Q3 2025 Genco Shipping & Trading Ltd Earnings Call

Speaker #2: Good morning ladies and gentlemen , and welcome to the Genco Shipping and Trading Limited . Third quarter 2020 Earnings Conference Call and Presentation .

Speaker #2: Before we begin , please note that there will be a slight presentation accompanying today's conference call . That presentation can be obtained from Genco's website at .

Speaker #2: The Inform Everyone today's conference is being recorded and is now being webcast at the company's website . We will conduct a question and answer session after the opening remarks .

Speaker #2: Instructions will follow at that time . A webcast replay will also be available via the link provided in today's press release , as well as the company's website .

Speaker #2: At this time . I will now turn the conference over to the company . Please go ahead .

Speaker #3: Good morning . Before we begin our presentation , I note that in this conference call , we will be making certain forward looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 .

Speaker #3: Such forward looking statements use words such as anticipate , budget , estimate , expect , project , intend , plan , believe . In other words , in terms of similar meaning in connection with the discussion of potential future events , circumstances , or future operating or financial performance .

Speaker #3: These forward looking statements are based on management's current expectations and observations . For a discussion of factors that could cause results to differ .

Speaker #3: 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 10-K for the year ended December 31st , 2024 , and the company's reports on Form 10-q and form 8-K subsequently filed with the SEC .

Speaker #3: At this time , I'd like to introduce John Wobensmith chairman and CEO of Genco Shipping & Trading Ltd .

Speaker #4: Good morning , everyone . Welcome to Genco's third quarter 2025 conference call . I will begin today's call by reviewing our Q3 2025 and year to date highlights .

Speaker #4: 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 .

Speaker #4: Before opening the call up for questions . For additional information , please also refer to our earnings presentation posted on our website . Starting on slide five .

Speaker #4: During the third quarter , we continued to advance our value strategy , prioritizing returning cash to shareholders through market cycles and taking additional steps to further expand our earnings power for the benefit of shareholders .

Speaker #4: For the third quarter , we declared a dividend of $0.15 per share despite an intensive Drydocking quarter , extending our track record of 25 quarters of consecutive dividends and marking the longest period of uninterrupted dividends in our Drybulk peer group , including the Q3 dividend , Genco has declared $7 six and a half cents in dividends per share , representing 43% of our current share price .

Speaker #4: In terms of Genco's ability to capitalize on a strong freight market , we remain optimistic for the remainder of 2025 and into 2026 .

Speaker #4: By the start of Q4 , we have completed 90% of our Drydocking schedule for the year , which positions us well to maximize utilization and what has been a strong Q4 to date .

Speaker #4: Specifically , our Q4 TCE is currently estimated to be up more than 25% to over $20,000 per day on a fleet wide basis .

Speaker #4: For 72% of the quarter , with strong freight rates being achieved by both our Capesize vessels at approximately $27,000 per day , as well as our minor bulk fleet at approximately $16,000 per day .

Speaker #4: These rates compare favorably to our Q4 cash flow breakeven rate , which is estimated to be approximately $10,000 per day , and represents an industry low breakeven rate in October , we took delivery of a 2020 built Capesize vessel , adding a modern high specification vessel to our fleet during a seasonally strong point in the freight market .

Speaker #4: Notably , our first fixture on the vessel following delivery was booked for $29,000 per day . Net over 50 days . Immediately generating earnings , while also de-risking the investment .

Speaker #4: This vessel acquisition represents the fourth high specification , fuel efficient capesize vessel that Genco has agreed to acquire since Q4 of 2023 . Further expanding the company's presence in a key sector with compelling supply and demand fundamentals .

Speaker #4: Moving on to slide six . When we implemented our value strategy in April 2021 , we set out to accomplish three main objectives .

Speaker #4: Transfer , Genco into a low leverage , high dividend company . Maintain significant flexibility for growth and pay a quarterly dividend based on cash flows .

Speaker #4: Less a voluntary quarterly reserve . Four years later , we are pleased to have made progress on each of these objectives . We have implemented a well-balanced capital allocation strategy successfully capitalized on compelling vessel acquisitions , provided shareholders with uninterrupted dividends and opportunistically paid down debt .

Speaker #4: Specifically , over the past four years , we have invested nearly $347 million in high quality modern vessels , distributed $264 million in dividends to shareholders , and down $279 million in debt .

