with added longer Long, Haul trading distances are 2, key Catalyst for the sector.

Speaker Change: As depicted on slide 22, the Trump Administration has initiated and threatened tariffs across a wide range of trade Partners since the inauguration in January.

Speaker Change: Many of these tariffs such as the blanket. 25% levies on Canadian and Mexican Imports have been delayed.

Speaker Change: However, the US has implemented a 10% tariff on all Chinese Imports, prompting China to impose 15% duties on us, coal and LNG as well as 10% on crude oil and agricultural equipment.

Speaker Change: Additionally, president Trump has announced that he plans to Institute a 25% tear up on all steel and aluminum Imports regardless of origin so far, the new tariff regimes have had a generally limited impact on global dry bulb trade. However, the tariffs have been more aggressive than what we witness in. The first Trump Administration as they are being implemented in a broad-based manner, on multiple trade Partners simultaneously,

Speaker Change: In terms of the grain trade, as detailed on page 23, which was impacted by the first us, China trade War. We are currently entering South American grain season.

Speaker Change: Following a strong us Harvest expectations are for another bumper year for both Brazilian and Argentine shipments, which should be supported for minor bulk trades.

Speaker Change: During February so far, we've seen supermax spot rates increased by approximately 40% in part due to these Dynamics.

Speaker Change: Moving to slide 24, the disruptions in Panama, and the Red Sea have gone in different directions since February 2024, low Drive bulk Panama Canal transits have increased over 200% in our back to near average levels.

Speaker Change: On the other hand, despite a tenuous Gaza ceasefire Suez Canal, transits are still well below. Normal levels and are likely to remain at lower levels in the near term until further steps are taken in the ceasefire agreement.

Speaker Change: Regarding the supply side outline on slide 25. Net Fleet growth for 2024 was 3%. In line with the previous year, the cape size segment continues to have the smallest order book among the sect sectors with only 2 capes delivered. In January, the least amount of January Cape delivery since 1999.

Speaker Change: There are currently only 36, more Cape deliveries expected this year.

Well, we expect volatility in the Freight Market, the foundation of a low Supply growth picture provides a solid basis for our constructive view of the dry bulk Market going forward.

Speaker Change: This concludes our presentation and we would now be happy to take your questions.

Speaker Change: Okay, thank you. Ladies and gentlemen. We will now conduct the question and answer session. If you'd like to ask a question this time, simply press star, followed by the number 1 on your telephone keypad. If you would like to return your question, press star 1 again,

Speaker Change: And your first question comes from the line of Omar okta, we have Omar. Please go ahead.

Omar okta: Hi uh morning, John Peter, Michael, uh, good update morning, uh, just on morning. Yeah, just just overall, I think, you know, just looking at, you know, the release and obviously, the market is what it is, but just an in terms of Genco, you know, clearly you're in strong shape. Maybe the strongest you've ever been LTV is at just 5%. As you highlight liquidity is pushing, close to 400 million. Um, how do you think about where you positioned right now, you know how the drywall Market has developed here recently and and how do you think Genco is going to be here in terms of opportunities that may be coming up, especially given the software Market of late?

Omar okta: Yeah, thanks so much. So look, I this plays right into um how we set this company up.

Omar okta: 2 and a half almost 3 years ago uh, with with the value strategy. And what I mean by that is we've always want we wanted to put the company in a position where it can always play offense and clearly you're you're you've seen that happen. Um, in 20124 with large dividend payouts due to the favorable cash flows. The fleet renewal that we were still able to do in 2024. Um, and as we look at 2025, while it may be from a rate standpoint softer than than 2024, we believe that that is going to allow us to, uh, to acquire additional vessels at at lower prices, particularly focusing on, um, Eco type capes and, uh, and ultramaxes. So, you know, again, I I just go back to this is what we set this company up for to, to thrive in all Freight environments. And, uh, while I maybe have a little softer situation in the first part of, of this year, we think that'll breed. Oh,

Omar okta: opportunity, for the

Omar okta: Need to uh to grow and with a 5% net debt, we can do that extremely easy without um sacrificing anything on the uh on the dividend side.

Speaker Change: Okay, thanks, John, that, that that's nice to hear and obviously nice to be able to play offense, um, in a market like this. And I guess maybe just on that. Your last point on the dividend, your, your, your your payout policy is pretty simple. You pay out operating cash flow unless that, uh, that 19 million Reserve. How do you think about the setup here for the first quarter? Uh, earnings may be slipping in the red. Just given the low spot rates. Um, how do you think about what the dividend would be in that? Uh, you know, it it with that dynamic.

Speaker Change: Yeah. And and and certainly um this question you know, calm comes up, I think

Speaker Change: So first of all, we're we're very much committed to uh to the value strategy. Um which includes quarterly dividends as you pointed out that that formula is very straightforward and and there's a very um again straightforward strategy on that.

