Q4 2024 Star Bulk Carriers Corp Earnings Call
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Speaker Change: Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Carriers conference call on the fourth quarter 2024 financial results.
Speaker Change: We have with us Mr. Petros Pappas, Chief Executive Officer, Mr. Hamish Norton, President.
Speaker Change: Mr. Simos Spyrou and Mr. Christos Begleris, Co-Chief Financial Officers, Mr. Nicos Rescos, Chief Operating Officer, and Mrs. Charis Plakantonaki, Chief Strategy Officer of the company.
Speaker Change: At this time, participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you would like to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced.
Speaker Change: I must advise you that this conference is being recorded today. We will now pass the floor to one of our speakers, Mr. Spyrou. Please go ahead, sir.
Chris Pappas, Simos Spyrou, Christos Begleris, Nicos Rescos, Charis Plakantonaki
Speaker Change: Thank you, Operator. I'm Simos Spyrou, Co-Chief Financial Officer of Starbuck Carriers, and I would like to welcome you to our conference call regarding our financial results for the fourth quarter of 2024.
Speaker Change: Before we begin, I kindly ask you to take a moment to read the Safe Harbor Statement on slide number 2 of our presentation.
In today's presentation, we will go through our Q4 results.
Speaker Change: Starbuck's investment proposition, actions taken to create value for our shareholders
Speaker Change: Cast evolution during the quarter, an update on the Equibalk integration, vessel operations, fleet update, the latest on the ESG front and our views on industry fundamentals, before opening up for questions.
Thank you.
Speaker Change: Let us now turn to slide number 3 of the presentation for a summary of our fourth quarter 2024 highlights.
and Christos Begleris. Thank you.
For the fourth quarter 2024, the company reported the following.
Speaker Change: Net income amounted to $42 million, with adjusted net income of $41 million, or $0.35 adjusted earnings per share.
Adjusted EBITDA was $104,000,000 for the quarter.
and Nicos Rescos. Thank you.
Speaker Change: On December 2024, we announced and amended our dividend policy alongside a new 100 million share repurchase program.
Speaker Change: Under this policy, the company may allocate up to 60% of excess cash flow towards dividends, with the remainder reserved for opportunistic share buybacks, growth initiatives, and fleet renewal.
Speaker Change: For the fourth quarter, the excess cash flow amounted to $17.6 million, and as per our new dividend policy, we declare the dividend per share of 9 cents.
Speaker Change: payable on or about March 18th 2025 and we repurchased 500,000 Starbucks shares for a total amount of 7.4 million on an average price of 14.83 dollars per share
Speaker Change: Overall, since December 2024 that we renewed our share repurchase program, we have bought back and subsequently cancelled 893,000.5 shares for a total cost of $13.5 million at an average price of $15.08.
As of today, the number of shares outstanding is 117,127,531.
Our pro forma total cash today stands at 452 million.
Meanwhile, our pro forma total debt stands at 1.3 billion.
Speaker Change: In February 2025, we received a credit committee approval for a Senior Secured Revolving Facility of an amount up to $50 million.
Speaker Change: Finally, we currently have 13 debt-free vessels, with an aggregate market value of $250 million, and we will have raised additional cash of approximately $28 million to be used for fleet renewal and general corporate purposes.
Speaker Change: On the top right of the page you will see our daily figures per vessel for the quarter.
Speaker Change: Our time charter equivalent rate was $16,129 per vessel per day.
Speaker Change: Therefore, our TCE, less OPEX and Cas-GNA is around $9,809 per vessel per day.
Speaker Change: Since the Iglibalk transaction was completed on April 9th, 2024 until today...
Speaker Change: The synergies achieved from the integration resulted to an amount approximately 22 million and we have reached the threshold of 50 million in annualized synergies almost 12 months before our original schedule.
Speaker Change: Slide 4 provides an overview of the company's capital allocation policy over the last three years and the various levers we have used to strengthen the company, increase the intrinsic value of our shares, and return capital to shareholders.