Speaker #4: Collectively , these actions have enabled Genco to establish a balance sheet that is built to effectively operate in a volatile market , create a highly differentiated risk reward balance , and increase the earnings power of the company to continue to pay regular quarterly dividends and create enduring long term shareholder value .

Speaker #4: On page seven , we highlight our fleet composition . We currently own a fleet of 17 Capesize vessels and 26 Ultramax and Supramax vessels .

Speaker #4: We continue to balance the high beta and the upside potential of the Capesize sector , along with the steadier earnings stream of the minor bulk ships .

Speaker #4: On a vessel ownership basis , our ownership splits are 40% and 60% . Ultras Supras . However , when we view these splits on an asset value or net revenue basis .

Speaker #4: We are over 50% weighted towards the Capesize vessels , providing a significant operating leverage . Turning to slide eight . With an industry low net loan to value ratio , a low cash flow break , even rate and $430 million in undrawn undrawn revolver availability , we believe Genco remains in a highly advantageous position to successfully operate in the current volatile freight rate environment and continue to differentiate itself from its Drybulk peer group , Genco , has the scale and operating leverage to benefit from a rising market , while also having significant access to capital to take advantage of opportunities if they were to arise .

Speaker #4: As we've demonstrated throughout the cycle , going forward , we remain focused on executing the three pillars of our value strategy dividends , deleveraging and growth .

Speaker #4: Importantly , as we've progressed through the fourth quarter and positioned Genco for 2026 , we do so with the majority of our drydock schedule from fleet .

Speaker #4: A further reduced cash flow breakeven level and significant operating leverage to capitalize on improving Drybulk fundamentals . Lastly , turning to page nine .

Speaker #4: Genco continues to prioritize strong corporate governance , which we believe is another key difference differentiator for the company relative to the peer group .

Speaker #4: Specifically , Genco is the only listed Drybulk shipping company with no related party transaction . We have a diverse and independent board of directors .

Speaker #4: Our highly transparent and provide detailed disclosures on company performance and initiatives while striving to provide a clear and thoughtful strategy to shareholders as we execute on our approach to capital allocation .

Speaker #4: We view this as a key part of Genco's identity as a company . I will now turn the call over to Peter Allen , our chief financial officer .

Speaker #3: Thank you . John . On slides 11 through 14 , we highlight our third quarter financial results . Genco recorded a net loss of $1.1 million , or $0.02 .

Speaker #3: Basic and diluted net loss per share . Adjusted net loss is $0.01 per share , excluding a loss on debt extinguishment of $0.7 million .

Speaker #3: Adjusted EBITDA for Q3 totaled $21.7 million , an increase of 52% as compared to Q2 . Our cash position as of September 30th was $90 million , which increased due to a drawdown of debt in the third quarter .

Speaker #3: For the purchase of Genco Courageous , which delivered in the fourth quarter . Our debt outstanding also increased $170 million due to this purchase .

Speaker #3: The final installment , representing 90% of the purchase price , or $57.2 million , was funded in October . Overall , since 2021 , we have reduced our cash , our debt balance from $450 million down to the current $170 million level , a reduction of 62% pro forma for this acquisition .

Speaker #3: Our net loan to value is approximately 12% . Furthermore , our undrawn revolver availability is currently $430 million . With our full revolving credit facility structure , we plan to continue to actively manage our cash and debt positions to reduce interest expense while maintaining access to capital to quickly act on growth opportunities , as we did with our most recent acquisition of a high specification , fuel efficient capesize vessel .

Speaker #3: Moving to slide 15 , we highlight our quarterly dividend policy , which targets a distribution based on 100% of operating cash flow , less a voluntary reserve for Q3 .

Speaker #3: Our Board of directors declared a 15% per share dividend based on operating cash flow of approximately $21.5 million and a voluntary quarterly reserve of $14.9 million .

Speaker #3: Notably , for the third quarter of 2025 , our dividend formula , including a voluntary reserve of $19.5 million , would have produced a five cent per share dividend .

Speaker #3: However , on management's recommendation , the board chose to reduce the voluntary reserve to $14.9 million for the quarter , resulting in the 15 cent per share dividend .

