Q4 2024 Golden Ocean Group Ltd Earnings Call
Good day and thank you for standing by. Welcome to the Golden Ocean Group Limited Q4 2024 earnings conference call and webcast.
At this time, all participants will be in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised.
Speaker Change: To withdraw your question, please press star 1 and 1 again. Please note that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr Peder Simonsen, Interim CEO and CFO. Please go ahead.
Speaker Change: Good afternoon and welcome to the GoldNotion Q4 2024 earnings release.
Speaker Change: My name is Peder Simonsen and I am the Interim CEO and CFO of GoldNotion.
Today I will present our Q4 numbers and Forward Outlook.
Speaker Change: In the fourth quarter of 2024, we have the following main highlights.
Speaker Change: Our adjusted EBTA in the fourth quarter of 2024 ended at $69.9 million compared to $124.4 million in the third quarter.
Speaker Change: Our full year 2024 net profit was $223.2 million, up from an annual result of $112.3 million in 2023.
Speaker Change: Our TCE rates were about $24,700 per day for cape sizes and about $14,800 per day for our panamax vessels.
for the quarter.
Speaker Change: We have during Q4 recorded dry docking costs of $34.3 million relating to 13 vessels.
compared to 9.7 million in Q3 relating to five vessels.
Speaker Change: We have declared a purchase option under our lease agreement with SFL Corp for 8 Cape South vessels for an aggregate sum of 112 million.
Speaker Change: The acquisition will be part-financed by a two-year $90 million non-amortizing revolving credit facility and will reduce our cape-sized cash break-even by approximately $1,000 per day.
Speaker Change: For Q1, we have secured a net TCE of about 15,100 per day for 77% of Cape Size days, and about 9,900 per day for 81% of our Panamax days.
Speaker Change: For Q2, we have locked in a net TCE of about 20,900 per day for 16% of our capesized days and about 14,200 per day for 10% of our Panamax days.
Speaker Change: Finally, we are pleased to declare a dividend of $0.15 per share for the fourth quarter of 2024.
Let's look a little deeper into the numbers.
Speaker Change: Our total fleetwide TCE rate was 20,800 in Q4, down from 23,700 in Q3.
Speaker Change: We are in a period with frequent dry docks. From Q4 and including Q2 2025, we will have dry docks close to 30 of our Cape Scythe and Newcastle maxis.
Speaker Change: We had 13 ships dry docked in Q4 compared to 5 ships in Q3, contributing to approximately 364 days of off-wire in Q4 versus 253 days in Q3.
Speaker Change: Nine ships are scheduled to dry dock in Q1 2025, with four vessels completed as of today.
Speaker Change: And further seven ships are expected to dry dock in Q2 2025.
Speaker Change: We recorded net revenues of $174.9 million, down from $206.6 million in Q3.
Speaker Change: Our OPEX recorded 95.6 million versus 69.4 million, a 26 million increase.
Speaker Change: Running expenses ended at $59.7 million, $4.8 million up from Q3, mainly due to brunkers related to dry dock and expense balanced by what treatment system upgrades.
Speaker Change: We expensed all our dry docking costs and we saw an increase in the OPEX result of $24.6 million quarter on quarter relating to dry docking.
Speaker Change: OPEX classified from charter hire was 2 million, 0.4 million down from Q3.
Speaker Change: Our general and administrative expenses ended at $6.4 million, up from $5.3 million in Q3.
$137 per day up from Q3.
Speaker Change: On our charter hire expense, we recorded $4.2 million versus $6.4 million in Q3, with a lower number of vessel days for the trading portfolio and profit-sharing expense accounting for the difference.
Speaker Change: Our net financial expense ended at $23.3 million versus $25.5 million in Q3, a reduction mainly due to lower software rates as well as lower average debt in the quarter.
Speaker Change: On derivatives and other financial income, we recorded a gain of 13.6 million compared to a loss of 12 million in Q3.
Speaker Change: On derivatives, we recorded a gain of 11.8 million versus a loss of 11 million in Q3.
Speaker Change: For results from investments in associates, we recorded a gain of 1.6 million compared to 0.7 million loss in Q3 relating to investments in Swiss Marine, TFG and UFC.
Speaker Change: and a net profit of $39,000,000 or $0.20 per share and an adjusted net profit of $12,700,000 or $0.06 and a dividend of $0.15 declared for the quarter.