Speaker Change: Definitely downward volatility in in the first quarter. But I I think all you have to do is go back and look at our track record of dividends during previous periods of softness. Um, even when at the time the formula would have produced, you know, a zero dividend, q1, 2023, Q3 2023. You know, the formula spit out a zero during those

Speaker Change: Quarters. But we still elected to pay 15 cents a share. So we we've, you know, I think there's a very defined track record now in terms of what the board and the management team and the company, um,

John Wobensmith: their commitment to uh to the value strategy. You pointed out the quarterly reserve, it actually works out to about 45 cents a share. So it there's quite a bit of reserve on a short-term basis to, uh, to tap as needed. Doesn't mean we're going to pay out the whole Reserve, but it's certainly gives us a lot of flexibility to counteract short-term volatility in the freight markets, which is exactly what we believe um, is happening right now. So it it's um, again it it's I just go back to the same thing. It's about playing offense, Omar, and we've set this company up to continue paying decent sized dividends even in, uh, you know, even in periods where, um, where we have softness and rates and growth is very much a factor still for us.

Speaker Change: Great. Oh thanks John very, very helpful. I'll turn it over.

John Wobensmith: Thanks so much.

Speaker Change: And your next question comes from the line of Chris Robertson with Deutsche Bank. Chris, please go ahead.

Chris Robertson: Hey, good morning guys and thank you for taking my questions. Um just with regards to pulling the dried off and forward. You know, you're not the only public player that's trying to front load, uh, this year just due to the rate environment and I'm assuming other private players are doing so as well.

Chris Robertson: You know, additionally, there's a large portion of the fleet that was built in 2010 that that has to do. Special surveys and undergo dry docking this year. So do you see any potential for I guess upside as effective capacity of the fleet is reduced because everyone's trying to rush to the yard.

Um, maybe a little bit. I I I actually think that that's being made. It's it's being made a little bigger than than it actually. Is I, I believe, actually, next year is is an even larger dried docking year. Um, if you look at the fleet overall, in terms of what, in terms of what Genco is doing, we're not necessarily pulling things forward in 2025 and we we obviously have a set regulatory schedule in terms of when we need to do our dry dockings but we certainly try to pull things forward

As much as we can in the earlier, part of the year, you know, to, to make opportunity costs as low as possible on dry dockings, and particularly this quarter, when we're having, you know, the normal seasonal softness, but I'm not. So sure how much of a factor it is this year, but as I, you know, again next year is even heavier. So maybe we start to see it. Um, as we get into next year,

Speaker Change: Okay, gotcha. All right. Um my second question is just as it relates to the Suez Canal Transit. Um John could you talk about which segment of the drive book sector this impacted the most? And what do you think? Normalization in the Suez means for overall you know decrease in time model demand, if that if that were to normalize

John Wobensmith: I don't think it's very much in dry bulk. You know what, maybe it's 1%. Um, I, I can tell you, Genco, as a company has no plans at this point to, um, you know, to Transit the Red Sea area, we will continue to go around, uh, Africa for it, at least the, at least the near-term. As we see it, we still think it's a very volatile situation there. And the last thing you want is to have a ship and crew, everything looks good 1 day and and all of a sudden you're in the, in the middle of the Red Sea and you can't turn around and, you know, the world blows up again, um, and and you have a tax. So I for the time being, we're, we're staying away. Um, I think a lot of other ship owners are, uh, clearly not everyone. Um, but it's not a risk that we want to take with our ship and crew.

John Wobensmith: Yeah, it's it's smart for the crew safety especially. All right guys, thank you for the time. I'll turn it over.

John Wobensmith: Thank you.

Speaker Change: again, if you'd like to ask a question simply press star, followed by the number 1 on your telephone keypad,

Speaker Change: And your next question comes from the line of sheriff, almograve, with btig Sheriff, please go ahead.

Speaker Change: Uh hey good morning. Thanks for taking my questions.

Speaker Change: Uh, so a couple on the market when we look at the time, Charter Market, um, recent fixtures, by some other owners are showing a bit of a bifurcation between vessel classes. Uh, capes aren't too far below where the liberty and the, um,

Speaker Change: and,

Speaker Change: Ever are fixed but smaller vessels are a bit lower. So I'm wondering what's behind the relative strength in capes. Even as a spark Market goes through this sort of seasonal and weather impacted slump.

Speaker Change: Um, so I'm a little confused because, um, you know, 1 year, TC rates on capes are are definitely below 20 at at this point. Um,

Speaker Change: so they they have been pushed down, you know, just like every other um,

Speaker Change: It's like every other Market um, on the on the smaller ships, as well as the larger ships. So they they definitely seen that downward pressure because of where spot rates are. And a lot of times, that Cape 1 year TC gets priced somewhat off of, you know, the the, the daily FFA curve.

Speaker Change: Because I think, you know, in in that market, that FFA those FFA are being used more so than in the uh, in the mid-size vessels.

Speaker Change: Okay. Yeah it could be that some of the fixtures I saw were for more than a year. So um maybe that's a driver but shifting to my second question, um the iron ore and box. I expansion as you highlighted on slide. Uh slide 20. Uh yeah. You know for context the tanker trade uh the last couple years, we've seen some important refineries come online but the ramp to full production has taken a year or more. So

Speaker Change: For these 3 Iron Ore box side projects, do you have a sense of how the Cadence of those 167 tons should start making an impact in the dry bulb trade?

