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Genco generated a 71% increase in TCE relative to the prior quarter says John C. Wobensmith, CEO


Genco Shipping & Trading, the largest U.S. headquartered drybulk shipowner focused on the transportation of major and minor bulk commodities globally, today reported its financial results for the three months and nine months ended September 30, 2020.

The following financial review discusses the results for the three and nine months ended September 30, 2020 and September 30, 2019.

Third Quarter 20 20 and Year-to-Date Highlights

  • Genco announced a regular quarterly cash dividend of $0.02 per share for the third quarter of 2020
    • Payable on or about November 25, 2020 to all shareholders of record as of November 17, 2020
    • We have now declared cumulative dividends totaling $0.735 per share over the last five quarters
  • Genco maintains a strong financial position with $160.8 million of cash, including $24.5 million of restricted cash, as of September 30, 2020
  • Voyage revenues totaled $87.5 million and net revenue1 (voyage revenues minus voyage expenses and charter hire expenses) totaled $53.0 million during Q3 2020
    • Our average daily fleet-wide time charter equivalent, or TCE1, for Q3 2020 was $11,456
    • We estimate our TCE to date for Q4 2020 to be $13,004 for 57% of our owned fleet available days, based on current fixtures
  • We recorded a net loss of $21.1 million for the third quarter of 2020
    • Basic and diluted loss per share of $0.50
    • Adjusted net income of $1.2 million or basic and diluted earnings per share of $0.03, excluding $21.9 million in non-cash vessel impairment charges and a $0.4 million loss on sale of vessels
  • Recorded adjusted EBITDA of $22.3 million during Q3 20201
  • In the second half of 2020 to date, we have completed the sale of four vessels
    • The Baltic Wind, a 2009-built Handysize, delivered to buyers on July 7, 2020
    • The Baltic Breeze, a 2010-built Handysize, delivered to buyers on July 31, 2020
    • The Genco Bay, a 2010-built Handysize, delivered to buyers on October 1, 2020
    • The Baltic Jaguar, a 2009-built Supramax, delivered to buyers on October 16, 2020
  • We have also agreed to sell the Genco Normandy, a 2007-built Supramax, the Genco Loire, a 2009-built Supramax, and the Baltic Panther, a 2009-built Supramax, which are part of our fleet renewal program and we expect to deliver to the respective buyers during Q4 2020 and Q1 2021
  • Genco’s focus remains on the health and safety of our crew members and our team onshore during this uncertain time
    • We have completed crew rotations on the majority of our fleet in the year-to-date, involving over 1,600 crew members, despite various travel and port restrictions and during a time in which seafarers globally have been onboard vessels well in excess of their original contract duration

John C. Wobensmith, Chief Executive Officer, commented, “During the third quarter, we generated a 71% increase in TCE relative to the prior quarter, capitalizing on a strengthening drybulk freight rate environment. In-line with our thesis of a second half recovery, we employed our vessels in the spot market in the third quarter and have continued implementing this approach to further capture the potential upside of a recovering market. Notably, our TCE to date has continued to improve, led by our Capesize bookings at nearly $20,000 per day thus far in the fourth quarter. Going forward, our outlook for the drybulk market remains favorable for the balance of the year and into 2021. Specifically, the orderbook as a percentage of the fleet is at an all-time low which limits net fleet growth, while the Brazilian iron ore recovery and growth story that has materialized since June is expected to continue. We believe that Genco is well-positioned to take advantage of these positive fundamentals due to our ownership of both major and minor bulk vessels, our world-class in-house commercial operating platform and our industry leading balance sheet.”

Mr. Wobensmith continued, “We are pleased to have declared our fifth consecutive quarterly dividend and now have declared dividends totaling $0.735 per share since we initiated our dividend policy in the third quarter of 2019. Effectively allocating capital for the benefit of shareholders remains a priority, as we have paid a quarterly dividend during a time of improved market conditions currently as well as in the market through earlier in the year. This success highlights our commitment to both returning capital to shareholders while maintaining our strong balance sheet which we view as a key differentiator of Genco.”

1 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 a further reconciliation.

Genco’s active commercial operating platform and fleet deployment strategy

Overall, our fleet deployment strategy 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 experienced in major bulk rates together with the relative stability of minor bulk rates in the year-to-date.