Speaker Change: Looking at our cash flow, we recorded cash flow from operations of $71.7 million down from $100.8 million in Q3.
Speaker Change: Cash flow used in financings of 91.5 million mainly comprising of net proceeds from new financings and new building drawdowns of 26.9 million
31.9 million in scheduled debt and lease repayments
19 million in prepayments of debt relating to vessels sold
5.7 million in debt fees paid and share repurchases
Speaker Change: and dividend payment of $60 million relating to the Q3 results.
Total net increase in cash of 14.1 million.
Looking at their balance sheets.
Speaker Change: In addition, we have 150 million of undrawn available credit facilities at quarter end.
Speaker Change: Debt and finance lease liabilities total $1.4 billion at end of Q4.
down by approximately 23 million quarter-on-quarter.
Speaker Change: and book equity of 1.9 billion and a ratio of equity to total assets of approximately 56 percent.
Peder Simonsen, Peder Simonsen, Peder Simonsen, Peder Simonsen
Speaker Change: Golden Ocean has in Q4 started and will in the first half of 2025 continue an intensive dry docking period for its capesized fleet. It's close to half of the fleet completing special surveys over a period of nine months.
Speaker Change: We believe that the timing of the dry docks is favorable ahead of a seasonal stronger second half of 2025 and onwards.
Speaker Change: Gold Notion maintains the position as the largest listed owner in the Cape size and Newcastle Max segment.
Speaker Change: Caves in New Gustlum Axis represent over 80% of Golden Ocean's dead weight tons and thereby earnings capacity.
Speaker Change: And we are the only listed driveable company offering CAPEX brochure and at the same time significant market capitalization and trading liquidity.
Speaker Change: In Q4, we saw cargo volumes start off healthy, but volumes fell by end of November ahead of the seasonally weaker winter season.
Speaker Change: Brazilian R&R volumes were down 13% quarter-on-quarter, while annual exports volumes were up 3%.
Speaker Change: Fowler reported record exports in the upper end of guidance range while the Australian exports continued in strong volumes but slightly down quarter-on- quarter
Speaker Change: We saw Vale reduce production after reaching their annual targets and further we've seen bad weather impacting mining and port operations, both in Brazil and Australia.
Speaker Change: In its high season the guinea bauxite volumes have grown 14% year-on-year and have during Q4 averaged over 13.5 million per month run rate exports up from average 10.5 million tons per month in Q3.
Speaker Change: Coal volumes continued in healthy levels in Q4, but whereas Colombian coal export increased one mile in the first half of 2024.
Speaker Change: Thank you for all reserved volumes being replaced by Australia and Indonesia.
Speaker Change: China is providing steady demand for most cargo types representing 74% of iron ore volumes and 85% of bauxite volumes for 2024. Further supplemented by other Southeast Asian economies.
Speaker Change: As a comment to the various tariffs and taxes being announced.
Speaker Change: U.S. exports are largely limited to grain and coal volumes, which in an adverse scenario we expect will be replaced by other sources.
Speaker Change: As an example, of the 543 million tons of coal that China imported last year, only 12.2 million came from the U.S.
Iron ore and bauxite are not U.S. related cargoes.
Speaker Change: However, an ongoing trade war will be negative for the sentiment, and over time impact dry bought the bond.
Speaker Change: This is mainly due to demand for drivable commodities being higher in emerging economies.
who have had higher than average growth rates.
Speaker Change: Although the growth in emerging economies driven by China and India has come down from historical highs, we expect the trend to continue.
Speaker Change: In addition, because emerging economies are located away from exporting regions
Speaker Change: The tonne-mile effect of this growth will add another boost to shipping demand. This is the case for most major dry bulk commodities.
Speaker Change: Latest growth projections for 2025 and 2026 from IMF forecast an annual GDP growth of 3.3% globally, while China and India are expected to grow 4.5% and 6.5% respectively.
Speaker Change: Brazilian miners have delivered a full year export of 390 million tons which is in the upper end of the full year guiding.
Speaker Change: Both Vala and Australian miners are continuing to guide positively on production targets for 2025, with new expansion projects also emerging in both basins.
Speaker Change: Australia and Brazil continue to be the largest exporters of iron ore.
Speaker Change: Brazil, with around 3 times the sailing distance to Asia compared to Australia, is the most important tonne-mile demand contributor to the Cape Size market.
Speaker Change: Chinese steel production has remained flat quarter-on-quarter, but is up 6% compared to Q4 2023.
