RESULTS Q3 - 2019 November 21, 2019
FORWARD LOOKING STATEMENTS
- Matters discussed in this presentation may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements, which include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. Words such as "believe," "anticipate," "intends," "estimate," "forecast," "project," "plan," "potential," "may," "should," "expect," "pending" and similar expressions identify forward-looking statements. The forward-looking statements in this presentation are based upon various assumptions. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. The information set forth herein speaks only as of the date hereof, and we disclaim any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this communication.
- In addition to these important factors and matters discussed elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies, fluctuations in currencies and interest rates, general market conditions, including fluctuations in charter hire rates and vessel values, changes in demand in the dry bulk market, changes in our operating expenses, including bunker prices, drydocking and insurance costs, the market for our vessels, availability of financing and refinancing, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents, political events or acts by terrorists, and other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission.
- Certain shipping, steel, Chinese and global industry information, statistics and charts contained herein have been derived from several sources. You are hereby advised that such industry data, charts and statistics have not been prepared specifically for inclusion in these materials and Golden Ocean has not undertaken any independent investigation to confirm the accuracy or completeness of such information
COMPANY UPDATE
HIGHLIGHTS
- The Company reports net income of \$36.7 million and earnings per share of \$0.26 for the third quarter of 2019, compared with net loss of \$33.1 million and net loss per share of \$0.23 for the second quarter of 2019
- Adjusted EBITDA in the third quarter of 2019 was \$81.1 million, compared with \$21.5 million in the second quarter of 2019
- Took delivery of two chartered-in 103,000 dwt ice-class vessels on index-linked time charters
- Completed refinancing of \$284 million loan facility financing 15 vessels at attractive terms and agreed charter amendment with SFL Corporation to fund seven scrubber installations
- Finalized joint venture agreement with Trafigura and Frontline to establish a leading global supplier of marine fuels and made further investment in Singapore Marine, a dry bulk freight operator
- Acquired 125,000 shares in the third quarter and an additional 380,000 shares so far in the fourth quarter under the share buy-back program announced in December 2018
- Announces a cash dividend of \$0.15 per share for the third quarter of 2019, the 8 th consecutive quarterly dividend announced
4
PROFIT & LOSS
| (in thousands of \$) |
Q3 2019 |
Q2 2019 |
Quarterly
Variance |
|
|
|
|
Operating
revenues |
219,898 |
117,653 |
102,245 |
| Voyage expenses |
(57,661) |
(32,905) |
(24,756) |
| Net revenues |
162,237 |
84,748 |
77,489 |
| Ship operating expenses |
(45,755) |
(48,707) |
2,952 |
| Administrative expenses |
(3,260) |
(3,276) |
16 |
Charter
hire expenses |
(36,457) |
(15,828) |
(20,629) |
| Depreciation |
(23,327) |
(23,978) |
651 |
| Net operating expenses |
(108,799) |
(91,789) |
(17,010) |
| Net operating income (loss) |
53,438 |
(7,041) |
60,479 |
Net financial
expenses |
(13,312) |
(14,214) |
902 |
Derivatives and other
financial income (loss) |
(3,389) |
(11,793) |
8,404 |
| Net income before taxation (loss) |
(36,737) |
(33,048) |
69,785 |
Income Tax
expense |
38 |
38 |
- |
| Net income (loss) |
36,699 |
(33,086) |
69,785 |
| Earnings (loss) per share: basic and diluted |
\$0.26 |
(\$0.23) |
\$0.49 |
| Adjusted EBITDA |
81,118 |
21,507 |
59,611 |
| TCE per day |
19,727 |
11,629 |
8,099 |
CASH FLOW DURING THE QUARTER
Q3 2019
BALANCE SHEET
| (in thousands of \$) |
Q3 2019 |
Q2 2019 |
Quarterly
Variance |
| ASSETS |
|
|
|
| Short term |
|
|
|
| Cash and cash equivalents (incl. restricted cash) |
87,156 |
117,549 |
(30,393) |
| Other current assets |
186,409 |
148,061 |
38,348 |
| Long term |
|
|
|
| Restricted cash |
52,112 |
45,708 |
6,404 |
Vessels
and equipment, net |
2,347,087 |
2,365,773 |
(18,686) |
| Operating leases, right of use assets, net |
210,468 |
196,827 |
13,641 |
| Other long term assets |
52,002 |
29,669 |
22,333 |
| Total assets |
2,935,234 |
2,903,587 |
(31,647) |
|
|
|
|
LIABILITIES AND EQUITY
| Short term |
|
|
|
Current portion of long
term debt and capital lease |
88,047 |
238,355 |
(150,308) |
| Current portion of operating leases |
28,094 |
22,585 |
5,509 |
| Other current liabilities |
112,001 |
90,334 |
21,667 |
| Long term |
|
|
|
Long
term debt and capital lease |
1,042,246 |
914,012 |
128,234 |
| Non-current portion of operating lease obligations |
169,884 |
165,084 |
4,800 |
| Equity |
1,494,962 |
1,473,217 |
21,745 |
| Total liabilities and equity |
2,935,234 |
2,903,587 |
31,647 |
CREDIT FACILITES
RECENT DEVELOPMENTS