Regarding our Q4 2020 fixtures to date, the firm drybulk market during the third quarter has carried into October and November to date, led by the Capesize sector. With our active commercial trading strategy currently geared towards spot market employment together with the absence of any scheduled drydockings for the balance of 2020 for our Capesize vessels, we have positioned our fleet to capture this strong market. During the second half of this past quarter, we repositioned certain Capesize vessels to the Atlantic basin as the market eased to better position these assets for the market improvement which materialized at the end of September and into the beginning of October. We further plan to ballast select Capesize vessels to the Atlantic basin to take advantage of improving cargo flows from the region.

For our minor bulk vessels, market conditions have also improved led by a strong grain trade coupled with augmented trade flows of commodities closely tied to global economic activity. Based on current fixtures to date, we estimate the following to be our TCE to date for the fourth quarter of 2020:

  • Capesize: $19,363 for 52% of the owned available Q4 2020 days
  • Ultramax and Supramax: $10,113 for 62% of the owned available Q4 2020 days
  • Handysize: $8,731 for 47% of the owned available Q4 2020 days
  • Fleet average: $13,004 for 57% of the owned available Q4 2020 days

Actual rates for the fourth quarter will vary based upon future fixtures. The above fourth quarter to date estimate compares to our third quarter of 2020 TCE results by class which are listed below.

  • Capesize: $16,287
  • Ultramax and Supramax: $9,857
  • Handysize: $6,445
  • Fleet average: $11,456

Regular Quarterly Cash Dividend Policy

For the third quarter of 2020, Genco declared a regular quarterly cash dividend of $0.02 per share. Management and the Board of Directors determined to pay a dividend in light of the Company’s strong balance sheet, its emphasis on returning cash to shareholders and the receipt of net proceeds from the sale of non-core assets. This dividend is payable on or about November 25, 2020, to all shareholders of record as of November 17, 2020.

Dividends going forward remain subject to the determination of our Board of Directors each quarter after its review of our financial performance and will depend upon various factors, including limitations under our credit agreements and applicable provisions of Marshall Islands law. Heightened economic uncertainty as a result of the COVID-19 pandemic and related economic conditions may result in our suspension, reduction, or termination of future quarterly dividends.

Financial Review: 20 20 Third Quarter

The Company recorded a net loss for the third quarter of 2020 of $21.1 million, or $0.50 basic and diluted net loss per share. Comparatively, for the three months ended September 30, 2019, the Company recorded a net loss of $14.6 million, or $0.35 basic and diluted net loss per share. Net loss for the three months ended September 30, 2020, includes non-cash vessel impairment charges of $21.9 million as well as a loss on sale of vessels of $0.4 million. Net loss for the three months ended September 30, 2019, includes non-cash vessel impairment charges of $12.2 million.

The Company’s revenues decreased to $87.5 million for the three months ended September 30, 2020, as compared to $103.8 million recorded for the three months ended September 30, 2019, primarily due to the operation of fewer vessels in our fleet, as well as a decrease in revenue earned by our minor bulk vessels. These decreases were partially offset by an increase in revenue earned by our Capesize vessels. The average daily time charter equivalent, or TCE, rates obtained by the Company’s fleet was $11,456 per day for the three months ended September 30, 2020 as compared to $11,687 per day for the three months ended September 30, 2019. During the third quarter of 2020, increased levels of global economic activity due to a gradual easing of global lockdown measures relating to COVID-19, together with a recovery in the Brazilian iron ore trade resulted in a significantly improved drybulk market as compared to the first half of the year. China continued to lead the global economy and drive drybulk demand through record iron ore imports and steel production. While the drybulk market has improved meaningfully since June, we note that economic activity in this current macro-economic environment is highly dependent on the trajectory of COVID-19, which is uncertain.

Voyage expenses were $33.5 million for the three months ended September 30, 2020 compared to $43.0 million during the prior year period primarily attributable to changes in bunker prices, as well as the operation of fewer vessels in our fleet. Vessel operating expenses decreased to $23.5 million for the three months ended September 30, 2020, from $24.7 million for the three months ended September 30, 2019, primarily due to fewer owned vessels, as well as lower drydocking expenses, partially offset by higher crew related expenses. General and administrative expenses decreased to $5.1 million for the third quarter of 2020 compared to $6.1 million for the third quarter of 2019, primarily due to lower office rent and administrative expenses. Depreciation and amortization expenses decreased to $16.1 million for the three months ended September 30, 2020 from $18.2 million for the three months ended September 30, 2019, primarily due to a decrease in the depreciation expense for certain vessels that were impaired during the first quarter of 2020, as well as a lower number of vessels owned during the 2020 period. These decreases were partially offset by an increase in depreciation expense related to scrubber additions for our Capesize vessels.

