GoodBulk Ltd.,a leading owner and operator of dry bulk vessels, announced its financial results for the first quarter of 2020.
•Generated $8.4 million EBITDA and $5.1million of net loss, after $10.2 million depreciation, resulting in lossper share of $0.17.
•Delivered the M/V Aquacarrier to its new owner on 28 January 2020 generatingnet freecash of $8.75 million
•Earned an average gross Time Charter Equivalent rate (TCE) of $10,851 per day on our Capesize vessels outperforming the Baltic Capesize Index by 156.3%(adjusted for vessels’ differentials).
•Ended the periodwith a cash balance of $23.3millionand net working capital of $11.9 million, totaling $35.2 million.
•Delivered M/V Aquajoy to itsnew 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 annualizedIRR of23.2%
•As of 04June 2020, for the second quarter of 2020 the Company has fixed approximately 88% ofits Capesize days at about $9,560per vessel per day (equivalent to reported gross TCE) about a 57% premium to the market1.
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 $310per vessel per day.
For the quarter ending 31 March 2020, the Baltic Capesize Index averaged $4,558 per day, 47.9% below $8,740 per day for the same period 2019 and 79.5% below $22,185 per day for the quarter ending 31 December 2019. During the first quarter of the year Brazil’s iron ore exports fell to the lowest since Q2 2009 at just 66 million tonnes which was down 23 million tonnes from the previous quarter, negatively impacting the Capesize market via the loss of important tonne miles. Being so correlated to Brazil, the weakness in the Capesize market can be mostly attributed to the huge fall in Brazil’s iron ore exports. Exports recovered slightly in April and May 2020, increasing by 3 to 4 million tonnes respectively compared to March 2020 and were around 7 million tonnes more compared to the low base of April 2019, the month which saw the largest effect of mine shutdowns at, Brazilian miner, Vale’s operations. Brazil’s weak exports were mainly due to excessive rainfall, scheduled and unscheduled maintenance and ongoing mine shutdowns.
The first quarter also saw the rapid spread of Covid-19 which led to many countries around the world to impose lockdowns, curfews and the closure of all work activities deemed non-essential. This has had a profound impact on industrial activity inevitably also impacting the supply and demand of globally traded dry bulk commodities. Iron ore imports into China were seemingly unaffected as the country also had its New Year Holidays during the first quarter which tends to slow down construction activity anyways, however Japan’s and South Korea’s iron ore imports were down 10% and 18% quarter-on-quarter in the first quarter. Global steel production in April 2020 fell by 13% compared to a 4% year-to-date decline showing the extent to which lockdowns have affected the steel market.
The deteriorating rate environment led to an acceleration in vessel demolitions in the first quarter however from around mid-March 2020 these activities also stopped as recycling yards had to shut down because of Covid-19, removing an essential supply and demand ‘self-correcting’ lever from the dry bulk market.
In recent weeks, the dry bulk market has seen encouraging signs as China’s industrial activity in ferrous metals has regained traction, but we still remain somewhat cautious as many parts of the world are still experiencing issues in restarting their activity. We are confident, however, that once Brazil iron ore export volumes recover and as lockdowns gradually ease there will be a pickup in global trade which will feed positively into rates.
Results of Operations First Quarter 2020
For the three months ended 31 March 2020, the Company reported revenues and net other operating income
(expenses) of $47.2 million, and a net loss of $5.1 million generating a loss per share of $0.17 based on 30,010,030 weighted average number of shares outstanding. This result compares with a gain of $2.6 million for the first quarter of 2019. Ship ownership days were 2,302 in the first quarter of 2020, less than 2,430 in the first quarter of 2019 as a result of the disposal of one Supramax vessel (the M/V Aquakula) and one Capesize vessel (the M/V Aquacarrier). In 2020 ownership days are expected to decrease to an estimated 8,936, from 9,702 in 2019, as all of GoodBulk’s previously announced dispositions have been completed.
The Company earned an average gross TCE of $10,851 per day on its Capesize vessels and $1,864 per day on its Panamax vessel for the three months ended 31 March 2020. Comparatively for the three months ended 31 March 2019, the Company earned an average gross TCE of $13,858 per day on its Capesize vessels, $9,988 per day on its Panamax vessel and $8,070 per day on its Supramax vessels. During the first quarter of 2020, 16 of the Company’s vessels were traded on the spot market employed in Capesize Chartering Ltd. (“CCL”) via the CTH Capesize Revenue Sharing Agreement (“Capesize RSA”) and eight Capesize vessels on period charters. The Panamax vessel was employed on the spot market.
Net result for the three months ended 31 March 2020 included non-cash depreciation expense of $10.2 million. Direct vessel operating expenses for the period totaled $13.0 million or $5,635 per vessel per day.
General and administrative expenses (“G&A”) for the three months ended 31 March 2020 were $0.9 million, or $401 per vessel per day, compared to $307 per vessel per day for the same period in 2019. Pure cash G&A were $310 per vessel per day.
GoodBulk controls a fleet of 24 dry bulk vessels with an average age of 11.0 years consisting of 23 Capesize vessels and one Panamax dry bulk vessel.
GoodBulk has fixed 26% of its fleet ownership days through the fourth quarter of 2020 at an average daily hire of $17,245 per vessel per day (equivalent to reported gross TCE). The Capesize vessels fixed on period are the M/V Aquaenna, M/V Aquaexplorer, M/V Aquamarie, M/V Aquataine, M/V Aquahope, M/V Nautical Dream, M/V Aquaproud and M/V Aquasurfer.
Gross profit, after the payment of vessel operating expenses, from the above eight period fixtures covers 64.4% of GoodBulk’s budgeted debt and interest repayments through the end of 2020.
GoodBulk’s regularly scheduled drydocking and maintenance program is another area of investment. This capital expenditure is necessary to ensure the proper, safe and efficient operation of our vessels and to comply with international shipping standards and environmental laws and regulations. Installation of Ballast Water Treatment Systems (“BWTS”) will be evaluated on a case by case basis depending upon the age of each ship and the market conditions at the time of the required installation. Upon the advice of our technical manager GoodBulk will install BWTS on seven Capesize vessels in 2020 and on two Capesize vessels in 2021 during their scheduled drydocks.
The following table includes our estimated drydock expense and off hire days for 2020 and 2021. These estimates are based upon our technical manager’s experience and the condition of the vessel at the time of acquisition. These estimates can vary based upon yard schedules, condition of the vessel at the time of drydocking, location of the drydocking, and other factors and include the cost of installing BWTS.
Liquidity and Capital Resources
Net cash used in the quarter ended 31 March 2020 was $23.7 million (after having paid $29.5 million in dividends to Shareholders) which compares to $2.8 million cash produced in the same period of 2019. Net cash provided by operating activities in the first quarter of 2020 was $8.2 million, compared to $15.8 million produced in the same period in 2019. Net cash produced by investing activities in the first quarter of 2020 was $14.5 million, compared to $0.1 million produced in the first quarter of 2019. Net cash used in financing activities in the first quarter of 2020 was $46.4 million (including $29.5 million in dividend paid), compared to $13.1 used in the same period of 2019. GoodBulk ended the quarter with cash and cash equivalents of $23.3 million.