Star Bulk Carriers Corp., a global shipping company focusing on the transportation of dry bulk cargoes, announced its unaudited financial and operating results for the first quarter of 2023.
Petros Pappas, Chief Executive Officer of Star Bulk, commented:
“Star Bulk was profitable for the first quarter of 2023, the seasonally weakest period of the year, reporting Net Income of $45.9 million and a TCE of $14,199. On the basis of our dividend policy, our Board of Directors has approved a dividend of $0.35 / share, representing our ninth consecutive quarterly payment. Since the beginning of 2021, the Company has returned over $1 billion to shareholders through dividends and share buybacks.
Looking at our fleet, we took advantage of the increase in vessel values and agreed to opportunistically sell two 2011 built Capesize vessels, the Star Borealis and Star Polaris. We also agreed with the war risk insurers of the Star Pavlina that the vessel became a constructive total loss, given its prolonged detainment in Ukraine following the ongoing conflict between Russia and Ukraine. Looking towards fleet renewal and increased fuel efficiency, we have secured seven long-term charter-in EEDI-Phase 3 latest generation eco vessels, built at first class shipyards, six of which are expected to be delivered during 2024.
We are also very positive as far as our cooperation with the Iron Ore Consortium on Green Corridors is concerned. Our recent study showed that ships powered by clean ammonia could carry iron ore from Australia to East Asia as soon as 2028 and could reach 5% of that market by 2030, assuming broad acceptance of ammonia as a fuel.
We are optimistic about the medium term prospects of the dry bulk market given the favorable order book and upcoming environmental regulations. We believe Star Bulk remains well positioned, with a strong balance sheet and a fully scrubber fitted fleet, to take advantage of the positive market backdrop and continue creating value for its shareholders.”
Declaration of Dividend
As of March 31, 2023, our aggregate amount of cash on our balance sheet was $254.6 million and after giving effect to the share repurchases and the prepayments of debt in connection with the changes in our fleet as described below, that took place during the first quarter of 2023, the cash available for distribution under our dividend policy was $306.0 million. Taking into account the Minimum Cash Balance per Vessel, as defined in our 2022 annual report, on May 16, 2023, pursuant to our dividend policy, our Board of Directors declared a quarterly cash dividend of $0.35 per share, payable on or about June 27, 2023 to all shareholders of record as of June 7, 2023. The ex-dividend date is expected to be June 6, 2023.
Share Repurchase Program & Shares Outstanding Update
In March 2023, we repurchased 331,223 common shares in open market transactions at an average price of $21.12 per share for an aggregate consideration of $7.0 million pursuant to the $50.0 million share repurchase program announced in August 2021. In addition, in April 2023, we repurchased 200,000 common shares in open market transactions at an average price of $20.74 per share for an aggregate consideration of $4.15 million, pursuant to the abovementioned share repurchase program. All of the abovementioned shares were cancelled and removed from our share capital as of the date of this release.
On May 16, 2023, our Board of Directors cancelled the previous share repurchase program under which $8.5 million was still outstanding and authorized a new share repurchase program of up to an aggregate of $50.0 million (“Share Repurchase Program”). The timing and amount of any repurchases will be in the sole discretion of our management team, and will depend on legal requirements, market conditions, share price, alternative uses of capital and other factors. Repurchases of common shares may take place in privately negotiated transactions, in open market transactions pursuant to Rule 10b-18 of the Exchange Act and/or pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act. We are not obligated under the terms of the Share Repurchase Program to repurchase any of our common shares. The Share Repurchase Program has no expiration date and may be suspended or terminated by our Board of Directors at any time without prior notice. We will cancel common shares repurchased as part of this program.
As of today, we have 102,881,065 shares outstanding.
During the first quarter of 2023, we agreed with the war risk insurers of the vessel Star Pavlina, that the vessel became a constructive total loss as of February 24, 2023, given its prolonged detainment in Ukraine following the commencement of Russia’s military action against Ukraine on February 24, 2022. As of the date of this release, we have collected the corresponding insurance value of this vessel.
On March 24, 2023, we agreed to sell the vessels Star Borealis and Star Polaris. The Star Borealis was delivered to its new owner with the respective sale proceeds being collected on May 4, 2023, while the delivery of Star Polaris is expected to occur by the end of May or early June 2023.
As of the date of this release, we have entered into long-term charter-in arrangements with respect to four Kamsarmax newbuildings and two Ultramax newbuildings which are expected to be delivered during 2024 with an approximate duration of seven years per vessel plus optional years. In addition, in November 2021 we took delivery of the Capesize vessel Star Shibumi, under a long-term charter-in contract for a period up to November 2028. Please see below a summary table of the respective contracts:
In March 2023, we entered into a committed termsheet with Nordea Bank Abp for a loan facility of up to $50.0 million (the “Nordea $50.0 million Facility”). The facility will be used to refinance the outstanding amounts under the loan agreements of the vessels Star Eleni and Star Leo and is expected to be drawn by the end of June 2023. The outstanding amount of the pre-existing loan facilities for the two vessels of $42.3 million was prepaid on May 2, 2023. The Nordea $50.0 million Facility is expected to be drawn in two tranches and will mature 5 years after the drawdown and will be secured by first priority mortgages on the Star Eleni and Star Leo.
In March 2023, we entered into a committed termsheet with Skandinaviska Enskilda Banken AB for a loan facility of up to $30.0 million (the “SEB $30.0 million Facility”). The facility amount will be used to replenish the cash used in May 2023 to prepay the outstanding amount of $25.1 million in aggregate, under the loan agreement and lease agreement for each of the vessels Star Aquarius and Star Pisces, respectively and is expected to be drawn in May 2023. The SEB $30.0 million Facility is expected to be drawn in two tranches and will mature 5 years after the drawdown and will be secured by first priority mortgages on the Star Aquarius and Star Pisces.