Daily vessel operating expenses, or DVOE, amounted to $4,961 per vessel per day for the third quarter of 2020 compared to $4,631 per vessel per day for the third quarter of 2019. This increase is primarily attributable to higher crew related expenses, partially offset by lower drydocking, insurance and stores related expenditures in the third quarter of 2020 as compared to the prior year period. 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 our estimates and those provided by our technical managers, we anticipate our DVOE to be approximately $4,750 per vessel per day for the fourth quarter of 2020.

Apostolos Zafolias, Chief Financial Officer, commented, “The improved market conditions since June have enabled Genco to continue to build upon our industry leading balance sheet, as we increased our cash position to $161 million, including $24.5 million of restricted cash, as of September 30, 2020. We achieved adjusted EBITDA of $22.3 million in Q3 while completing the sale of two vessels during the quarter. Furthermore, during the fourth quarter to date, we have completed the sale of two additional vessels with another three expected to be concluded in the near term. We also declared a dividend of $0.02 per share for the quarter highlighting our continued commitment to returning capital to shareholders even through volatile market conditions.”

Financial Review: Nine Months 2020

The Company recorded a net loss of $159.7 million or $3.81 basic and diluted net loss per share for the nine months ended September 30, 2020. This compares to a net loss of $56.9 million or $1.36 basic and diluted net loss per share for the nine months ended September 30, 2019. Net loss for the nine months ended September 30, 2020 includes $134.7 million in non-cash vessel impairment charges and a $0.8 million loss on sale of vessels. Net loss for the nine months ended September 30, 2019, includes non-cash vessel impairment charges of $26.1 million, a $0.2 million non-cash impairment of the operating lease right-of-use asset, as well as gain on sale of vessels totaling $0.6 million. Revenues decreased to $260.1 million for the nine months ended September 30, 2020 compared to $280.8 million for the nine months ended September 30, 2019, primarily due to the operation of fewer vessels, as well as a decrease in revenue earned by our minor bulk vessels. These decreases were partially offset by an increase in revenue earned by our Capesize vessels. Voyage expenses decreased to $123.6 million for the nine months ended September 30, 2020 from $127.8 million for the same period in 2019. TCE rates obtained by the Company decreased to $9,307 per day for the nine months ended September 30, 2020 from $9,405 per day for the nine months ended September 30, 2019. Total operating expenses for the nine months ended September 30, 2020 and 2019 were $402.3 million and $316.8 million, respectively. Total operating expenses include $134.7 million in non-cash vessel impairment charges, as well as a loss on sale of vessels of $0.8 million for the nine months ending September 30, 2020. For the nine months ended September 30, 2019, total operating expenses include $26.1 million in non-cash vessel impairment charges as well as a gain on the sale of vessels of $0.6 million. General and administrative expenses for the nine months ended September 30, 2020 decreased to $16.4 million as compared to the $18.3 million in the same period of 2019, due to a decrease in office rent and administrative expenses, as well as lower legal and professional fees associated with our credit facilities. DVOE was $4,576 for the year to date period in 2020 versus $4,556 in 2019. The increase in DVOE was predominantly due to higher crew related expenses, partially offset by lower drydocking related expenses. EBITDA for the nine months ended September 30, 2020 amounted to $(93.5) million compared to $18.9 million during the prior period. During the nine months of 2020 and 2019, EBITDA included non-cash impairment charges, an operating lease right-of-use asset non-cash impairment and gains and losses on sale of vessels as mentioned above. Excluding these items, our adjusted EBITDA would have amounted to $42.1 million and $44.6 million, for the respective periods.

Liquidity and Capital Resources

Cash Flow

Net cash provided by operating activities for the nine months ended September 30, 2020 and 2019 was $16.0 million and $28.8 million, respectively.  This decrease in cash provided by operating activities was primarily due to changes in working capital, as well as a decrease in drydocking related expenditures.

Net cash provided by investing activities during the nine months ended September 30, 2020 was $12.3 million as compared to $31.8 million net cash used in investing activities during the nine months ended September 30, 2019.  This fluctuation was primarily due to an increase in net proceeds from the sale of vessels in 2020 year to date as compared to 2019, as well as a decrease in scrubber and ballast water treatment system related expenditures.

