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Genco Shipping & Trading Limited Announces Q1 2024 Financial Results

Genco Shipping & Trading Limited (NYSE:GNK) (“Genco” or the “Company”), the largest U.S. headquartered drybulk shipowner focused on the global transportation of commodities, today reported its financial results for the three months March 31, 2024.

First Quarter 2024 and Year-to-Date Highlights

Dividend: Declared a $0.42 per share dividend for Q1 2024
19th consecutive quarterly payout
Cumulative dividends of $5.575 per share or 25% of our share price1
Q1 2024 dividend is payable on or about May 30, 2024 to all shareholders of record as of May 22, 2024.
Financial performance: Net income of $18.8 million for Q1 2024, or basic and diluted earnings per share of $0.44 and $0.43, respectively
Adjusted net income of $21.4 million or basic and diluted earnings per share of $0.50 and $0.49, respectively, excluding other operating expense of $1.8 million, a loss on sale of vessels of $1.0 million and unrealized fuel gains of $0.2 million
Adjusted EBITDA of $41.9 million for Q1 20242
Voyage revenues: Totaled $117.4 million in Q1 2024
Net revenue2 was $76.7 million during Q1 2024
Average daily fleet-wide TCE2 was $19,219 for Q1 2024
Estimated TCE to date for Q2 2024: $20,126 for 65% of our owned fleet available days, based on both period and current spot fixtures2
Fleet renewal: Finalized the sales of three 2009-2010-built 169,000 dwt Capesize vessels in Q1 and Q2 2024
Deleveraging: Paid down $30.0 million of debt in Q1 2024 and an additional $55.0 million of debt in Q2 2024 to date primarily utilizing proceeds from vessel sales

John C. Wobensmith, Chief Executive Officer, commented, “During the first quarter, we further executed our value strategy, which is aimed at driving returns through the drybulk cycles and creating sustained long-term shareholder value. Our first quarter dividend increased quarter-over-quarter and represents our 19th consecutive dividend. Notably, dividends over this period have now increased to $5.575 per share in total, or 25% of our stock price. We also continued to voluntarily pay down debt during the quarter and have lowered our debt by 62% since 2021, while reducing our cash flow breakeven rate to the lowest in the peer group. Finally, we continued to take steps to renew the fleet, closing on the sales of three older Capesize vessels scheduled for special survey in 2024.”

Mr. Wobensmith continued, “We increased first quarter TCE 38% year-over-year, highlighting our leading commercial platform and significant operating leverage. With 65% of our Q2 days fixed at over $20,000 per day, we expect the second quarter to be strong as we further capitalize on the current positive drybulk fundamentals. Progressing through the year, we are well positioned to continue advancing our value strategy for the benefit of shareholders, with a focus on dividends, deleveraging and growth while maintaining industry leading governance standards.”

1 Genco share price as of May 7, 2024.
2 We believe the non-GAAP measure presented provides investors with a means of better evaluating and understanding the Company’s operating performance. Please see Summary Consolidated Financial and Other Data below for further reconciliation. Regarding Q2 2024 TCE, actual results will vary from current estimates. Net revenue is defined as voyage revenues minus voyage expenses, charter hire expenses and realized gains or losses on fuel hedges.

Comprehensive Value Strategy

Genco’s comprehensive value strategy is centered on three pillars:

Dividends: paying sizeable quarterly cash dividends to shareholders
Deleveraging: through voluntary debt repayments to maintain low financial leverage, and
Growth: opportunistically growing and renewing the Company’s asset base
This strategy is a key differentiator for Genco, which we believe creates a compelling risk-reward balance to drive shareholder value over the long-term. The Company intends to pay a sizeable quarterly dividend across the cyclicality of the drybulk market while maintaining significant flexibility to grow the fleet through accretive vessel acquisitions.

Key characteristics of our unique platform include:

Industry low cash flow breakeven rate
Net loan-to-value of 7%3
Strong liquidity position of $347.6 million at March 31, 2024, which consists of:
$48.7 million of cash on the balance sheet
$298.9 million of revolver availability
High operating leverage with our scalable fleet across the major and minor bulk sectors
3 Represents the principal amount of our credit facility debt outstanding less our cash and cash equivalents as of March 31, 2024 divided by estimates of the market value of our fleet as of May 7, 2024 from VesselsValue.com. These figures are pro form for vessels sales that occurred in Q2 2024. The actual market value of our vessels may vary.

Financial Deleveraging

Genco has reduced debt outstanding by ~$280 million or 62% since implementation of our value strategy

Debt outstanding: $170.0 million as of March 31, 2024
Paid down $30.0 million of debt in Q1 and an additional $55.0 million of debt in Q2 to date primarily utilizing proceeds from vessel sales
We plan to continue to actively manage our debt outstanding under our $500 million revolver to reduce interest expense and our cash flow breakeven rate
We plan to continue to voluntarily pay down debt with a medium-term goal of zero net debt in order to enhance our ability to pay meaningful dividends and take advantage of strategic opportunities throughout drybulk market cycles
Fleet Renewal

Sold three of our 169,000 dwt Capesize vessels in Q1 and Q2 2024. The vessels were sold for aggregate gross proceeds of $66.5 million. These sales resulted in approximately $10 million of drydocking savings in 2024 due to the vessels’ upcoming third special surveys. We delivered these vessels to their respective buyers on the following dates:

Genco Commodus: February 7, 2024
Genco Maximus: April 2, 2024
Genco Claudius: April 22, 2024
We continue to further evaluate fleet renewal and growth opportunities in the sale and purchase market.

