GoodBulk Ltd. (“GoodBulk” or the “Company”) (N-OTC: BULK), a leading owner and operator of dry bulk vessels, announces its financial results for the second quarter 2020.
2nd Quarter Highlights
• Generated $7.2 million EBITDA and $5.8 million of net loss, after $10.1 million depreciation, resulting in loss per share of $0.19.
• Delivered M/V Aquajoy to its new owners on 5 May 2020 generating $10.8 million of free cash, $2.1 million profit from disposal and a return of 86.1% giving an annualized IRR of 23.2%
• Earned an average gross Time Charter Equivalent (TCE) rate of $8,912 per vessel per day on its Capesize vessels and $7,314 per day on its Panamax vessel.
• Ended the period with a cash balance of $22.5. Recent Developments
• As of 31 July, for the third quarter of 2020 the Company has fixed approximately 55% of its Capesize days at about $16,236 per vessel per day (equivalent to reported gross TCE) allowing for ample room to capture expected strong spot market rates in August and September.
• On 10 July the Group drew down the new $200.0 million facility, thus concluding the refinancing of five of its six previously existing facilities.
• Employed the M/V Aquamaka on a period charter of 17 to 20 months at $16,500 per day. GoodBulk is a leading owner of dry bulk vessels executing a strategy combining low financial leverage with active portfolio management to optimize operational leverage to the dry bulk freight market. The Company’s strict financial discipline resulted in industry leading pure cash general and administrative expenses of $275 per vessel per day.
Market Commentary
For the quarter ending 30 June 2020, the Baltic Capesize Index averaged $9,932 per day, 12.7% below $11,372 per day for the same period 2019 and 117.9% above $4,558 per day for the quarter ending 31 March 2020. The Capesize market has improved from last quarter on the back of strengthening iron ore shipments from both Australia and Brazil as well as heightened port congestion, particularly in China.
In June 2020, iron ore exports from both Australia and Brazil reached year-to-date highs. Brazil’s iron ore export volumes in June 2020 amounted to 29.9 million tonnes – the highest since October 2019 – up 18.3% or 4.6 million tonnes month-on-month. The growth was seen particularly to China (+4.3 million tonnes) and to Oman (+1.6 million tonnes) testament that Chinese steel output has been gathering pace and there has been a need to increase dwindling iron ore stockpiles. Exports to China increased for the fourth consecutive month to 22.7 million tonnes and were about 4 million tonnes more than in June 2019.
The global iron ore trade in the first half of this year has seen a growth of around 4% mainly due to a 9.3% increase in Chinese imports. Other major iron ore importers have seen their imports slump in the first half 2 of this year – Japan by 15%, South Korea by 8% and the EU by 20% as a result of Covid-19 lockdowns. China’s steel market has given strengthening signals with profit margins steadily increasing since midJune and into July, despite high iron ore prices, pushed up by rising steel prices.
Demand ex-China has been severely impacted due to Covid-19 lockdowns in the second quarter which led to manufacturing shutdowns, supply chain interruptions, a slump in demand for automobiles and a widespread slowdown in construction. Steel production ex-China in Q2 2020 was down 11.8% year-onyear, compared to a 3% rise within China and in the first half of this year global steel demand has contracted by 6%. Demand for energy, and therefore the coal trade, has also been severely affected as industry in most countries came to a halt for several weeks.
Overall, the coronavirus has been the world’s largest challenge this year and although China and some other Western countries managed to bring it under control for a few months, Europe is now being hit by a second wave and the pandemic is still not under control in the US, Brazil and India. This leads us to believe that the majority of the globally traded commodities related to construction and energy will be negatively impacted whereas grains should be less impacted. On the bright side, Brazilian miner Vale, has recently reiterated their production guidance targets which require a significant uplift in exports in the coming months to be met. This will be a strong support to the Capesize, market in particular, which is so closely correlated to Brazil’s iron ore export volumes.
Results of Operations
Second Quarter 2020
For the three months ended 30 June 2020, the Company reported revenues and other income (expenses) of $36.6 million and net loss of $5.8 million, resulting in a loss per share of $0.19 based on 30,012,061 weighted average number of shares outstanding.
This result compares to a gain of $0.2 million for the second quarter 2019. Ship ownership days were 2,218 in the second quarter 2020, compared to 2,457 in the second quarter 2019. Following the delivery of the M/V Aquajoy to its buyers on 5 May 2020, ship ownership days are expected to decrease to an estimated 2,208 for the third quarter 2020, and 2,208 for the fourth quarter 2020 resulting in an estimated 8,936 and 8,760 ship ownership days for the full years ending 31 December 2020 and 2021, respectively.
The Company earned an average gross TCE of $8,912 per day on its Capesize vessels and $7,314 per day on its Panamax vessel for the three months ended 30 June 2020. Comparatively, for the three months ended 30 June 2019, the Company earned an average gross TCE of $12,481 per day on its Capesize vessels, $12,147 per day on its Panamax vessel, and $8,347 per day on its Supramax vessels, owned at the time.
During the second quarter 2020, fifteen of the Company’s Capesize vessels were traded on the spot market employed in Capesize Chartering Ltd. (“CCL”) via the CTH Capesize Revenue Sharing Agreement (“Capesize RSA”); the Panamax vessel was also traded on the spot market. Eight Capesize vessels were employed on period charters.
Net loss for the three months ended 30 June 2020 included non-cash depreciation expense of $10.1 million.
Direct vessel operating expenses for the period totaled $12.1 million or $5,443 per vessel per day.
General and administrative expenses (“G&A”) for the three months ended 30 June 2020 were $0.7 million, or $318 per vessel per day compared to $351 per vessel per day for the same period in 2019. Pure cash G&A were $238 per vessel per day.
First Half 2020
For the six months ended 30 June 2020, the Company reported revenues and other income (expenses) of $83.8 million, and net loss of $10.9 million, resulting in a loss per share of $0.37 based on 30,011,045 weighted average number of issued and outstanding shares. This result compares to a gain of $2.8 million for the first half of 2019. Ship ownership days decreased to 4,520 for the first half 2020, from 4,887 for the first half 2019.
For the six months ended 30 June 2020, the Company earned an average gross TCE of $9,907 per day on its Capesize vessels, outperforming the Baltic Capesize Index by 48.5% (adjusted for vessels’ differentials) and $4,589 per day on its Panamax vessel. This compares to $13,166 per day on its Capesize vessels, $11,073 per day on its Panamax vessel, and $8,209 per day on its Supramax vessels, owned at the time, for the six months ended 30 June 2019. Most of the Company’s vessels were traded on the spot market, with fifteen Capesize vessels employed in Capesize Chartering Ltd. (“CCL”) via the CTH Capesize Revenue
Sharing Agreement (“Capesize RSA”); the Panamax vessel was also traded on the spot market. Eight Capesize were employed on period charters.
Net income for the six months ended 30 June 2020 included non-cash depreciation expense of $20.3 million. Direct vessel operating expenses for the period totaled $25.0 million or $5,541 per vessel per day.
General and administrative expenses (“G&A”) for the six months ended 30 June 2020 were $1.6 million, or $360 per vessel per day compared to $329 per vessel per day for the same period 2019. Pure cash G&A were $275 per vessel per day.
Source: GoodBulk