Net cash used in financing activities during the nine months ended September 30, 2020 and 2019 was $29.8 million and $33.5 million, respectively.  The decrease was primarily due to the $24.0 million drawdown on the $133 Million Credit Facility and the $11.3 million drawdown on the $495 Million Credit Facility during the nine months ended September 30, 2020 partially offset by a $21.5 million drawdown on the $495 Million Credit Facility during the nine months ended September 30, 2019.  This decrease was partially offset by $9.0 million payment of dividends during the nine months ended September 30, 2020, as well as a $0.9 million increase in repayments under the $133 Million Credit Facility during the nine months ended September 30, 2020 as compared to the same period during 2019.

Capital Expenditures

We make capital expenditures from time to time in connection with vessel acquisitions. As of November 4, 2020, Genco Shipping & Trading Limited’s fleet consists of 17 Capesize, six Ultramax, 19 Supramax and seven Handysize vessels with an aggregate capacity of approximately 4,680,000 dwt and an average age of 10.3 years.

In addition to acquisitions that we may undertake, we will incur additional capital expenditures due to special surveys and drydockings. We estimate our capital expenditures related to drydocking, including capitalized costs incurred during drydocking related to vessel assets and vessel equipment, ballast water treatment system costs and scheduled off-hire days for our fleet for the remainder of 2020 and 2021 to be:

Q4 2020 2021
Estimated Drydock Costs (1) $3.0 million $9.3 million
Estimated BWTS Costs (2) $1.1 million $5.4 million
Estimated Offhire Days (3) 94 230

(1) Estimates are based on our budgeted cost of drydocking our vessels in China. Actual costs will vary based on various factors, including where the drydockings are actually performed. We expect to fund these costs with cash on hand. These costs do not include drydock expense items that are reflected in vessel operating expenses. Estimated costs presented include approximately $2.8 million of costs associated with four vessels that could potentially be sold based on our fleet renewal program.

(2) Estimated costs associated with the installation of ballast water treatment systems is expected to be funded with cash on hand. Estimated costs presented include approximately $2.0 million of costs associated with four vessels that could potentially be sold based on our fleet renewal program.

(3) Actual length will vary based on the condition of the vessel, yard schedules and other factors. Estimated offhire presented includes approximately 80 days associated with four vessels that could potentially be sold based on our fleet renewal program. The estimated offhire days per sector scheduled for Q4 2020 consists of 20 days for Ultramaxes, 17 days for Supramaxes and 57 days for Handysizes.

Fleet Update

We continue to divest our older, less fuel-efficient tonnage as part of our efforts to modernize our fleet and create a more focused asset base while reducing our carbon footprint. Specifically, we delivered the Baltic Wind and Baltic Breeze to their new owners during the third quarter of 2020 and the Genco Bay and Baltic Jaguar in October. The Baltic Jaguar was sold for gross proceeds of $7.3 million.

We have also agreed to sell the Genco Normandy, a 2007-built Supramax, for $5.85 million, the Genco Loire, a 2009-built Supramax, for $7.65 million and the Baltic Panther, a 2009-built Supramax, for $7.51 million, which we expect to deliver to the respective buyers during the fourth quarter of 2020 and the first quarter of 2021. The aggregate gross proceeds of these seven vessel sales amounts to $51.9 million, with associated debt of approximately $31.4 million. As a result of the agreements to sell these three vessels in addition to the Baltic Jaguar, the Company recorded a $13.9 million non-cash impairment charge for the third quarter. Also during the third quarter, the Company recorded an $8.0 million non-cash impairment charge related to the remaining three Supramax vessels in its fleet renewal program, namely the Genco Lorraine, Baltic Leopard and Baltic Cougar, as the estimated future undiscounted cash flows for each of these vessels did not exceed their net book values.

As of September 30, 2020, $24.2 million of restricted cash is recorded on our balance sheet relating to the sale of the Genco Raptor, Genco Charger and Genco Thunder which were sold in previous quarters, as well as the Baltic Wind and Baltic Breeze. Under the terms of our $495 million credit facility, the Company can either repay this amount, which represents the debt associated with these vessels, or utilize the 360-day reinvestment period to redeploy this capital towards the acquisition of a replacement vessel instead of repaying the loan, if the applicable terms and conditions under the facility are met.

Source: Genco

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