Speaker Change: Sentiment among steel mills is more positive and Chinese authorities have reiterated their commitment to stimulate the economy if needed. But analysts claim that new stimulus news has been postponed due to the ongoing tariff discussions.
Speaker Change: China continued its attempt to decarbonize its heavy industry, including steel production.
Speaker Change: By using higher quality commodities, they are able to reduce emissions per tonne steel produced.
Speaker Change: Increased demand for high-grade R&R and coal is highly supported to tonnemile with the largest new deposits of high-grade R&R being found in Brazil and Guinea.
Speaker Change: Outside China and India, crude steel production has started recovering, but only by a conservative 1.5% quarter-on-quarter, as weak demand from construction and high interest rates is limiting growth.
Speaker Change: However, as the recovery is coming closer, it presents a significant upside to potential steel demand.
Speaker Change: In Q4 this year, we will see the Simondul wine in Guinea, West Africa, commence exports.
Speaker Change: Simundu high-grade iron ore mine is expected to ramp up its production over two years adding an expected 120 million tons export capacity annually
Speaker Change: In addition, new expansion projects are underway in Brazil, with an additional capacity of approximately 50 millitons coming on stream during 2025 and 2026.
Speaker Change: Iron ore prices have been volatile but stayed at historically healthy levels despite negative macro backdrop.
Speaker Change: Iron ore is currently trading at around $107 per ton which compares very favorably to the break-even rate for the major miners of approximately $40 per ton delivered in Asia
Speaker Change: At current iron ore prices, most producers are profitable, but it's expected that new volumes will put pressure on prices.
Speaker Change: The cost curve among the key producers shows that Australian-Brazilian ore is highly resilient at lower prices and outcompete more expensive producers, including Chinese domestic production.
Speaker Change: If we conservatively assume that the Simundu volumes will replace Australian volumes, it will triple the sailing distance to Asia, boosting tonne-mile demand for cape sizes significantly.
Speaker Change: Guinea in West Africa has become a major exporter and holds the vast deposits of high-grade bauxite and iron ore
Speaker Change: The Guinea government has, together with mining majors and large Chinese industrial conglomerates, made significant investments in infrastructure and mine development.
Speaker Change: With a majority of demand being located in Southeast Asia, this provides steady growth in tonne-mile for the largest vessels.
Speaker Change: Guinnean bauxite exports over the last five years has grown with an average composite growth rate of 22 percent
Speaker Change: Bauxite, which is used in production of aluminum, is feeding the booming EV industry as well as other sectors in China.
Speaker Change: The guinean bauxite replaces volumes from Indonesia, which, in addition to significant growth in traded volumes and tonnemile, represents a switch to cape sizes from smaller vessel segments.
The average monthly export volumes in 2024 were 12 million.
Speaker Change: While Q1 to date, in high season, exports have exceeded 15.5 million tonnes per month.
Speaker Change: Following infrastructure improvements, analysts are expecting an annual export of 155 million tons.
in 2025.
representing a five to ten percent year-on-year growth.
Speaker Change: As bauxite exports currently contributing to about 13 to 15 percent of tonne mile for capesized vessels.
Speaker Change: This would represent the demand growth covering most, if not all, of the scheduled deliveries of capsizes in 2025.
Speaker Change: The order book development has followed last year's pattern, with container ships filling up most of the capacity on shipyards able to build Newcastle Maxxis and Capesides vessels.
Speaker Change: Despite elevated new building prices, the largest dry bulk vessels remain unfavoured by the shipyards as they provide for lower profit margins compared to other shipping segments.
In addition, limited shipyard capacity leads to long-dated delivery dates.
Speaker Change: currently quoting 2028 as the earliest delivery for any meaningful capacity volume.
Speaker Change: The global capesize in Newcastle Maxfleet is entering into a period of frequent dry dockings. An analyst estimates an additional 0.5-1% in fleet capacity reduction during both 2025 and 2026 compared to 2024.
Speaker Change: We are in a period with increasing competitive advantages for modern vessels, both in terms of fuel efficiency and carrying capacity, but also increasing requirements to safety, crew welfare and emissions.
Speaker Change: The large-sized Dreadlock fleet is aging, and over half of the Cape-sized fleet will be above 15 years of age in 2028, in a period where environmental regulations are tightening.
Speaker Change: The fleet continues to operate at record efficiency, and although we have seen some seasonal disruptions, it has not reduced the operating fleet capacity meaningfully.