Dividend Policy

Genco declared a cash dividend of $0.42 per share for the first quarter of 2024. This represents our tenth dividend payment under our value strategy with cumulative dividends declared to date of $4.52 per share. The Q1 2024 dividend is payable on or about May 30, 2024 to all shareholders of record as of May 22, 2024.

Quarterly dividend policy: 100% of excess quarterly operating cash flow ex-maintenance and withholding for future investment

Peter Allen, Chief Financial Officer, commented, “In the year-to-date, we have utilized the built-in flexibility of our $500 million revolving credit facility to voluntarily pay down $85 million of debt so far this year. This active management of our balance sheet has enabled Genco to further lower interest expense and our cash flow breakeven rate, supplementing our earnings and dividend capacity. We continue to improve upon our strong financial position in this firm market while maintaining optionality given the Company’s undrawn revolver availability, low cash flow breakeven rate and a net loan-to-value ratio at an industry low of 7%.”

Genco’s Active Commercial Operating Platform and Fleet Deployment Strategy

We utilize a portfolio approach towards revenue generation through a combination of:

Short-term, spot market employment, and
Opportunistically booking longer term coverage
Our fleet deployment strategy currently remains weighted towards short-term fixtures, which provide us with optionality on our sizeable fleet.

Our barbell approach towards fleet composition enables Genco to gain exposure to both the major and minor bulk commodities with a fleet whose cargoes carried align with global commodity trade flows. This approach continues to serve us well given the upside potential in major bulk rates together with the relative stability of minor bulk rates.

Based on current fixtures to date, our estimated TCE to date for the second quarter of 2024 on a load-to-discharge basis is presented below. Actual rates for the second quarter will vary based upon future fixtures. These estimates are based on time charter contracts entered by the Company as well as current spot fixtures on the load-to-discharge method, whereby revenue is recognized ratably over the voyage from the commencement of loading to the completion of discharge. The actual TCE rates to be earned will depend on the number of contracted days and the number of ballast days at the end of the period. According to the load-to-discharge accounting method, the Company does not recognize revenue for any ballast days or uncontracted days at the end of the second quarter of 2024. At the same time, expenses for uncontracted days will be recognized.

Financial Review: 2024 First Quarter

The Company recorded net income for the first quarter of 2024 of $18.8 million, or $0.44 and $0.43 basic and diluted earnings per share, respectively. Adjusted net income of $21.4 million, or $0.50 and $0.49 basic and diluted earnings per share, respectively, excluding other operating expense of $1.8 million, a loss on sale of vessels of $1.0 million and unrealized fuel gains of $0.2 million. Comparatively, for the three months ended March 31, 2023, the Company recorded net income of $2.6 million, or $0.06 basic and diluted earnings per share, respectively.

Revenue / TCE
The Company’s revenues increased to $117.4 million for the three months ended March 31, 2024, as compared to $94.4 million recorded for the three months ended March 31, 2023, primarily due to higher freight rates earned by our major bulk vessels. The average daily time charter equivalent, or TCE, rates obtained by the Company’s fleet was $19,219 per day for the three months ended March 31, 2024 as compared to $13,947 per day for the three months ended March 31, 2023.

Voyage expenses
Voyage expenses decreased marginally to $37.2 million for the three months ended March 31, 2024 from $37.4 million during the prior year period.

Vessel operating expenses
Vessel operating expenses increased to $25.9 million for the three months ended March 31, 2024 from $24.4 million for the three months ended March 31, 2023. Daily vessel operating expenses, or DVOE, amounted to $6,275 per vessel per day for the first quarter of 2024 compared to $6,160 per vessel per day for the first quarter of 2023. The increase was primarily due to the timing of the purchase of stores and higher repair and maintenance costs.

We believe daily vessel operating expenses are best measured for comparative purposes over a 12-month period in order to take into account all of the expenses that each vessel in our fleet will incur over a full year of operation. Based on current estimates, our DVOE budget for Q2 2024 is $6,350 per vessel per day on a fleet-wide basis.

General and administrative expenses
General and administrative expenses decreased marginally to $7.7 million for the first quarter of 2024 compared to $7.8 million for the first quarter of 2023.

Other operating expense
Other operating expense of $1.8 million recorded during the three months ended March 31, 2024 consists of costs incremental to routine expenses that were incurred related to the Company’s 2024 annual meeting to be held on May 23, 2024.

Depreciation and amortization expenses
Depreciation and amortization expenses increased to $17.2 million for the three months ended March 31, 2024 from $15.9 million for the three months ended March 31, 2023, primarily due to an increase in drydocking amortization expense for certain vessels that completed their respective drydockings during 2023.
Source: Genco Shipping & Trading

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