Speaker Change: Starbucks has been growing the platform through consecutive flip buyouts by issuing shares at or above NAV. In total, since 2021, we have taken actions of $2.6 billion to create value for our shareholders.
Speaker Change: On the bottom of the page we show our net debt evolution per vessel.
Speaker Change: Our average net debt per vessel has decreased from $12.9 million per vessel to $5.4 million per vessel, a reduction of more than 50%.
Speaker Change: As a result of this deleveraging process, our current net debt is covered by the fleet scrap value.
and Charis Plakantonaki.
Speaker Change: After including debt proceeds and repayments, CAPEX payments for ESD and ballast water treatment installations, and the third quarter dividend payment, we arrived at a cash balance of $441 million at the end of the fourth quarter.
Speaker Change: And I will now pass the floor to our Chief Operating Officer, Nicos Rescos, for an update on the Eagle Bulk integration and our operational performance.
Nicos Rescos: Thank you Simos. Slide 6 provides an update on the Eagle integration and synergies.
Nicos Rescos: We continue to realize savings on the operating expenses front, as we take in-house a crewing of the former Eagle Fleet, phasing out third-party managers, and having centralized procurement on all stores, spare parts, bankers, and lubricants.
Nicos Rescos: Oversight of technical management of the former Eagle fleet has been consolidating the company's headquarters in Athens, along with the implementation of uniform maintenance protocols and marine safety standards, reflected in our low general administrative expenses.
Nicos Rescos: For Q4, OPEX and G&A savings for the Eagle fleet stood at $1,685 per vessel per day.
Nicos Rescos: In addition, due to our scale in relation to the yards and service providers, we have reduced significantly the drive-no cost of the former Eagle Fleet, saving $4.4 million for the quarter.
Nicos Rescos: Interest expense savings have accumulated thanks to the refinancing of the former EGLE debt, which took place in Q2 of 2024.
Nicos Rescos: Cumulative cost synergies since closing stand at $22 million. Our Q4 2024 synergies stand at $12.6 million, implying the run rate of $15 million in annualized synergies that Simos mentioned before.
Nicos Rescos: Please turn to slide 7, where we will provide an operational update.
Nicos Rescos: Hopex for the fourth quarter stood at $5,056 and $5,123 for the full year of 2024.
Nicos Rescos: Net cash GNA expenses were $1,264 per day and $1,284 per day for the same period respectively.
Nicos Rescos: In addition, we continue to rate at the top amongst our listed peers in terms of ridership safety scores.
Nicos Rescos: Slide 8 provides a fleet update and some guidance around the future dry dock and the relevant total of hired days.
Nicos Rescos: On the bottom of the page we provide our expected driver expense schedule, which for 2025 is estimated at 68 million for the dry docking of 53 vessels.
Nicos Rescos: In total, we expect to have approximately 1,645 days for the same period.
Nicos Rescos: In order to take advantage of the current slower market, we have arranged a front-load dry dosage during Q1 2025.
Nicos Rescos: On the top right of the page, we have our CAPEX schedule illustrating our new building CAPEX and vessel energy efficiency upgrades.
Nicos Rescos: Based on our latest construction schedule our new building vessels are expected to be delivered in Q4 2025 and the first half of 2026.
Nicos Rescos: For these vessels, we have secured $130 million worth of debt refinancing against illegal installments.
Nicos Rescos: In line with EXI and CII regulations, we will continue investing in upgrading our fleet with the latest operational technologies available, aimed at improving our fuel consumption and reducing our environmental footprint.
Further enhancing the commercial attractiveness of the Stado fleet.
Nicos Rescos: Regarding our energy-saving devices retrofit program, we have completed 42 installations by the end of 2024. We plan to retrofit another 23 devices with ESDs during 2025.
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Nicos Rescos: On the vessel sales front, we will continue disposing non-eco-vessels opportunistically.
Nicos Rescos: In 2024, we sold 13 vessels for total gross profits of $233 million, reducing our average fleet age and improving overall fleet efficiency.
Nicos Rescos: During Q1, we agreed to sell Modules SL-β that is expected to be delivered to her new owners in Q2 2025.
