Genco Shipping & Trading Limited Executes on All Three Pillars of Value Strategy Related to Dividends, Deleveraging and Growth

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 and twelve months ended December 31, 2023.

Fourth Quarter 2023 and Year-to-Date Highlights

Dividend: Declared a $0.41 per share dividend for Q4 2023
18th consecutive quarterly payout
Cumulative dividends of $5.155 per share or 29% of our share price1
Q4 2023 dividend is payable on or about March 13, 2024 to all shareholders of record as of March 6, 2024.
Global refinancing: Closed a $500 million revolving credit facility providing additional capital allocation flexibility and improved terms compared to our previous facility
100% revolver structure with increased borrowing capacity by $156 million, maturity is extended by over two years to the end of 2028 and margin is reduced to a grid of 1.85% to 2.15% from 2.15% to 2.75%
Fleet renewal: Acquired two 2016-built scrubber-fitted Capesize vessels, the Genco Ranger and the Genco Reliance, for $86.1 million, in Q4 2023
Agreed to sell three 2009-2010-built 169,000 dwt Capesize vessels
Saved nearly $10 million in 2024 drydocking capex for these vessels which had upcoming third special surveys due
Financial performance: Net income of $4.9 million for Q4 2023, including a non-cash vessel impairment charge of $13.6 million, or basic and diluted earnings per share of $0.12 and $0.11, respectively
Adjusted net income of $18.6 million or basic and diluted earnings per share of $0.43, excluding the non-cash vessel impairment charge of $13.6 million2
Adjusted EBITDA of $37.1 million for Q4 2023 and $101.5 million for FY 20232
Voyage revenues: Totaled $115.5 million in Q4 2023
Net revenue2 was $70.6 million during Q4 2023
Average daily fleet-wide TCE2 was $17,373 for Q4 2023
Fleet-wide TCE for FY 2023: $14,766, which outperformed our scrubber-adjusted internal benchmark by approximately $1,300 per day3
Estimated TCE to date for Q1 2024: $18,724 for 81% of our owned fleet available days, based on both period and current spot fixtures2
John C. Wobensmith, Chief Executive Officer, commented, “2023 marked another strong year for Genco, as we continued to take concrete steps to drive sustainable long-term shareholder value while remaining the #1 shipping company for the third consecutive year in the Webber Research ESG Scorecard. Notably, we further executed on all three pillars of our comprehensive value strategy focused on dividends, deleveraging and growth. We declared our 18th consecutive dividend, increasing cumulative dividends to shareholders to $5.155 per share over this period. We also continued to enhance our financial strength, lowering our debt by 55% since 2021 and reducing our cash flow breakeven rate to the lowest in the peer group. In terms of growth, including the two high-specification scrubber-fitted Capesize vessels we acquired in 2023 to advance our fleet renewal strategy, we have invested $520 million over the past 5 years. We also enhanced our ability to opportunistically drive growth with the closing of our $500 million revolving credit facility.”

Mr. Wobensmith continued, “Our performance in the fourth quarter was strong. Importantly, we capitalized on our industry leading commercial platform and our significant operating leverage to once again outperform benchmarks and increase TCE by 44% from third quarter levels. We expect the first quarter to be solid as 81% of our Q1 days are fixed at over $18,700 per day.”

Mr. Wobensmith concluded, “Since implementing our value strategy in early 2021, we have taken important steps to position Genco to drive value through drybulk shipping market cycles. Going forward, we continue to focus on providing significant returns to shareholders, reducing our financial risk and maximizing our ability to pursue accretive growth opportunities. At the same time, we remain committed to maintaining high corporate governance standards for the benefit of shareholders.”

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 10%4
Strong liquidity position of $341.7 million at December 31, 2023, which consists of:
$46.9 million of cash on the balance sheet
$294.8 million of revolver availability
High operating leverage with our scalable fleet across the major and minor bulk sectors
4 Represents the principal amount of our credit facility debt outstanding less our cash and cash equivalents as of December 31, 2023 divided by estimates of the market value of our fleet as of February 20, 2024 from VesselsValue.com. These figures are pro forma for agreed upon vessel sales, the delivery of which occurred or is expected to occur in Q1 2024. The actual market value of our vessels may vary.

