Pacific Basin, one of the world’s leading dry bulk shipping companies, announced the results of the Company and its subsidiaries for the year ended 31 December 2020.
Mr. Mats Berglund, CEO of Pacific Basin, said: “In a year dominated by the global Covid-19 pandemic, we delivered a positive EBITDA of US$184.7 million and an underlying loss of US$19.4 million. Our core business of deploying owned and long-term chartered ships generated Handysize and Supramax TCE earnings that outperformed the BHSI (tonnage adjusted) and BSI spot market indices by US$1,140 and US$3,360 respectively. Our operating activity generated a healthy margin of US$1,080 net per day. Our underlying results were negatively impacted by markedly weaker dry bulk market freight rates in first half of the year due to global efforts to contain the pandemic while the dry bulk fleet continued to grow. Overall, we made a net loss of US$208.2 million, substantially attributable to US$199.6 million one-off non-cash impairments of our Handysize core fleet (primarily our smallest and oldest Handysize vessels), which do not impact our operating cash flows, EBITDA or available liquidity, and result in lower depreciation costs, higher EPS and higher return on equity going forward, all things being equal.
Having implemented wide-ranging business continuity initiatives, our business has been fully operational throughout the pandemic. While incurring Covid-related additional costs and delays, our service to customers has continued seamlessly and substantially uninterrupted. However, governments’ Covid restrictions around the world continue to make it very difficult for ship owners to change crews and get their seafarers home, leaving tens of thousands stuck at sea beyond their original contract periods. We continue to pursue every effort to reunite our seafarers with their families and we have successfully changed and repatriated many of our crews in recent months.
In view of the generally much improved conditions and outlook, we resumed our strategy to grow and renew our owned fleet by buying larger, high-quality, modern second-hand vessels. In November 2020 we agreed to acquire four high-quality 2015-built Ultramax ships and in February 2021 we agreed to acquire one more second-hand Ultramax, all at what we consider to be attractive prices.
We continue to sell our smaller, older Handysize vessels to trade up to newer vessels with larger carrying capacity. We are still avoiding contracting newbuildings with traditional fuel oil engines due to the continued gap between newbuilding and second-hand prices, their low return and the uncertainty over new environmental regulations and their impact on future vessel designs and technology.
We will own 116 ships after our current sale and purchase commitments are delivered in the first half of 2021. Including chartered ships, we currently have about 250 ships on the water overall.
We further enhanced our total available liquidity position to US$362.5 million at the year end. Our net borrowings of US$629.1 million were 37% of the net book value of our owned vessels.
The Market Outlook is Encouraging
Global economic recovery is already benefitting the dry bulk freight market in 2021 which has got off to a significantly stronger start than usual at this time of year. The stronger market rates are driven by a broad-based demand recovery for dry bulk commodities with especially strong Chinese demand and global grain trades. Fleet inefficiencies have also supported recent market strength. Vessels carrying Australian coal have been held up outside Chinese discharge ports, Covid restrictions have disrupted the flow of traffic, and a larger than usual concentration of dry bulk tonnage is in the Pacific. Deliveries of new ships are expected to reduce further, especially in the second half of 2021 and into 2022, which combined with scrapping will likely result in reduced net fleet growth across the whole dry bulk sector and especially in our segments. The dry bulk orderbook is now the smallest it has been in decades.
We are Well Positioned for the Future
The market has staged a remarkable recovery from May 2020 onwards and, although Covid uncertainty remains, the roll out of vaccine programmes and extensive stimulus around the world should help to drive global economic activity. We expect the reducing fleet growth and improving demand for commodities to result in stronger average dry bulk freight earnings in 2021 and beyond. Our healthy balance sheet and liquidity, customer-focused business model, high laden utilisation, strong team, large owned fleet, competitive cost structure and ability to outperform helped us to ride out the challenging period last year and we are now well positioned for stronger markets ahead.”
Source: Pacific Basin