Nicos Rescos: Following the rollover of the Eagle bulk, existing chartering contracts, we now have a total of 10 chartering vessels.
Nicos Rescos: who have five firmship building contracts with Kindal Shipyard for the construction of five Tamsul Akim buildings.
Nicos Rescos: Considering the aforementioned changes in our fleet mix, we operate one of the largest drywall fleets among U.S. and European living spheres, with 155 vessels on a fully delivered basis and an average age of 11.8 years.
Speaker Change: I will now pass the floor to our Chief Strategy Officer, Charis Plakantonaki, for an ESG update.
Charis Plakantonaki: Thank you, Niko. Please turn to slide 10, where we highlight our continued leadership on the ESG program. In 2024, Starbucks sustained its peak score in the Carbon Disclosure Project, indicating effective environmental management.
Charis Plakantonaki: We also obtained a B score on water management. A new requirement under the CPB, admitted for the first time.
Charis Plakantonaki: Starbuck has achieved the Sapphire Tier in the Protecting Blue Whales and Blue Skies Special Speed Reduction Program in Southern California and the San Francisco regions, meeting the highest requirements of over 85% of distance traveled at less than 10 knots.
Charis Plakantonaki: During Q4-24, the Starbuck fleet retained its average C++ score in the Greenhouse Gas Rating from ViroCity.
Charis Plakantonaki: We further improved the company's SustainAnalytics ESG Risk Mark Score to 18.4, indicating low risk and maintaining Starbucks' top position among U.S. listed peers.
Charis Plakantonaki: Starbuck was recognized in the Automated Mutual Assistance Vessel Rescue Award by the U.S. Coast Guard for rescue operations that saved 17 people in Boto.
during Q4 2014.
Charis Plakantonaki: We actively engaged with our stakeholders to closely monitor the IMO developments regarding global marketplace pleasures for the reduction of greenhouse gas emissions. We also explored optimal compliance strategies for the fuel-e-humanitarian regulation, which came into force on January 1, 2025.
Charis Plakantonaki: We continue our employee well-being and engagement programs, having increased the retention rate of our SOAR employees, as well as our corporate social responsibility initiatives.
Charis Plakantonaki: On the technology front, we are progressing with the upgrade of digital infrastructure and cybersecurity systems on board the Starbucks fleet.
Charis Plakantonaki: In December 24, the company received the Deal of the Year award at the Lois Leeds Recipient Awards for accomplishing the merger with Equifold.
Charis Plakantonaki: I will now pass the floor to our CEO, Petros Pappas, for a market update and his closing remarks.
Thank you, Charis.
Speaker Change: Please turn to slide 11 for a brief update of supply.
Thank you.
Speaker Change: During 2024, a total of 33.8 million deadweight was delivered and 3.8 million deadweight was sent to demolition for a net flip growth of 30 million deadweight or 3% year on year.
Speaker Change: The new building order book increased over the last two years but still stands at a relatively low level of ten and a half percent of the fleet.
Speaker Change: Contracting decreased to 47.3 million deadweight during 2024 due to limited available shipyard capacity up to 2027, high shipbuilding costs, and future green propulsion uncertainty.
Speaker Change: Vessels above 20 and 15 years of age stand at 9.8% and 24.9% of the fleet.
Speaker Change: while scrap prices have stabilized at relatively elevated levels and along with high dry-dough costs should induce demolition of over-aged and energy-inefficient tunnels during seasonal downturns.
Speaker Change: Moreover, an increasing number of vessels delivered during the 2009-2011 shipbuilding boom will go through their third special survey during 2025.
Speaker Change: and 2026 and helped trim effective capacity by approximately 0.5% per annum.
Speaker Change: The average steaming speed of the fleet has decreased to a new low of 10.8 knots as reduced earnings, high bunker costs, and stricter environmental regulations provide a strong incentive to slow steam.
Speaker Change: Global port congestion has fully normalized during the second half of 2024, following a strong reduction that gradually inflated supply by approximately 6% over the last two years.
Speaker Change: Congestion presently stands slightly above last year's levels and is expected to follow seasonal trends.
