Results Q3 - 2017
November 21, 2017
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 \$0.4 million and earnings per share of \$0.00 for the third quarter of 2017
- An improvement of \$12.4 million compared with a net loss of \$12.0 million for the second quarter of 2017
- Adjusted EBITDA in the third quarter was \$40.4 million, compared with \$29.7 million in the second quarter of 2017
- Entered into agreement to sell six Ultramax vessels
- Took early delivery of one Capesize newbuilding and took delivery of the remaining three of the 14 modern dry bulk vessels acquired earlier this year
- Raised \$100 million in capital through a \$66 million equity offering and a \$34 million equity in-kind contribution as partial consideration for two modern Capesize vessels, one of which was delivered in the fourth quarter
- Terminated the covenant waivers related to the Company's recourse debt
Profit & Loss
| (in thousands of \$) |
Q3 2017 |
Q2 2017 |
| Operating revenues |
|
|
| Time charter revenues |
59,506 |
50,095 |
| Voyage charter revenues |
67,178 |
49,551 |
| Other revenues |
266 |
36 |
| Total operating revenues |
126,950 |
99,682 |
| Gain (loss) on sale of assets and amortization of deferred gains |
65 |
64 |
| Other operating income (expenses) |
1,591 |
1,149 |
| Operating expenses |
|
|
| Voyage expenses and commission |
34,970 |
28,567 |
| Ship operating expenses |
37,206 |
31,317 |
| Charter hire expense |
20,837 |
13,313 |
| Administrative expenses |
3,151 |
3,515 |
Impairment
loss on vessels and newbuildings |
1,066 |
- |
| Depreciation |
21,235 |
19,239 |
| Total operating expenses |
118,465 |
95,951 |
| Net operating income/(loss) |
10,141 |
4,944 |
| Other income (expenses) |
|
|
| Interest income |
520 |
483 |
| Interest expense |
(16,245) |
(14,394) |
| Gain/(Loss) on derivatives |
1,523 |
(3,772) |
| Equity results of associated companies, including impairment |
4,117 |
283 |
| Other financial items |
337 |
519 |
| Total other (expenses) income, net |
(9,748) |
(16,881) |
| Net income (loss) before income taxes |
393 |
(11,936) |
| Tax expense |
(25) |
24 |
| Net income/ (loss) |
368 |
(11,961) |
| Earnings (loss) per share: basic and diluted |
\$0.00 |
\$(0.10) |
| Adjusted EBITDA |
40,448 |
29,741 |
TCE per day 12,958 12,237
- TCE (Operating revenues, including other operating income, less voyage expenses) increased by \$21.3 million in the third quarter compared to the previous quarter, primarily due to a \$9.8 million contribution from 16 recently acquired vessels as well as improved freight rates
- Ship operating expenses increased by \$5.9 million mainly due to a full quarter's operating expenses for most of the recently acquired vessels
- Charterhire expenses increased by \$7.5 million, reflecting increased short-term charter-in activity at higher rates
- Positive contribution from derivatives of US interest rate hedges, FFA and bunkers instruments during third quarter
- \$4.1 million income from associated companies mainly relates to the sale of the joint venture vessel Golden Opus
Balance Sheet
| (in thousands of \$) |
Q3 2017 |
Q2 2017 |
| ASSETS |
|
|
| Short term |
|
|
| Cash and cash equivalents |
123,926 |
122,699 |
| Restricted cash |
3,966 |
4,361 |
| Other current assets |
109,562 |
107,963 |
| Long term |
|
|
| Restricted cash |
62,370 |
64,168 |
| Vessels, net |
2,193,838 |
2,243,448 |
| Vessels held for sale |
141,500 |
- |
| Vessels under capital lease, net |
2,286
105,726
51,732 |
2,512
126,506
58,413 |
| Newbuildings |
|
|
| Other long term assets |
|
|
| Total assets |
2,794,906 |
2,730,070 |
| LIABILITIES AND EQUITY |
|
|
| Short term |
|
|
Current portion of long
-term debt |
28,780 |
- |
| Current portion of obligations under capital lease |
5,140 |
5,043 |
| Other current liabilities |
54,649 |
51,898 |
| Long term |
|
|
Long
-term debt |
1,302,120 |
1,287,498 |
| Obligations under capital lease |
8,793 |
10,125 |
| Other long term liabilities |
8,098 |
8,136 |
| Equity |
1,387,327 |
1,367,370 |
Total liabilities and equity 2,794,906 2,730,070
- \$190.3 million in cash, including cash classified as restricted, only a marginal change compare to previous quarter
- \$26.2 million in positive cash generated from operation, offset by \$20.8 million net used in investing activities and \$4.2 million used in financing activities
- Three remaining vessels from the Quintana acquisition delivered to the company early in the third quarter. The acquisition cost of the vessels primarily comprised of 2,850,000 shares in the Company, and \$43.3 million in assumed debt financing
