RESULTS Q3 - 2018 November 20, 2018
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 \$35.3 million and earnings per share of \$0.24 for the third quarter of 2018, compared with net income of \$9.0 million and earnings per share of \$0.06 for the second quarter of 2018
- Adjusted EBITDA in the third quarter was \$78.8 million, compared with \$54.0 million in the second quarter of 2018 and \$40.4 million in the third quarter 2017
- Declared the first four options to install exhaust gas scrubbers on Capesize vessels in addition to previously announced contracts to install scrubbers on 16 Capesize vessels
- Completed the sale of the Panamax vessel Golden Eminence to an unrelated third party
- Average TCE rate for the fleet was \$17,730 per day in the third quarter of 2018, compared with \$15,215 per day in the second quarter of 2018
- Increased charter coverage for both Panamax and Capesize vessels
- Announces a cash dividend of \$0.15 per share for the third quarter
4
PROFIT & LOSS
| (in thousands of \$) |
Q3 2018 |
Q2 2018 |
Quarterly
Variance |
Operating
revenues |
190,006 |
143,991 |
46,014 |
| Voyage expenses |
(54,533) |
(32,603) |
(21,930) |
| Net revenues |
135,473 |
111,388 |
24,084 |
| Ship operating expenses |
(36,699) |
(39,150) |
2,451 |
| Administrative expenses |
(3,621) |
(3,688) |
67 |
Charter
hire expenses |
(21,022) |
(19,056) |
(1,966) |
Depreciation
/ impairment |
(23,345) |
(24,437) |
1,093 |
| Other gains (losses) |
65 |
64 |
1 |
| Net operating expenses |
(84,622) |
(86,267) |
1,646 |
| Net operating income (loss) |
50,851 |
25,121 |
25,730 |
Net financial
expenses |
(17,287) |
(17,447) |
161 |
Derivatives and other
financial income (loss) |
1,734 |
1,319 |
414 |
| Net income before taxation (loss) |
35,298 |
8,993 |
26,305 |
Income Tax
expense |
13 |
13 |
- |
| Net income (loss) |
35,285 |
8,980 |
26,305 |
| Earnings (loss) per share: basic and diluted |
\$0.24 |
\$0.06 |
0,18 |
| Adjusted EBITDA |
78,846 |
54,046 |
24,803 |
| TCE per day |
17,730 |
15,215 |
2,515 |
CASH FLOW DURING THE QUARTER
BALANCE SHEET
| (in thousands of \$) |
Q3 2018 |
Q2 2018 |
Quarterly
Variance |
| ASSETS |
|
|
|
| Short term |
|
|
|
| Cash and cash equivalents (incl. restricted cash) |
312,772 |
265,505 |
47,267 |
| Other current assets |
162,274 |
148,057 |
14,217 |
| Long term |
|
|
|
| Restricted cash |
55,633 |
56,156 |
(523) |
Vessels
(incl. newbuildings and held-for-sale) |
2,429,561 |
2,467,064 |
(37,503) |
| Other long term assets |
38,875 |
40,745 |
(1,870) |
| Total assets |
2,999,115 |
2,977,526 |
21,589 |
| LIABILITIES AND EQUITY |
|
|
|
| Short term |
|
|
|
Current portion of long
term debt and capital lease |
250,394 |
236,900 |
13,494 |
| Other current liabilities |
82,494 |
73,067 |
9,427 |
| Long term |
|
|
|
Long
term debt and capital lease |
1,134,754 |
1,156,833 |
(22,079) |
| Other long term liabilities |
7,501 |
7,723 |
(222) |
| Equity |
1,523,972 |
1,503,003 |
20,969 |
| Total liabilities and equity |
2,999,115 |
2,977,526 |
21,589 |
MODERN, EFFICIENT FLEET
- Fully-burdened Opex includes dry docking and management fees
- Five vessels dry docked year to date, and one more to be docked later this year
- Average fleet age of ~5 years and majority of the fleet designed with fuel-efficient engines and ballast water treatment systems
- Additional advantage to be gained through scrubber installations
5 300 5 100 390 80 - 1 000 2 000 3 000 4 000 5 000 6 000 Supramax & Panamax Capesize OPEX Drydock & Surveys
OPERATING EXPENSES (YTD 2018) BWTS INSTALLATION SCHEDULE
SCRUBBERS FURTHER INCREASE COMPETITIVE ADVANTAGE UNDER NEW SULPHUR CAPS
- Golden Ocean's fleet of Capesize vessels has an average age of just 4 years