The financing arrangements discussed above contain financial and other covenants substantially similar to those covenants described in Item 5 of our 2022 annual report regarding our credit facilities.
Excess debt proceeds drawn from the new facilities described above will be used to prepay debt in other Star Bulk debt facilities.
In March 2023 we prepaid the outstanding debt under the facilities financing the vessels Star Pavlina, Star Borealis and Star Polaris for an aggregate amount of $44.4 million.
Following the completion of the $509.9 million of new refinancings that we performed during 2022 and 2023, we have 13 unlevered vessels and we expect to save approximately $6.7 million per year in interest costs from more competitive margins.
As of today, following a number of interest rates swaps we have entered into, we have an outstanding total notional amount of $636.5 million under our financing agreements with an average fixed rate of 45 bps and an average maturity of 1.0 year. As of March 31, 2023 the Mark-to-Market value of our outstanding interest rate swaps stood at $26.2 million. The above interest rate swaps are designated and qualify for hedge accounting, except for one which matures in August 2023.
Vessel Employment Overview
Time Charter Equivalent Rate (“TCE rate”) is a non-GAAP measure. Please see EXHIBIT I at the end of this release for a reconciliation to Voyage Revenues, which is the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.
First Quarter 2023 and 2022 Results
For the first quarter of 2023, we had a net income of $45.9 million, or $0.44 earnings per share, compared to a net income for the first quarter of 2022 of $170.4 million, or $1.67 earnings per share. Adjusted net income, which excludes certain non-cash items, was $37.1 million, or $0.36 earnings per share, for the first quarter of 2023, compared to an adjusted net income of $175.6 million for the first quarter of 2022, or $1.72 earnings per share.
Net cash provided by operating activities for the first quarter of 2023 was $83.2 million, compared to $229.2 million for the first quarter of 2022. Adjusted EBITDA, which excludes certain non-cash items, was $84.8 million for the first quarter of 2023, compared to $225.9 million for the first quarter of 2022.
Voyage revenues for the first quarter of 2023 decreased to $224.0 million from $360.9 million in the first quarter of 2022 and Time charter equivalent revenues (“TCE Revenues”)1 were $156.1 million for the first quarter of 2023, compared to $304.9 million for the first quarter of 2022. TCE rate for the first quarter of 2023 was $14,199 compared to $27,405 for the first quarter of 2022 which is indicative of the weaker market conditions prevailing during the recent quarter.
For the first quarters of 2023 and 2022, vessel operating expenses were $55.8 million and $57.5 million, respectively. Vessel operating expenses for the first quarter of 2023 included additional crew expenses related to the increased number and cost of crew changes performed during the period as a result of COVID-19 related restrictions, estimated to be $1.4 million. In addition, we incurred $0.5 million of additional operating expenses due to change of management of certain vessels from third party to in-house. Vessel operating expenses for the first quarter of 2022 included COVID-19 related expenses of $2.8 million. Excluding non-recurring expenses such as increased costs due to the COVID-19 pandemic and pre-delivery and pre-joining expenses due to change of management, our daily operating expenses per vessel decreased to $4,696 for the first quarter of 2023 from $4,747 for the first quarter of 2022.
Drydocking expenses for the first quarters of 2023 and 2022, were $8.0 million and $8.7 million, respectively. During the first quarter of 2023, five vessels completed their periodic dry docking surveys while during the corresponding period in 2022, eight vessels completed their periodic dry docking surveys.
General and administrative expenses for the first quarters of 2023 and 2022 were $11.7 million and $8.8 million, respectively, primarily due to the increase in the stock based compensation expense to $3.4 million from $1.2 million. Vessel management fees for the first quarter of 2023 decreased to $4.2 million from $4.8 million in the corresponding period of 2022 due to the change of management of certain vessels, from third party to in-house as described above. Our daily net cash general and administrative expenses per vessel (including management fees and excluding share-based compensation and other non-cash charges) for the first quarters of 2023 and 2022 were $1,059 and $1,065, respectively.
Depreciation expense decreased to $35.1 million for the first quarter of 2023 compared to $38.5 million for the corresponding period in 2022. The decrease is primarily driven by the change in the estimated scrap rate per light weight tonnage from $300 to $400 effective January 1, 2023, which resulted in lower depreciation expense by $3.9 million.
During the first quarter of 2023, an impairment loss of $7.7 million was incurred, resulting from the agreement to sell the vessels Star Borealis and Star Polaris described above as part of our fleet update.
Other operational gain for the first quarter of 2023 of $33.2 million includes a) gains from insurance proceeds relating to Star Pavlina’s total loss discussed in our fleet update above of $28.2 million, b) daily detention compensation for Star Pavlina pursuant to its war risk insurance policy of $2.7 million in aggregate as well as c) other gains from insurance claims relating to other vessels of $2.3 million in aggregate.
Our results for the first quarter of 2023 include a loss on write-down of inventories of $2.2 million resulting from the valuation of the bunkers remaining on board our vessels as a result of their lower net realizable value compared to their historical cost.
Interest and finance costs for the first quarters of 2023 and 2022 were $15.7 million and $12.1 million, respectively. The driving factor for this increase is the significant increase in variable interest rates, which was partially offset by the positive effect from our interest rate swaps and the decrease in our weighted average outstanding indebtedness.
Interest income and other income for the first quarter of 2023 amounted to $3.1 million, compared to an interest income and other income, of $0.3 million in the first quarter of 2022. This variation is mainly due to higher interest earned from fixed deposits during the first quarter of 2023 and higher foreign exchange gains recognized in the same period compared to the first quarter of 2022.