- Final installments paid on Golden Nimbus of \$29.6 million following delivery in September. Available financing of \$25 million related to this delivery was drawn early October 2017
- Only debt to be paid under cash sweep classified as short term, not regular amortization or debt related to the sale of Ultramaxes
Entered into agreement to sell six Ultramax vessels
- Transaction announced in September 2017
- Following the delivery of all vessels, expected net proceeds to be ~\$100 million after debt prepayment of \$40 million
Equity offering and concurrent acquisition of two Capesize vessels
- Net cash proceeds of \$64 million from equity offering
- \$34 million in equity-in-kind from Hemen Holding Ltd as part-finance for two Capesize vessels
- Sellers credit of \$43 million in total to be assumed on delivery
- Cash payment of \$9 million in total to be paid at delivery
- One vessel delivered in November, and the remaining vessel expected in January 2018
Termination of waivers on resource debt
- One year ahead of the schedule agreed to in the first quarter 2016
- Prepaid all deferred debt of \$28.8 million in October 2017
- Resumption of ordinary quarterly amortization as from Q4 2017
- \$14.8 million in Q4 2017
- \$16.7 million from Q1 2018 after newbuilding deliveries
Young, fuel efficient fleet with average age of less than 5 years
| Fleet profile |
|
|
|
|
|
|
|
|
|
Capesize |
Panamax /
Kamsarmax |
Iceclass
Panamax |
Ultramax
/
Supramax |
Total |
|
|
|
| Sailing vessels |
41 |
17 |
12 |
3 |
73 |
|
|
|
| Newbuildings |
5 |
- |
- |
- |
5 |
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
46 |
17 |
12 |
3 |
78 |
|
|
|
Took delivery of one Capesize in September and paid delivery installment of \$29.6 million in cash and drew down \$25 million in debt in October 2017
Available financing of \$125 million and net cash requirement of \$20 million related to remaining CAPEX
Chartering profile
- 10 Capesize vessels on index-linked long term TC-out
- Four Panamax vessels on long term TC out at fixed rate
- Fixed seven Capesize vessels on fixed rates for the year 2018 at an average gross rate of \$16,850
- Includes one vessel delivered early to the Company and two newbuildings scheduled to be delivered in Q1 2018
- Remaining fleet is trading spot, in spot pools or on short term charters expiring within six to nine months
Vessel Operating Expenses
Maintaining competitive OPEX levels
- Fully-burdened Opex includes dry docking and management fees
- Two vessels completed dry docks in the third quarter of 2017
- Start-up costs for the newly acquired vessels have contributed to slightly higher daily costs
- G&A net of management fees are estimated to be approximately \$400 per day in 2018 on a fully delivered fleet
Dry bulk market
Utilization continues to rebound from historically low levels
Supply, demand and utilization rate - dry bulk ships 10,000 dwt +
Seaborne Trade Continues to Record New Highs
Growth observed for all major commodities in the third quarter
Seaborne trade of dry bulk commodities (major importers)
Source: SSY
Chinese Apparent Steel Demand Remains at Strong Levels
Gross profit (steel price minus cost of coking coal and iron ore; all prices spot)
Australia and Brazil Remain Major Iron Ore Exporters
Price differentials on higher quality iron ore support this trend
Iron ore price differentials
Improvements have come primarily from Asia, where inventories are lower than average
Seaborne coal imports by major importers
October
77,5
7,4
Strong Electricity Consumption Supports Coal Demand
Grain Exports had a Strong Year so far
Soybean and soybean meal exports by source
USA Brazil Argentina
Deliveries Slowing into Year End
Handymax / Supramax Handysize
-2,0 -1,0 0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Mill dwt LTM Delivered: 10.1m dwt LTM Scrapped: 4.2m dwt
Capesize Panamax / Post-Panamax
Downside Case for Supply Growth
- Construction has not even commenced on 27% of the orders (in dwt) scheduled for delivery within end of H1 2018
- Further delays of deliveries are likely based on progress in production
- Should see very few deliveries in Q4 2017
Forecast fleet growth is at its lowest point ever, despite some new ordering
S&P Prices Stable (yet still low) Following Strong Increases
Panamax values and earnings
Market has performed according to expectations as supply/demand balance improves
Upside potential Downside risks
Expect to see continuation of positive trend in dry bulk environment, despite near-term concerns around China. Longer term fundamentals are supportive as long as new ordering is minimal.
Q & A
Thank you for your attention!