Speaker #3: This highlights our commitment to regular shareholder returns as well as our favorable view on the long term fundamentals of the Drybulk industry and the seasonally stronger freight rate environment that has emerged in the second half of this year .

Speaker #3: Looking ahead to Q4 2025 , we currently have 72% of owned available days fixed at approximately $20,000 per day as compared to our anticipated cash flow breakeven rate .

Speaker #3: Excluding Drydocking related CapEx of approximately $9,000 per vessel per day , our TCE has increased each quarter of this year and Q4 . TCE estimates are currently projected to not only be the highest CC of the year , but the highest quarterly level since 2022 , highlighting the freight rate improvements seen in the second half of this year .

Speaker #3: Thus far . Notably , this improvement has been led by our Capesize vessels , which in Q4 to date are currently fixed at approximately $27,000 per day , an increase of nearly 30% from $21,000 per day in Q3 .

Speaker #3: Further highlighting the significant operating leverage of the sector . We note that Genco , like much of the industry , has a large scale drydocking program in 2025 through the first nine months of the year , we have completed 16 of 19 scheduled dry dockings , with one more completed in early November .

Speaker #3: This resulted in Genco completing 90% of our full year 2025 dry Dockings , with only two dry dockings remaining . As we look to maximize utilization in Q4 , we believe Genco's high operating leverage as displayed in the second half of this year , combined with our low financial leverage , creates a solid risk reward balance for shareholders while providing Genco with increased optionality for the company .

Speaker #3: I will now turn the call over to Michael Oher , our Drybulk market analyst , to discuss industry fundamentals .

Speaker #5: Thank you . Peter . Beginning on slide 17 . The Drybulk freight rate environment meaningfully improved in Q3 and into Q4 to date as compared to earlier in the year levels .

Speaker #5: Capesize rates were driven by all-time high Brazilian iron ore shipments during the quarter, including exceeding 40 million tons in both July and August.

Speaker #5: For the first time on record . Brazilian iron ore miner Vale also reported their highest quarterly production since 2018 . Supermax rates were led by augmented coal shipments to China , as the country's domestic coal output declined during a period of strong demand .

Speaker #5: Furthermore , increased South American grain shipments were also supportive for the smaller class vessels . These factors resulted in the Baltic Capesize Index and Baltic Supramax Index to average approximately 26,000 and $14,000 per day , respectively .

Speaker #5: In Q3 . Turning to 18 . We point to China's strong level of iron ore imports in recent months , led by increased seaborne supplies , together with the restocking of iron ore inventories .

Speaker #5: Specifically , the country's iron ore imports in Q3 rose by 6% year over year after a softer first half , while China's iron ore stockpiles were drawn down as much as 8% in the year to date .

Speaker #5: Stockpiles are now increased by 6% off of their 2025 lows . China's steel production has decreased year over year by 3% , while China continues to export over 10% of the steel it produces , mostly going to other Asian countries .

Speaker #5: Turning to page 19 . We highlight the long haul iron ore and bauxite trade growth expected from Brazil and West Africa in the coming years .

Speaker #5: While the page likely to have materialize in November , there are significant growth volumes expected in the coming years given the scale of the projects .

Speaker #5: These volumes could absorb potentially over 200 capesize vessels , which is more than the current Capesize new building order book . Supply constraints in Capesize new building activity combined , combined with added long haul trading distances , are two key catalysts for the sector in terms of the grain trade , as detailed on page 20 , China has reportedly purchased at least four US soybean cargoes following the meeting of President Trump and President XI last week .

Speaker #5: China has agreed to purchase a minimum of 25 million tonnes of soybeans per year from the US over the next three years . Prior to the summit , China had not purchased any US soybean cargoes as they had ramped up purchases of Brazilian agricultural products for much of the year .

Speaker #5: Regarding the supply side outline on slide 21 , net fleet growth in the year to date is 3% . On an annualized basis , split between 1% .

Speaker #5: Net fleet growth for Cape sizes and 4 to 5% net fleet growth for Panamax is down to handy . Sizes . Cape size segment continues to have the smallest order book among the drybulk sectors , at 9% of the fleet .

Speaker #5: Additionally , as scrapping has remained low in recent years , the age of the global fleet has risen to nearly 13 years old .

Speaker #5: The highest average age of the global dry bulk fleet since 2010 . This has increased the pool of potential scrapping candidates , as over 10% of the on the water fleet is 20 years or older , which is identical to the global Dry Bulk Order book .