Financial deleveraging

Genco has reduced debt outstanding by ~$250 million or 55% since implementation of our value strategy

Debt outstanding: $200.0 million as of December 31, 2023
Drew down $65.0 million under our revolver in Q4 2023 to partially fund the acquisition of the Genco Ranger and the Genco Reliance
Later in Q4, we paid down $9.8 million of debt as we actively manage our debt outstanding under our $500 million revolver to reduce interest expense
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
Growth

Acquired two 2016-built 181,000 dwt scrubber-fitted Capesize vessels for $86.1 million constructed at SWS shipyard in China. We took delivery of these vessels on the following days:

Genco Reliance: November 21, 2023
Genco Ranger: November 27, 2023
We took delivery of the two acquired Capesize vessels as the freight rate environment was strengthening. As such, EBITDA generated on the first fixtures for these ships are estimated to have paid off approximately 10% of the purchase price.

Furthermore, we agreed to sell three of our 169,000 dwt Capesize vessels for aggregate gross proceeds of $56.0 million. These sales resulted in approximately $10 million of drydocking savings in 2024 due to the vessels’ upcoming third special surveys. We delivered or expect to deliver these vessels to their respective buyers based on the following schedule:

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

Dividend Policy

Genco declared a cash dividend of $0.41 per share for the fourth quarter of 2023. This represents our ninth dividend payment under our value strategy with cumulative dividends declared to date of $4.10 per share. The Q4 2023 dividend is payable on or about March 13, 2024 to all shareholders of record as of March 6, 2024.

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

Operating cash flow is defined as net revenue (consisting of voyage revenue less voyage expenses, charter hire expenses, and realized gains or losses on fuel hedges), less operating expenses (consisting of vessel operating expenses, general and administrative expenses other than non-cash restricted stock expenses, technical management fees, and interest expense other than non-cash deferred financing costs), for purposes of the foregoing calculation. Estimated expenses and capital expenditures for Q1 2024 are estimates and subject to change. For the first quarter, operating expenses are expected to exclude extraordinary annual meeting related expenses.

The voluntary quarterly reserve for the first quarter of 2024 under the Company’s dividend formula is expected to be $19.5 million, which remains fully within our discretion. A key component of Genco’s value strategy is maintaining a voluntary quarterly reserve, as well as the optionality for the use of the reserve as Genco seeks to pay sizeable dividends across the cyclicality of the drybulk market. Subject to the development of freight rates for the remainder of the first quarter and our assessment of our liquidity and forward outlook, we maintain flexibility to reduce the quarterly reserve to pay dividends or increase the amount of dividends otherwise payable under our formula. The reserve is set by our Board of Directors at its discretion, and our Board has generally allotted an amount for anticipated debt prepayments plus an additional amount. We plan to set the voluntary reserve on a quarterly basis for the subsequent quarter.

Anticipated uses for the voluntary reserve include, but are not limited to:

Vessel acquisitions
Debt repayments, and
General corporate purposes
The Board expects to reassess the payment of dividends as appropriate from time to time. Our quarterly dividend policy and declaration and payment of dividends are subject to legally available funds, compliance with applicable law and contractual obligations (including our credit facility) and the Board of Directors’ determination that each declaration and payment is at the time in the best interests of the Company and its shareholders after its review of our financial performance.

Peter Allen, Chief Financial Officer, commented, “During the fourth quarter, we continued to enhance our financial strength and increase the fleet’s earnings power. We closed on a new $500 million revolving credit facility, meaningfully increasing Genco’s borrowing capacity, reducing margin, extending maturity and augmenting our ability to capitalize on opportunistic growth. This 100% revolver structure aligns well with Genco’s value strategy, providing both the flexibility to continue on our debt paydown trajectory and the optionality to strategically access capital when attractive opportunities materialize. Furthermore, during the quarter, the operating leverage of the fleet was on full display. Net revenues increased by approximately 50% in Q4 compared to Q3, while our recurring cost structure remained nearly flat over that period, illustrating the high degree of operating leverage inherent in the business and specifically our approach to fleet composition. This cash flow generation together with our new revolver enabled Genco to increase our overall liquidity position to $341.7 million at year end. Lastly, following the completion of our agreed upon vessel sales, our net loan-to-value ratio is expected to be further reduced to an industry low of 10%.”

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 first quarter of 2024 on a load-to-discharge basis is presented below. Actual rates for the first 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 first quarter of 2024. At the same time, expenses for uncontracted days will be recognized.

Financial Review: 2023 Fourth Quarter

The Company recorded net income for the fourth quarter of 2023 of $4.9 million, or $0.12 and $0.11 basic and diluted earnings per share, respectively. Adjusted net income is $18.6 million or $0.43 basic and diluted earnings per share, excluding a non-cash vessel impairment charge of $13.6 million. During the fourth quarter of 2023, we entered into agreements to sell three of our 169,000 dwt Capesize vessels, that we are divesting as part of fleet renewal with third special surveys scheduled in 2024. Therefore, the values of these vessels were adjusted to their net sales prices during the fourth quarter of 2023. Comparatively, for the three months ended December 31, 2022, the Company recorded net income of $28.7 million, or $0.67 basic and diluted earnings per share, respectively.