- Completed refinancing outstanding amount of the original \$284 million loan facility, that was scheduled to mature in December 2019 and financed 15 vessels, with a new \$153.3 million term loan facility
- Interest rate of LIBOR + 210 bps
- Tenor of five years
- 20 year age adjusted repayment profile
- Agreed charter amendment with SFL Corporation to fund seven scrubber installations
DEBT MATURITIES AS OF 12/31/2018
DEBT MATURITIES AS OF 09/30/2019
SELECTED COVENANTS
- Free cash of at least \$20 million or 5% of interest bearing debt
- Market Value Clause of 135%
- Value adjusted equity of at least 25% of its value adjusted total assets
MODERN, EFFICIENT FLEET
- Fully-burdened Opex includes dry docking and management fees
- 12 vessels completed dry-dock in first nine months of 2019
- Additional seven Capesize vessels are scheduled for drydock in 2019
- Average fleet age of six years and majority of the fleet designed with fuel-efficient engines and ballast water treatment systems
- Additional advantage to be gained through scrubber installations
SCRUBBER INSTALLATION SCHEDULE
FLEET DEPLOYMENT
Opportunistic chartering strategy with significant operating leverage
CONTRACTED EARNINGS
|
Capesize
(46 vessels)
Age 5.3 years |
*See note
•
Equivalent of two vessels at fixed rate for 2020 at \$22,750 per day
•
Equivalent of two vessels on floor/ceiling contracts for 2020 |
|
Panamax (30 vessels)
Age 7.7 years |
•
Equivalent of 10 vessels on time charter that expire between
second quarter 2020 and the end of 2021 at an average gross rate
of \$18,200 per day |
|
Ultramax
(3 vessels) |
•
3 trading in pool |
|
Age 4.7 years |
|
2020 OPERATING LEVERAGE
DRY BULK MARKET UPDATE
DRY BULK SUPPLY / DEMAND & UTILIZATION
Fleet utilization reached 90% in the third quarter due to strong demand for transport combined with capacity constraints related to vessel offhire
SUPPLY, DEMAND AND UTILIZATION RATE - DRY BULK SHIPS 10,000 DWT +
RECORD VOLUMES RECORDED IN THE THIRD QUARTER
Sharp increase in iron ore volumes as Brazil production came back onstream and transport of all other commodity groups increased
SEABORNE TRADE OF DRY BULK COMMODITIES (MAJOR IMPORTERS)
RAPID REBOUND IN IRON ORE EXPORTS AS PRODUCTION RESUMES IN AUSTRALIA AND RECOVERS IN BRAZIL
QUARTERLY EXPORTED IRON ORE VOLUMES PER COUNTRY
WORLD STEEL PRODUCTION TRENDS
China steel production slowing into the end of the year; ex-China production slowed in the third quarter
ANNUAL CHANGE IN STEEL PRODUCTION
China Rest of World
CHINA COAL IMPORTS AND INVENTORIES UP AHEAD OF EXPECTED IMPORT RESTRICTIONS
0 10 20 30 40 50 60 70 80 90 100 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Metric tonnes (millions)
COAL IMPORTS BY MAJOR IMPORTERS CHINA AND INDIA COAL INVENTORIES
China Japan S. Korea India Other Asia Europe
CONTINUED YEAR OVER YEAR GROWTH IN ELECTRICITY CONSUMPTION SUPPORTS COAL DEMAND IN CHINA
CHINESE ELECTRICITY OUTPUT
CHINESE ELECTRICITY OUTPUT BY SOURCE
U.S. GRAIN EXPORTS CONTINUE TO BE DISRUPTED BY TRADE TENSION, BUT TOTAL VOLUME REMAINS
GRAIN EXPORTS BY SOURCE
SOYBEAN AND SOYBEAN MEAL EXPORTS BY SOURCE
INCREASE IN NET FLEET GROWTH ACROSS MOST VESSEL CLASSES IN THE THIRD QUARTER
HANDYMAX / SUPRAMAX HANDYSIZE
CAPESIZE PANAMAX / POST-PANAMAX
LARGE PORTION OF THE FLEET IS NOT FUEL EFFICIENT
Potential for older vessels to be phased out under new sulphur regulations
FLEET AGE DISTRIBUTION
S&P PRICES SLIDING; ACTIVITY FOCUSED ON OLDER, SMALLER TONNAGE
CAPESIZE VALUES AND EARNINGS
PANAMAX VALUES AND EARNINGS
THE ADVANTAGE OF FUEL-EFFICIENT VESSELS IS INCREASING
'Premium for 'ECO' vessels increased by 13% in the third quarter as spread between MGO and HSFO continues to increase
CAPESIZE VALUES AND 'ECO' PREMIUM
FUEL SPREAD
OUTLOOK AND STRATEGY
COMPETITIVE BREAKEVEN LEVELS DRIVE EARNINGS AND CASH GENERATION
- Fully-burdened Opex includes dry docking and management fees
- G&A net of management fees are estimated to be approximately \$450 per day on a fleet of 79 vessels
- Average margin on bank financing is competitive at LIBOR + 2.25% and the majority of bank debt has 19 years profile (adjusted for year of age)
CASH BREAKEVEN LEVELS VS. INDEXES(1)
REDUCE THE CASH BREAKEVEN FROM THESE LEVELS SOURCE: CLARKSONS
WELL POSITIONED AS IMO 2020 APPROACHES
MODERN, FUEL-EFFICIENT FLEET DRIVES COMPETITIVE ADVANTAGE
- Modern, fuel-efficient fleet with average age of six years comprised primarily of "ECO" vessels
- Thus far installing scrubbers on 50% of the Capesize fleet, or the equivalent of 2/3 of the Capesize fleet with economic exposure to fuel prices in the coming years
- Joint venture with Trafigura Group and Frontline ensures availability of competitively priced fuel from a trusted supplier with a global network
SIGNIFICANT EXPOSURE TO VESSEL CLASSES THAT PROVIDE THE GREATEST LEVERAGE
- Capesize and Panamax vessels offer the greatest exposure to changes in market sentiment
- Large fleet comprised primarily of Capesize (46) and Panamax (30) vessels
- Majority of the fleet is trading spot, and every \$2,500 increase in average TCE rates above breakeven levels results in \$0.44 / share in cash flow
QUESTIONS & ANSWERS
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