- The Company signed contracts to install 20 exhaust gas scrubbers on Capesize vessels with options for five additional vessels; installations to coincide with scheduled dry docks in 2019 and 2020
- Strategic investment decision creates a further competitive advantage as new regulations on sulphur emissions come into effect in 2020
POTENTIAL SCRUBBER ADVANTAGE
SCRUBBER INSTALLATION SCHEDULE
Modern 10 yr old NOTE: COMPLIANT FUEL PRICE ESTIMATED 1:2 FO:GASOIL BLEND; ASSUMES MODERN AND 10 YR OLD VESSELS CONSUME 9,500 AND 11,750 MT, RESPECTIVELY, OF FUEL ANNUALLY
FLEET DEPLOYMENT
Opportunistic chartering strategy with significant operating leverage
CHARTERING PROFILE
CREDIT FACILITIES
CREDIT FACILITY SUMMARY(1)
Recourse Non-recourse
RECOURSE DEBT
Selected covenants
- Ordinary amortization of \$16.6 million per quarter
- 135% MVC
- Convertible Bond matures in January 2019
NON-RECOURSE DEBT
Selected covenants through July 1, 2019
- No regular amortization payments
- Cash sweep mechanism
- 105% MVC
Selected covenants post July 1, 2019
- Amortization payments resume
- 125 135% MVC
DRY BULK MARKET UPDATE
DRY BULK SUPPLY / DEMAND & UTILIZATION
Utilization continued to improve in the third quarter and averaged ~87% in the quarter
SUPPLY, DEMAND AND UTILIZATION RATE - DRY BULK SHIPS 10,000 DWT +
GROWTH IN SEABORNE TRADE CONTINUED
Total global dry bulk trade reached record levels in the third quarter
SEABORNE TRADE OF DRY BULK COMMODITIES (MAJOR IMPORTERS)
WORLD STEEL PRODUCTION TRENDS
Chinese steel production remained strong, offsetting a slight decline in other parts of the world
ANNUAL CHANGE IN STEEL PRODUCTION
IRON ORE PRICES STEADY DESPITE DECLINES IN STEEL PRICES AND MARGINS
GROSS PROFIT (STEEL PRICE MINUS COST OF COKING COAL AND IRON ORE; ALL PRICES SPOT)
Gross profit using Cn coking coal price, Au iron ore price and Tangshan steel billett price
IRON ORE PRICE DIFFERENTIALS
AUSTRALIA AND BRAZIL REMAIN MAJOR IRON ORE EXPORTERS
QUARTERLY EXPORTED IRON ORE VOLUMES PER COUNTRY
COAL DEMAND REMAINS HIGH, BUT INVENTORY BUILDS REPRESENT SHORT-TERM OVERHANG
CONTINUED YEAR OVER YEAR GROWTH IN ELECTRICITY CONSUMPTION SUPPORTS COAL DEMAND
CHINESE ELECTRICITY OUTPUT
CHINESE ELECTRICITY OUTPUT BY SOURCE
U.S. GRAIN EXPORTS WERE STRONG, BUT HAVE BEEN DISRUPTED BY TRADE TENSIONS; TOTAL VOLUMES GROWING YOY
GRAIN EXPORTS BY SOURCE
SOYBEAN AND SOYBEAN MEAL EXPORTS BY SOURCE
ZERO NET FLEET GROWTH QUARTER OVER QUARTER
HANDYMAX / SUPRAMAX HANDYSIZE
PROJECTED FLEET GROWTH IS MODERATE
Some 2018 deliveries pushed out to 2019; despite new ordering observed, any additional capacity from now expected to be placed in 2021 or later
FLEET GROWTH (ASSUMES NO SCRAPPING OR NEW ORDERING)
DOWNSIDE CASE FOR SUPPLY GROWTH
Continued slippage is expected as ~37% of vessels scheduled for delivery by the end of H1 2019 have not even commenced construction
STATUS OF ORDERBOOK
S&P PRICES IMPROVE FOR MODERN VESSELS WITH NOTABLE PREMIUM TO OLDER TONNAGE
CAPESIZE VALUES AND EARNINGS
PANAMAX VALUES AND EARNINGS
OUTLOOK AND STRATEGY
RELATIVELY BALANCED MARKET DESPITE HIGH VOLATILITY DUE TO TRADE TENSIONS AND SHORT TERM FACTORS
UPSIDE POTENTIAL DOWNSIDE RISKS
COMPETITIVE CASH COST DRIVE EARNINGS AND PROTECTS DOWNSIDE
- Fully-burdened Opex includes dry docking and management fees
- G&A net of management fees are estimated to be approximately \$450 per day in 2018 on a fully delivered fleet of 77 vessels
- Average margin above LIBOR on bank financing is competitive at ~2.3% and majority of bank debt has 20 year profile (adjusted for year of age)
CASH BREAKEVEN LEVELS VS. INDEXES(1)
(1) ESTIMATED CASH BREAKEVEN LEVELS AT TODAYS INTEREST LEVEL, INCLUDING FULL CASH-SWEEP FOR NON-RECOURSE DEBT AND EXCLUDING PROFITABLE CHARTERS WHICH WILL REDUCE THE CASH BREAKEVEN FROM THESE LEVELS SOURCE: CLARKSONS
QUESTIONS & ANSWERS
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