Thank you. Thank you. Thank you.
Speaker Change: Focusing on canal inefficiencies, Panama's transit of dry-buck vessels have almost fully recovered, while the recovery of Red Sea crossings is expected to take time as the ceasefire agreement looks fragile and will mainly affect smaller vessel sizes.
as a result of the above trends.
Speaker Change: while effective supply growth might drop below 2% per annum after adjusting for changes in speed, congestion and dry dock off-hires.
Speaker Change: Let us now turn to slide 12 for a brief update of demands.
Speaker Change: According to Clarkson's during 2024 total dry bulk trade expanded by 3.3% in tons and 5% in ton miles supported by record-high coal iron ore and minor bulk exports
Speaker Change: During the first half of the year, inflated ton-mile growth, but a strong correction in grain trade since July and weaker iron ore trade gradually reversed the positive effect and led to a weaker fourth quarter.
Speaker Change: Despite weak economic performance and a struggling property sector, China's total drive-back imports increased by 19.5% over the last two years, supported by a post-COVID recovery and strength in infrastructure, manufacturing and exports.
Speaker Change: Imports to the rest of the world experienced a strong recovery during the last five quarters as lower commodity prices and easing monetary policy helped boost demand for raw materials.
Speaker Change: During 2025, dry bulk trade is projected to increase by 0.4% in tons and 0.9% in ton-miles.
with the IMF forecasting global GDP growth at 3.3%.
Speaker Change: China's GDP is projected to slow down to 4.6% from 4.8% in 2024, while India's GDP should remain stable at 6.5%.
Trump's administration's pro-tariff policy is expected to create headwings.
Speaker Change: for global trade, but the direct impact on dry bulk is relatively small and difficult to forecast.
Speaker Change: Chinese dry bulk imports are expected to slow down during 2025, as domestic production of iron ore, coal, and grains increased throughout 2024, while stocks stand at high levels.
Speaker Change: Having said that, Chinese authorities announced strong stimulus measures in September with a target to boost private consumption, help stabilize the property market, and minimize the negative effect of a potential trade war.
Speaker Change: Crude steel production in China declined by 1.9% during 2024, but during the fourth quarter showed signs of stabilization and increased by 6.1% year over year.
Speaker Change: Crude steel production in the rest of the world increased 2.1% during 2024, driven by strong growth in India and Turkey.
Speaker Change: Iron ore trade will most likely underperform during the first half of 2025, as the La Nina wet weather conditions will lead to a return of seasonal disruptions for exports at a time that Chinese stockpiles and domestic production have increased.
Speaker Change: Nevertheless, new iron ore, Atlantic mines of high quality, will come online towards the end of 2025, gradually substituting low-quality Chinese domestic production and Indian exports positively impacting cape-sized tonnemels.
Speaker Change: Coal trade expanded by 6.5% during 2024 and is projected to contract by 2.7% during 2025. Global focus on energy security during the last years inflated coal trade volumes, but growth has come primarily from short-haul Indonesian exports.
Speaker Change: Chinese coal imports increased by 14.5% in 2024, following higher thermal electricity production and the country's strategic decision to lift stockpiles.
Speaker Change: Indian coal imports were stable during most of 2024, but suffered a strong pullback.
during the fourth quarter.
Speaker Change: Domestic production of coal in China and India grew at a higher pace than consumption during the second half, being a negative indicator for coal imports during the first half of 2025.
Speaker Change: Having said that, increasingly competitive international coal prices may incentivize Chinese and Indian coal imports during the next few years, while strong demand from Southeast Asian economies will continue to provide support.
Speaker Change: Grains trade expanded by 2.9% during 2024 and is projected to expand by 2.2% during 2025.
Speaker Change: Grain exports contracted by 2.5% during the second half of 2024.
Speaker Change: driven by a strong reduction of Brazil corn exports to China and weakness in Australian and Russian wheat exports with a strong negative effect on tonnemiles of smaller sizes during the fourth quarter.
Speaker Change: U.S. exports recovered during the last quarter, while the Brazilian soybean season is projected to be strong due to rising uncertainty on U.S.-China geopolitics.