Speaker Change: For dry bulk, full verminization of transits through the Suez Canal will have a marginal negative effect.
Speaker Change: It will provide some reduction in ton miles but will also open for further transatlantic trades.
Speaker Change: The company has over the last year outperformed indexes by close to $4,500 per day on the full fleet.
Speaker Change: We continue to push for lower costs, retaining conservative but meaningful leverage, and an industry-low cash break-even rate.
Speaker Change: The recently announced refinancing of leases for 8 vessels with SFL Corp. will reduce the cash break-even rate for the Cape Fleet with $1000 per day.
Speaker Change: As mentioned, we are using the weakness in the market to significantly upgrade the vessels.
Speaker Change: This will provide us with a highly competitive fleet ahead of the seasonally strong second half and onwards.
Speaker Change: We continue our strategy to reward our shareholders through dividends as well as previously announced share buybacks.
Speaker Change: With ongoing geopolitical uncertainty, we continue to remain fundamentally positive on the market outlook and have positioned ourselves thereafter.
Speaker Change: On the left-hand side, we illustrate the significant cash flow potential of Golden Ocean as we move into the stronger market sentiment.
Speaker Change: I will now pass the word back to the operator and welcome any questions.
Thank you.
Speaker Change: Thank you. As a reminder to ask a question please press star 1 and 1 on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question please press star 1 and 1 again. Once again, please press star 1 and 1 and wait for your name to be announced. To withdraw your question please press star 1 and 1 again. Thank you. We are now going to proceed with our first question.
Speaker Change: The questions come from the line of Omar Nocta from Jeffreys. Please answer your question, your line is opened.
Omar Nocta: Hi Simon, thank you. Good update as usual and kind of giving a good overview of the market and how things look big picture.
Speaker Change: Just a couple of questions as a follow-up to that, you know, maybe
Speaker Change: And I know it's a little too short term, but, you know, what do you make of what we've been seeing here, you know, this week in the cake market?
specifically.
Speaker Change: I know it's still early days and rates haven't really run away but there seems to be a good amount of momentum. Sentiment looks like it's improving. You can see that obviously in the futures and whatnot. I just want to get your sense of what do you think is behind this latest move we've been seeing in freight rates?
Speaker Change: Hi Omar, thanks for the question. I think what we see now is
Speaker Change: A little bit of a rebound in sentiment, which is based on, you know,
Speaker Change: In addition, we've seen, due to the boost in Panamax rates, we've seen some of the coal volumes move into the Capes as well, which has created a bit of a squeeze in the Pacific that you see now with rates moving.
Speaker Change: We're still not sort of seeing a lot of volume increases in Brazil, it's still, you know, at fairly muted levels, but I think that's what's driving the sentiment now. But it does show that...
Speaker Change: that the market is very responsive, and we are sort of in the...
Speaker Change: in the end of maybe the seasonal downturn, and it remains to be seen how long we will need to wait before it sort of firmly moves upwards.
Speaker Change: I think we, you know, it depends very much on which sort of, is it the 5-year, 10-year or 15-year dry dock. I think, in general, what we are doing is we're putting a lot of, you know, efforts into upgrading the vessels with the newest and best paint.
Speaker Change: making them sort of fully maintained, we are also investing additional money into them.
I think the sort of the.
Speaker Change: The average that you saw in this quarter was maybe slightly higher than what we would see normally going forward because we have
had quite a few of the 15-year-old dry dockings.
in this quarter.
Speaker Change: But I think due to the regulations that we have seen come in and the requirements to the quality of the vessels moving into the dry box space as well, we have seen that costs have moved up and expenses have moved up.
Speaker Change: in addition to sort of the value of having a high-performing vessel commercially.
Speaker Change: Got it. Okay, that's very helpful. Thank you. I'll pass it back.
Thanks very much.
We are now going to proceed with our next question.
Craig Lewis: The questions come from the line of Craig Lewis from BTIG. Please answer your question. Hey, thanks and good afternoon and thanks for taking my question.
Speaker Change: You know, I was hoping you could talk a little bit about
Speaker Change: opportunities you're seeing on the sales and purchase side, obviously the purchase options you exercised were in the money. So I guess that was, I mean, I guess I would think that was kind of a no-brainer just given.
Speaker Change: the pricing of that. But I guess, like, as you think about, you know, positioning the fleet.