Revenue / TCE
The Company’s revenues decreased to $115.5 million for the three months ended December 31, 2023, as compared to $127.0 million recorded for the three months ended December 31, 2022, primarily due to lower rates earned by our minor bulk vessels and a decrease in revenues earned by third party chartered-in vessels, partially offset by higher rates achieved by our major bulk vessels. The average daily time charter equivalent, or TCE, rates obtained by the Company’s fleet was $17,373 per day for the three months ended December 31, 2023 as compared to $19,330 per day for the three months ended December 31, 2022.

Voyage expenses
Voyage expenses were $42.5 million for the three months ended December 31, 2023 compared to $43.5 million during the prior year period. This decrease was primarily due to lower bunker expenses for our minor bulk vessels and third-party chartered-in vessels, partially offset by higher voyage expenses incurred by our major bulk vessels.

Vessel operating expenses
Vessel operating expenses increased to $25.4 million for the three months ended December 31, 2023 from $20.9 million for the three months ended December 31, 2022. Daily vessel operating expenses, or DVOE, amounted to $6,153 per vessel per day for the fourth quarter of 2023 compared to $5,164 per vessel per day for the fourth quarter of 2022. The increase was primarily due to the timing of the purchase of stores and spare parts and timing of crew changes as well as higher repair and insurance related expenses. For the full year of 2023, our DVOE was $6,017 per vessel per day, essentially in line with our full year budget.

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 estimates provided by our technical manager, our DVOE budget for Q1 2024 is $6,150 per vessel per day on a fleet-wide basis.

General and administrative expenses
General and administrative expenses decreased to $7.0 million for the fourth quarter of 2023 compared to $7.4 million for the fourth quarter of 2022, primarily due to a decrease in compensation related expenses.

Depreciation and amortization expenses
Depreciation and amortization expenses increased to $16.7 million for the three months ended December 31, 2023 from $16.0 million for the three months ended December 31, 2022, primarily due to an increase in drydocking amortization expense for certain vessels that completed their respective drydockings during the third quarter of 2022 through the second quarter of 2023.

Financial Review: Twelve Months 2023

The Company recorded net loss of $12.9 million or $0.30 basic and diluted loss per share for the twelve months ended December 31, 2023. Adjusted net income is $28.8 million or $0.67 basic and diluted earnings per share excluding a non-cash vessel impairment charge of $41.7 million. This compares to net income of $158.6 million or $3.74 and $3.70 basic and diluted earnings per share, respectively, for the twelve months ended December 31, 2022.

Revenue / TCE
The Company’s revenues decreased to $383.8 million for the twelve months ended December 31, 2023 compared to $536.9 million for the twelve months ended December 31, 2022. The decrease in voyage revenues was primarily due to lower rates earned by our minor bulk vessels. Additionally, there was a decrease in voyage revenues earned by third party chartered-in vessels primarily as a result of fewer chartered-in days, as well as decrease in rates earned. TCE rates obtained by the Company decreased to $14,766 per day for the twelve months ended December 31, 2023 from $23,824 per day for the twelve months ended December 31, 2022.

Voyage expenses
Voyage expenses decreased to $143.0 million for the twelve months ended December 31, 2023 from $153.9 million for the same period in 2022. This decrease was primarily due to lower bunker expenses for our minor bulk vessels and third-party chartered-in vessels, partially offset by higher voyage expenses incurred by our major bulk vessels.

Vessel operating expenses
Vessel operating expenses decreased to $97.1 million for the twelve months ended December 31, 2023 from $99.5 million for the twelve months ended December 31, 2022. DVOE was $6,017 for 2023 versus $6,197 in 2022. This decrease was primarily due to an absence of COVID-19 related expenses, partially offset by an increase in the purchase of spare parts, higher insurance related costs, and higher crew costs due to the timing of crew changes. For the full year of 2023, our DVOE of $6,017 per vessel per day, essentially in line with our full year budget.

General and administrative expenses
General and administrative expenses for the twelve months ended December 31, 2023 increased to $28.3 million as compared to $25.7 million in the same period of 2022 primarily due to higher nonvested stock amortization expense.

EBITDA
EBITDA for the twelve months ended December 31, 2023 amounted to $59.7 million compared to $226.8 million during the prior period. During the twelve months of 2023 and 2022, EBITDA included non-cash impairment charges as well as gains and losses on fuel hedges. Excluding these items, our adjusted EBITDA would have amounted to $101.5 million and $226.8 million, for the respective periods.
Source: Genco Shipping & Trading Limited