Speaker Change: creating an incentive to import from Latin America during the second quarter of 2025. Furthermore, a potential resolution of the war in Ukraine.
Speaker Change: is viewed as a tailwind for grain trade, inflating black sea demand for middle-sized vessels.
Speaker Change: Mineral bulk trade expanded by 4.7% during 2024 and is projected to expand by 2% during 2025. Mineral bulk trade has the highest correlation to global GDP growth and is supported by improving global macroeconomic fundamentals.
Speaker Change: by importing nations, while bauxite exports out of West Africa increased by 13% during 2024 and should continue to generate strong tonnemiles for Cape-sized vessels.
Speaker Change: As a final comment, we expect a volatile market in 2025, as the aggressive approach of the new U.S. administration implies changes in international trade patterns
amid the imposition of tariffs and subsequent retaliation acts.
Speaker Change: We nevertheless remain cautiously optimistic about the medium-term outlook for the dry bulb market given the favorable supply picture, stricter environmental regulations, and the recent steps by the Chinese government to stimulate the economy.
Speaker Change: In a period of increased geopolitical uncertainty, we remain focused on actively managing our diverse scrubber-fitted fleet to take advantage of emerging market opportunities and to continue creating value for our shareholders.
and Nicos Rescos. Thank you. Thank you.
Speaker Change: Without taking any more of your time, I will now pass the floor over to the operator to answer any questions you may have.
Speaker Change: Thank you. We will now be conducting a question and answer session.
Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: The confirmation tone will indicate your line is in the question key.
Speaker Change: You may press star 2 if you'd like to remove your questions from the queue. For participants, you can speak for equipment. It may be necessary to pick up your handset before pressing the star key. One moment please while we call for questions.
Thank you.
Speaker Change: Thank you. Our first question is from Chris Robertson with Deutsche Bank. Please proceed with your question.
Chris Robertson: Hey, good morning everybody and thank you for taking my questions. This might be a question for Nicos. Just going back to the cost synergies and savings from the Eagle Bulk merger, you guys mentioned you were able to pull forward some of the savings ahead of schedule. So I'm just wondering here how much runway you think we have left in terms of
Chris Robertson: Future savings, have we reached kind of a floor for OPEX per day from your perspective and are there any inflationary counter forces that might you know be a counterbalance to that?
Chris Robertson: I will reserve any comments to what we expect, but we think it's going to be significant. And we're still aligning operating expenses as we're restructuring the entire way things were done in the past. So I think we are not there yet to realizing the full scale of the efficiencies.
Chris Robertson: and Chris Hamish Norton. The cost savings are easy to prove, but there are probably also some revenue synergies which are very hard to prove out, but we think they're there.
Yeah, especially on the supremacist side.
Speaker Change: and many more. I hope you enjoyed this video. Thank you for watching. I'll see you in the next one.
Speaker Change: Turning to the market for a moment, you guys talked a little bit about
Speaker Change: a potential trade war and how it could impact the grain trade here, but can you remind us what is the ton-mile advantage, let's say, of Brazilian soybeans versus U.S.?
Speaker Change: And what kind of impact that would have if the Chinese diversify and go more heavily into Brazilian crop.
Speaker Change: Plus the fact that I think that South American ports are probably not as efficient as U.S. ports, so that might create more congestion.
Speaker Change: Okay, got it. And the last question for me, just as it relates to the Fleet Renewal Program, and you guys mentioned divesting the non-eco vessels over time, there's quite a number of CAMS or MAX vessels that kind of fit that age profile, so just any comments around how the the S&P market, you know, the appetite for some of those types of vessels is in the current market?
Well, um...
Speaker Change: Prices have fallen, especially more on older vessels than on younger vessels.
Speaker Change: We expect that the market will improve in the next several months and that it will give us an opportunity to continue to sell older and perhaps less efficient vessels as time goes by.
Speaker Change: All right, great. Thank you for taking my questions. I'll turn it over.
Thank you.
Speaker Change: Thank you. Our next question is from Omar Nocta with Jeffreys. Please proceed with your question.