Speaker Change: you know, over the next one to two years, you know, how are you thinking about opportunities maybe to add tonnage or following this, you know, eight vessel acquisition thinking about, you know, maybe
maybe even selling some vessels now.
Peder Simonsen, Peder Simonsen, Peder Simonsen
Speaker Change: Hi Greg, I think, you know, from where we are in the cycle at the moment, we are maybe more sellers than buyers, from where the sort of valuations are.
Speaker Change: We want to maintain as much capacity as we can in the Cape and Newcastle MAG space, which is sort of our strategic area.
Speaker Change: which made them sort of very, very highly likely that we would declare the options. And so, so that, that...
Speaker Change: So we won't be sort of seeing those for more of those So I think in in general in the S&P side. I think we are You know generally more sellers and buyers at the moment We are
Speaker Change: more keen on growing in the Cape side space than the Panamac space over time.
Speaker Change: and other than that we will sort of continue to be optimistic and you know it's
Speaker Change: It's not been that long since we sold some vessels, but if the opportunity comes up we may end up buying ships as well. I'd say we're always through.
Maria
You know, light-footed and nimble here in the building.
Speaker Change: yeah thank you for that and then just you know it's funny how you know the cycles kind of kind of play out everyone's a little bit different um you know I guess
Speaker Change: In the past, other companies have been a little bit more active in M&A.
Speaker Change: You know, I guess as you think about that, and you know, people always ask about the potential for
Speaker Change: I mean, I guess what I would think is, as you look out over the next 12 months, where we are in the cycle, do you think we could see a pickup in M&A, or do you think it's kind of business as usual? And that can be private and public fleets.
Speaker Change: Yeah, no, I think, you know, M&A is a wide term, I think, you know,
transactions where we use the share as a collateral.
So it's...
very much possible, if the pricing is right, and obviously...
There's different
Speaker Change: It is the assets that everybody is after and they are pretty generic.
Speaker Change: combination of ownership and fleet, you know, composition in terms of age and type. That's very much possible.
Thank you.
Super helpful. Thanks for the time.
Thanks, Greg.
Speaker Change: As a reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, it's star 1 and 1 for any question.
We are now going to proceed with our next question.
Clement Mullins: The questions come from the land of Clement Mullins from Value Investors Edge. Please ask your question.
Clement Mullins: Good afternoon. Thank you for taking my questions and thank you for this presentation.
Speaker Change: I wanted to ask about recent news flow around the potential imposition of port fees on Chinese-built vessels docking in the U.S.
Speaker Change: It remains to be seen whether those will ultimately come into force, but if so, what impact do you foresee on the overall market? To what extent do you expect those to impact trading patterns?
you know, view on it. It seems that the...
soybean side and also on coal.
These are volumes that are...
You know possible to replace from other sources if
Speaker Change: if it becomes, you know, economically challenging to lift these volumes from the U.S. due to the increased cost on freight.
So I think...
Speaker Change: That falls in line with a lot of other elements that we see in the drybox phase where there are things happening in one region which then reroutes trading patterns from one place to another.
and that's very much, you know, possible here in the
Speaker Change: if this suggestion comes into play. But I do also think that it seems that it will hurt, as it looks, more the US consumer than it will China, which it seems to be.
Speaker Change: They will be passed on to the end user at the end of the day and will be sort of included in the freight calculations when we fix our ships. So it will not be...
Speaker Change: We do not see this as a massive change to the shipping outlook for dry bulk.
Speaker Change: Yeah, makes sense. I was just wondering whether you expected that to have an effect on the let's say Korean or Japanese chips taking more of a prominent role in routes towards the U.S. But time will tell, I guess.
So, thank you. I'll turn it over.
Okay, thank you. Sorry, go ahead.
Speaker Change: No, no, I was just saying that, you know, if it comes...
Speaker Change: through and it will come into effect as it is presented then I guess more of the ships in the Atlantic Basin will be Korean and Japanese ships but it is still very much a theoretical exercise.
Speaker Change: Agreed. Makes sense. I'll turn it over. Thank you for taking my questions.
Thank you.
Speaker Change: Once again as a final reminder to ask a question please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 and 1 again. Thank you.
Speaker Change: We have no further questions at this time. I will now hand back to you for any closing remarks.
Speaker Change: Thank you very much. Thank you for listening in and thank you for the questions and have a continued great week.
Speaker Change: This concludes today's conference call. Thank you all for participating. You may now disconnect your line. Thank you.