Speaker #5: As a percentage of the fleet, this implies net replacement of tonnage over time, as opposed to any material net fleet growth.

Speaker #5: While 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 Drybulk market going forward .

Speaker #5: This concludes our presentation and we would now be happy to take your questions .

Speaker #2: Thank you . Ladies and gentlemen , we will now conduct the question and answer session . Your first question comes from the line of Omar Nokta with Jefferies .

Speaker #2: Your line is open .

Speaker #6: Thank you . Hi , guys . Good morning . Thanks for the for the update . Just wanted to get maybe just a sense .

Speaker #6: I know you talked about it a bit , but just sort of in terms of what we're seeing in the freight market , you know , it looks like we've been building on this improvement .

Speaker #6: That was you first were talking about back in August when you reported two key results . Caves have gotten stronger . We've seen the Panamax of Supramax segments have all started lifting here into year end .

Speaker #6: Just wanted to get a sense from from your perspective , is this a seasonality thing or is this something much bigger ? Is it simandou ?

Speaker #6: How would you characterize sort of this improvement that we've just been continuing to see here in the second half ?

Speaker #4: Yeah . Good morning . So I think it's it's sort of all the above in the sense that , yes , it's seasonal .

Speaker #4: We you know , typically have a late Q3 , Q4 , stronger freight market , but this time around we're also seeing record Brazilian iron ore exports in the second half .

Speaker #4: That obviously has been very positive because of the long haul ton mile creation nature of that . And we've had an increase on the coal trades , China domestic demand has increased on domestic coal production , actually has has gone down .

Speaker #4: There's been a strong grain trade driven by South America on the miner bulk side . A lot of soybeans being bought by the Chinese really in record quantities at this point .

Speaker #4: And and then we've also had the USTR with the self sanctioning , which really reduced some of the tonnage count in the Atlantic , which we've been able to actually take full advantage of .

Speaker #6: Thanks , John . Yeah . So it seems like , as you said , just a handful of things coming together and maybe just on that as a follow up , just on that final point you brought up USTR , you know , the China fees that went into effect briefly against US shipping .

Speaker #6: You know , those have now been postponed for for 12 months . Just wanted to get a sense how did that affect things ?

Speaker #6: I guess from your view in terms of how it affected , say , dry bulk rates , you know , that that the Chinese fees and then how did it affect Genco ?

Speaker #4: So from affecting revenues and affecting Genco completely immaterial affecting the management team . You know , we as I like to say , had a lost weekend that Columbus Day weekend because we spent we we spent an inordinate amount of time diverting ships .

Speaker #4: We had four ships that , that were going in . And so but we were able to successfully divert those vessels to different discharge ports .

Speaker #4: And then , of course , Monday of Columbus Day weekend , the Chinese clarified the port fee side of it . And it will allow US companies to come in with Chinese built vessels and not have any port fees .

Speaker #4: Of course , 80% of our fleet is Chinese built , so that was that took a lot of risk off the table . And , you know , we even if those port fees had remained in place , we're really talking about 7 to 8 capesize vessels .

Speaker #4: And we'd already worked out a way to trade those ships , you know , at the at the same earnings level as their , as they're trading now .

Speaker #4: Good news is all of that's been taken off the table for at least a year . But you know we're we're well prepared if , if that comes back into effect for some reason .

Speaker #6: Okay . Thanks , John . Yeah . So if , if indeed it does come back in 12 months time seems like it's a fairly negligible impact on the on .

Speaker #6: .

Speaker #4: It's , it's it's just a change of strategy a little bit . I mean our minor bulks are trading , you know , very much so in the Atlantic anyway .

Speaker #4: And not doing a lot of Chinese business . And on the capes , as I said , there are plenty of other trades on the capes that the 7 or 8 that we that we have that are Japanese and South Korean built .

Speaker #4: We'll find alternative employment without any material impact on the company .

Speaker #6: Got it . Thanks , John . That's it for me .

Speaker #4: Thanks , Omar .

Speaker #2: Your next question comes from the line of Liam Burke with B Riley Securities . Please go ahead .

Speaker #7: Yes . Good morning John . Good morning Peter .

Speaker #4: Morning .

