Goodbulk Ltd. Expects Dry Bulk Market Volatility in 2019, as Chinese Trade Policies Will Have an Impact on Iron Ore and Coal Trades
GoodBulk Ltd., a leading owner and operator of dry bulk vessels, announced its financial results for the fourth quarter of 2018.
4th Quarter Highlights
• Generated $10.6 million of net profit resulting in earnings per share (EPS) of $0.35. EBITDA for the period was $26.0 million.
• Net profit was net of $2.5 million one-off costs incurred as part of the IPO process, which have been charged to the Statement of Profit or Loss for the fourth quarter.
• Earned an average gross Time Charter Equivalent rate (TCE) of $17,747 per day on our Capesize vessels, $10,303 per day on our Panamax vessel and $12,480 per day on our Supramax vessels.
• Averaged direct vessel operating expenses for the period of $5,849 per vessel per day.
• Hedged all floating interest rate exposure under its credit facilities to maturity, fixing LIBOR at an average of 2.7694%.
• Ended the period with a cash balance of $43.2 million.
• GoodBulk has fixed 26% of its fleet ownership days through the fourth quarter of 2019 at an average daily hire of $20,146 per vessel per day (equivalent to reported gross TCE).
• Declared a regular quarterly cash dividend of $0.34 per common share payable to shareholders of record as of 20 February 2019.
GoodBulk is a leading owner of dry bulk vessels executing a strategy combining low financial leverage with active portfolio management to optimize operational leverage to the dry bulk freight market. This strategy has resulted in GoodBulk announcing its seventh consecutive profitable quarter, with $10.6 million of net profit ($0.35 per share) on revenue and other income of $56.2 million, for the quarter ended December 31, 2018. The Company’s strict financial discipline resulted in industry leading general and administrative expenses of $290 per vessel per day, excluding one-time expenses related to the initial public offering. As a result, the Board of Directors approved a cash dividend of $0.34 per share.
Rates in the Capesize segment in the fourth quarter of the year disappointed relative to expectations averaging $15,829 per day, 31.2% lower than the fourth quarter of 2017 which had averaged $22,995 per day and 28.7% less than the third quarter of 2018 which had averaged $22,207 per day. The weak fourth quarter of 2018 is attributable to a contraction in iron ore and coal imports into China, which decreased sequentially by 41.9 million tonnes from the third quarter of 2018 of which 30.4 million tonnes were Chinese coal imports following the implementation of import restrictions. India’s coal imports in the fourth quarter increased by 4.0 million tonnes sequentially, however, this was not enough to offset the decline from China.
Tensions between the US and China as well as the decline of the Chinese stock market by over 25% in 2018 and a series of other negative Chinese economic data including the Purchasing Managers Index drop 2 to 49.4 led to the government announcing measures to stimulate the economy and reassure financial markets. These measures include investments in and faster approvals for infrastructure projects, a series of cuts in banks’ reserve requirement ratios and tax cuts and should generally be supportive of Chinese demand for seaborne bulk commodities.
The development of the market in 2019 is increasingly subject to Chinese government policies and trade relations, the availability of longhaul iron ore cargoes from Brazil, disruptions caused by the upcoming implementation of IMO 2020 regulations and fleet growth. China’s policies regarding the approvals of new infrastructure construction, domestic production of iron ore and coal, coal import restrictions and pollution control will influence the iron ore and coal trades significantly. The IMO regulations will effectively reduce fleet supply through vessels exiting the market to retrofit scrubbers and to undergo fuel testing. Fleet growth is contained but it is a fine balance with demand in 2019 and the aforementioned items will be the key ones to watch.
Source: Goodbulk Ltd.