Speaker Change: Sure. So I would call it an educated guess. Um you know I I would tell you you'll see full ramp up as we get into 2000.

Speaker Change: 27 and 28. Um, they certainly have indicated.

Speaker Change: You know, shipments by the end of this year, I don't believe those are going to be large shipments that my I, I think they'll be more symbolic that it's up and going more than anything else. And then a real ramp up should begin as you get into the second half of 26 and then 27. And as I said, by the time we get into early 28, you should have that full run rate um of 120 million tons.

Speaker Change: That's helpful. Thanks very much for the color.

Speaker Change: Yeah, you're welcome. And you know, don't don't lose sight of the fact as well that you know you've got you've got growth from valet as well. That's going to come a little sooner, that's obviously still a long haul trade and we still have growth on the box site side. Um, you know, at least through 26 and probably into 27, as well coming out of West Africa and and and going uh, going east.

Speaker Change: And your next question comes from the line of PO fratt with Alliance Global Partners Paul. Please go ahead.

Paul Fratt: Hey, good morning John. Um, comprehensive presentation is always, can you just talk about the the play between, you know, buying assets? You're talking about growth, you're clearly emphasizing growth, find modern tonnage.

Paul Fratt: And would you compare that to, you know, buying your own stock? Um, you know, you're in the market, you're probably not going to be able to get a huge discount to NAB. You're going to pay market prices for all intents and purposes. But conversely, you can go into the open market and buy your own stock at a pretty good discount to anybody. Can you just talk about

Paul Fratt: how you assess that that um, those different opportunities?

John Wobensmith: Sure, um, first is we're shipping company and we make money by buying ships and operating them and, and and, you know, using those cash flows to um, you know, continue to pay down that generate roic and most importantly, return dividends to shareholders. So I think it comes down to a question of, is it dividends or share BuyBacks. We have done a tremendous amount of work on share BuyBacks. We have not seen them work in shipping, um, in any sector, um, as a as a whole. Um, we do believe returning money to shareholders. In the form of dividends is a, uh, is a better way to go. And when I, you know, when I look at share buyback programs that have been done, you know, this year uh with the exception of 1 company, our our our our TSR is actually better than the companies that are that have been formed. Share buyback. So we, you know, we fundamentally believe.

Paul Fratt: Believe, the best way to uh, generate shareholder returns is through dividends.

Paul Fratt: Shipping side again, Poe we're shipping company. We we need to continue to uh to grow our Fleet and and cash flows to generate roic.

Paul Fratt: Good. So no change.

Paul Fratt: In your, you know, previous, you know, year historic opinion on it on stock BuyBacks. Can you just talk about the the reserve in the presentation? You know, you still have for the first quarter that full Reserve where you know, does it make sense at this point in time you're already 72% covered and you know called 12,000, you know? Clearly you're you're not going to

Paul Fratt: You know, generate a significant or a dividend in the first quarter, at least, the quarter, the you know, my calculation. So, why not Flex Down? The the Reserve right now? Instead of waiting, until next quarter,

Paul Fratt: When you report look I I think it's again. I think it's just about being consistent though. You know. We we give the guidance

Paul Fratt: Um, you know, a quarter forward and and I I I agree, I'm not sure what, what the actual formula will spit out, but we definitely had a soft first quarter across the industry. But again we have that Reserve that we can flex and and and use um to to smooth out quarterly dividends as we've done in the past and you know I can't say it enough we're we're committed to

Paul Fratt: The quarterly dividends.

Speaker Change: And the value strategy and I think it's working extremely well I I'm not sure if most companies will even have the ability to to do that in in the first quarter and and pay a dividend.

Speaker Change: Understood and and John you replied you know based on your history that you know the minimum level of the dividend should you know at least I heard 15 cents a quarter, is that something we should sort of?

Speaker Change: Build into expectations or is that did you not mean that?

Speaker Change: I well, I

Speaker Change: didn't address it though. I, I addressed that we had 45 cents.

Speaker Change: Of of per share of Reserve to. Um,

Speaker Change: You know, to to, to have as as optionality in terms of what what the board and and the management team put forward as the dividend, I I've certainly pointed to past history, um, but in, in terms of a decision that's been made yet. No, we we want to get through the first quarter. We want to see what the cash flows are. Um, we've obviously as well, this is as as I said earlier on the call it's a heavy dry docking year which is why we took out the capex, uh minus out of the out of the formula going forward. Um, because we have such a very, very strong balance sheet and we still have positive fundamentals on the market.

Speaker Change: Sounds good. Thanks for checking my questions, John.

Speaker Change: Thank you, po.

Speaker Change: I started no further question at this time, this includes your conference call for today. I thank you for participating and ask you to please disconnect your lines.

Speaker Change: Please wait the conference will begin shortly.