Speaker #7: John . You've been investing in the Capesize on the on the investments . But do you ever look at the non capesize or are you .

Speaker #7: Is it just the asset coming online that's attractive and gives you the proper return .

Speaker #4: Yeah . So look we have a strong miner bulk fleet . You know we continue to to operate that and we have no plans to divest out of that minor bulk .

Speaker #4: We have quite a commercial operating platform there . But when we look at the market as a whole and we look at the , you know , the , the low order book , which , which Michael pointed out at a little more than 10% versus ships that are 20 years and older overall , are basically match that number .

Speaker #4: So there is no fleet growth that is anticipated . At least now for for the drybulk industry as a whole . The Capesize sector as better supply dynamics in being much lower than on the minor bulk side .

Speaker #4: And when we couple that with the demand growth that we see coming, particularly out of West Africa, but also I think ballet is going to have some growth as well.

Speaker #4: And there'll be some further growth on the bauxite trade . But that Simandou and the tonnage that is really going to ramp up , we think in the second half of , of next year also creates demand growth .

Speaker #4: So low supply and demand growth , that bodes well for a sector . And that's why we're focused in terms of acquisitions . More on the the larger vessels than , than the midsize .

Speaker #7: Great . Thank you . With your fleet renewal , your debt balance is moved up to finance the asset acquisitions outside of fleet renewal .

Speaker #7: Do you anticipate accelerating that debt reduction as you're seeing strong cash flows on the higher rates ?

Speaker #4: Look , we we have a dividend formula in place . So we will definitely be sticking to that . We have a reserve of a little less than $20 million a quarter that's built into that .

Speaker #4: We think that is sufficient at this point . So you know , I , I see us continuing to do fleet renewal . And as I said , we are before we're we're concentrated right now .

Speaker #4: Anyway , on the on the larger vessels .

Speaker #7: Great . Thank you . John .

Speaker #4: Thanks , Liam .

Speaker #2: I would like to remind everyone that if you would like to ask a question , you may press star . Then the number one on your telephone keypad .

Speaker #2: Your next question comes from the line of Michael Matheson with Sedo . Please go ahead .

Speaker #8: Good morning , you guys . And congratulations on the demand growth . I just had a question regarding Chinese demand for coal . You mentioned that their demand is up .

Speaker #8: Have you seen any signs of switching the source of their imports from the US to Brazil or other providers ?

Speaker #4: Yeah , I think I think because of the . USTR , we've seen less a lot less coal come out of the US and it has come from , from other areas from , you know , from a ton mile standpoint .

Speaker #4: I would say it's been fairly neutral , but we do expect us coal exports to pick up in the next six months because of USTR going going away .

Speaker #4: And I think the I think there's also a push in the US right now by the current administration to beef up export . So we we do expect to see some growth again in that area .

Speaker #8: Well thank you . That's very helpful . And that runs me out of questions .

Speaker #4: Okay . Thank you .

Speaker #2: Your final question comes from the line of Paul Fred with AGP Alliance Global Partners . Your line is open .

Speaker #9: Hey John , you are on page nine of your presentation . You highlight your corporate governance and how it's very strong in the best in the industry .

Speaker #9: Can you just give us a reason for adopting a poison pill in early October ?

Speaker #4: Yeah . I mean , I think it's you know , we had a we had we had a shareholder that quickly accumulated a little less than a 15% position .

Speaker #4: And so as , as all poison pills , we , we want to do what's right for , for all shareholders . And so what that means is that we can slow things down so that we can make sure that if there is something to be done , that , that again , we can get the best transaction for , for shareholders .

Speaker #4: And we also I'll add , we did it in the most shareholder friendly way in that we put it in place for just less than a year .

Speaker #4: And we spent a lot of time on structuring that again to be as shareholder friendly as we could .

Speaker #9: Would you categorize the move , John , as preemptive , or was it response to , you know , signals from the largest shareholder ?

Speaker #4: No , I would characterize it only to the the speed in which the 15% was was acquired . And again , we if , if there was any process , you want to slow it down .

Speaker #4: And again , the idea is to maximize value for all shareholders . And that that can be accomplished by by putting that in place .

Speaker #9: Great . Thanks .

Speaker #4: Thanks , pal .

Speaker #2: There are no further questions at this time . This concludes our conference call for today . We thank you for participating and ask that you please disconnect your lines .