Thank you. Hey guys, good afternoon. Good morning.
Omar Nocta: Just a couple of questions from me, more just on sort of the capital allocation or the updated policy on that. Maybe just first, and this is very simple, what would you say is kind of, for us, the best way to calculate or reconcile the definition of excess cash? Should we just assume it's basically operating cash flow, lesser debt payments, and scheduled dry docks? Is it as simple as that?
Christos: Hi Omar, this is Christos. That's actually pretty accurate. So it's operating cash flow, less our debt principal repayments.
Christos: less dry dock expenses for a specific quarter of course subject to the 2.1 million cash vessel that we have for each vessel that we have in our fleet.
Christos: So that should essentially generate what is available for dividends as well as the 40% that we have announced that is for other general corporate purposes.
Thank you. Thank you.
Okay.
Thank you
Christos: And then just maybe kind of following up on that part, you mentioned the 40%. So, you know, clearly the nine cent dividend is, you know, it seems to be that 60% of excess cash. Share buybacks look like they, in January, lined up with that 40% remainder. I guess maybe the first question on that is, is that by design? And then...
Christos: The other question is, in the past you had earmarked dividends with 100% of your excess cash. Now we've shifted to 60%.
Christos: Back prior to the latest update to the policy, ship sales funded buybacks, that the valuation made sense.
Speaker Change: Kind of, when you think about it going forward, is the plan to keep the buybacks contained within that 40% or up to 100% presumably of ongoing cash, or do vessel sales continue to be a source of buyback if that opportunity makes sense?
Well, the answer is, we may use, you know...
40% or even more of cash to buy back shares.
Speaker Change: We're retaining the flexibility, frankly, to use the cash for the best, you know, use from the shareholder's point of view, which sometimes will be share buybacks and sometimes maybe keeping the cash on hand for possible better opportunities later.
Speaker Change: Basically what we're saying is that we're not going to pay out more than 60% of cash flow as a dividend.
Speaker Change: And Omar, just to give an example, the excess cash that we announced for the fourth quarter was $17.6 million.
The 60% which is the maximum distribution available for dividend
corresponds to the $0.09 per share dividend that we announced.
The remaining, this is about 10.2 million.
Speaker Change: The remaining 7.4 million has been already used to buy, within January, the 500,000 Starbucks shares out of this excess cash, as we said.
Speaker Change: and an additional 393,000 shares which were financed by the vessel sales.
Speaker Change: So, it's a combination of the excess cash flow that we described in the Dibouten formula and the vessel sale proceeds.
Speaker Change: Okay, thank you. That's clear. So we have definitely, you know, capital returns are not contained within that excess cash and investment sales can fund it. Well, good. Well, that's it for me. I'll turn it over.
Speaker Change: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: Our next question is from Clement Mullins with Value Investors. Please proceed with your question.
Good afternoon. Thank you for taking my questions.
Speaker Change: Most has already been covered, but I wanted to ask about the 7 vessels time-chartered in under long-term agreements.
Thank you.
Speaker Change: The first part of the question I can answer, yes, there are fixed levels. They're chartered in at fixed levels for the initial seven-year duration and there are a couple of optional years.
but the fixed duration is at the same levels, yes.
Speaker Change: And on the second part of your question, this is not only the chartering expense for these seven vessels, we have in addition chartering...
Speaker Change: by the end of June, these three vessels. So, this chartering expense that we have in the P&L includes both the long-term chartering vessels that we have in...
You've mentioned the seven vessels, plus the additional shorter durations.
Speaker Change: Makes sense. And could you provide some color on what portion of the 26 million was actually attributable to the long-term charter? About 50 percent.
Speaker Change: All right, that's very helpful. I'll turn it over. Thank you for taking my questions.
Thank you.
Speaker Change: Thank you. If there are no further questions at this time, I'd like to hand the floor back over to...
Mr. Pappas, for any closing remarks.
Speaker Change: Thank you, operator. No further closing remarks. Thank you for listening and reading.
Thank you for watching!
Speaker Change: This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.