Golden Ocean Group Limited

Good day and welcome to the Golden Ocean Q1 2024 release. My name is Lars Christian Svensson and I'm the CEO of Golden Ocean. Today our CFO Petter Simonsen and I will guide you through our Q1 numbers, forward outlook and activities within the Golden Ocean Group. Here are the highlights for the first quarter of 2024. Our adjusted EBITDA in the first quarter of 2024. ended up at $114.3 million compared to $123.2 million in the fourth quarter of 2023. We delivered a net income of $65.4 million and earnings per share of $0.33, compared to a net income of $57.5 million and earnings per share of $0.29 for the fourth quarter of 2023. Our TCE rates for Cape Size and Panamax vessels were about $27,200 per day and about $15,000 per day, respectively. In conclusion, a combined fleet-wide net TC of about $22,600 per day for the quarter. For Q2, we have secured a net TC of $27,200 per day for 75% of the Cape size days and about $14,500 per day for 82% of the Panamax days. For Q3, we locked in a net TC of about $25,200 per day for 24% of the Cape size days and about $20,500 per day for 41% of the Panamax days. With a strong result in Q1, where we were able to capitalize on our commercial strategy in full, we are pleased to declare a dividend of $0.30 per share for this first quarter of 2024. Petter will now guide you through our numbers in detail. Over to you, Petter.

If we move to slide five and look at our P&L for the quarter, we achieved strong commercial performance in an unusually healthy freight market for the season. Our CAPEs came in at 27,200, and Panamaxes achieved 15,000 in TCE rates for the quarter, which resulted in a total fleet-wide TCE rate of 22,600, up from 22,000 in Q4 2023. We dry docked two ships in Q1, which is the same as in Q4, contributing to approximately 97 days of fire versus 109 days of fire in Q4. We have three ships scheduled for dry dock in Q2-24, of which two vessels have been completed as of this report. This resulted in net revenues of 196.7, unchanged quarter-on-quarter as stronger TCE performance was offset by fewer vessel days. Looking at our OPEX, we achieved total operating expenses of 62.6 versus 63.4 million in Q4. Running expenses were largely unchanged quarter-on-quarter and OPEX reclassified from charter hire was 2.4 million 0.7 million lower than in Q4. OPEX extra dock was 6,700 per ship per day, which is unchanged from Q4. Looking at our general and administrative expenses, we ended up at 7.4 million, which is up from 4.9 million in Q4. The increase mainly relates to non-recurring personnel expenses. Our daily G&A came in at $819 per ship per day, net of cost recharged to affiliated companies, and $524 per day when adjusted for non-recurring expenses. In line with last quarter. Our charter hire expense came in at 7.3 million, which was slightly up from Q4, with fewer vessel days in our trading portfolio, was offset by profit split payments to our leasing counterpart, SFL Corp. Our net financial expenses were 27.2 million versus 27.3 million in Q4. On our derivatives and other financial income, we recorded a gain of 7.3 million, which compares to a loss of 5.8 million in Q4. On derivatives, we recorded a gain of 12 million versus a loss of 8.2 million, which is the result of interest rate swaps gains of 9.6 million, which again includes 4.1 million in realized cash gains, and gains on FFA and bunker derivatives of 2.5 million. For results from investments in associates, we recorded a loss of 4.6 million compared to a 2.7 million gain in Q4. This relates to our investments in Swiss Marine, TFG, and UFC. In sum, we recorded a net profit of 65.4 million, 33 cents per share, and an adjusted net profit of 58.4 or 29 cents per share, and a dividend of 30 cents declared for the quarter. Moving to slide six and our cash flow, we recorded cash flow from operations of 115.8 million, which include 0.6 million in dividends received from associated companies. Cash flow used in investments totaled 12.2 million, which mainly relates to 15.7 million relating to the sale of one Panamax vessel, which was offset by 27 million in installments and costs relating to our Camp San Max new buildings. Cash flow used in financings were 74.9 million. This mainly comprises of 35.4 million in scheduled debt and leadership payments, including prepayments relating to the sale of one Panamax vessel, 73.7 million in net proceeds from refinancings announced in the previous quarter, and 50 million in repayment under the revolving credit facilities. Lastly, we had a dividend payment of 59.9 million relating to the Q4 results during Q1. Total net increase in cash of 28.8 million. Moving to slide seven, our balance sheets, we recorded cash and cash equivalents of 147.4 million which includes 2.7 million in restricted cash. In addition, we have 125 million in undrawn available credit lines at quarter end. Debt and finance lease liabilities totalled 1.5 billion end of Q1, down by approximately 11 million quarter on quarter. Average fleet-wide loan-to-value under the company's debt facilities per quarter end was 38.3%. And book equity of 1.9 billion led to a ratio of equity to total assets of approximately 55%. With that, I give the word back to Lars Huston.

Thank you, Peter. We will then continue with the market outlook, first up illustrating the Golden Ocean fleet composition. The solid financial platform Peter just described gives GoldenOcean the ability to tilt the fleet in the spot market when we see a trend we believe in, like we've done in Q1. Large volatility and equally great monetary upside still lies in the larger segments, especially in the capesize space. As the graph illustrates, we're still the only company compared to our peers with meaningful market caps that have significant capesize exposure. With our dual listing in New York and Oslo and a market cap of around $3 billion, we offer large liquidity and exposure to what we believe will be the most favorable dry bulk segments in the years to come, Panamax and Cape Sizes. The global Cape Size trade continued its positive trajectory with almost 4% increase in Q1. But more interestingly, the trade flows from the Atlantic to the Pacific were up 13% year-on-year, a massive ton-mile absorber. This was mostly driven by a dry Brazil, where we saw an iron ore increase of 15% year-on-year, Colombian coal exports, where we noted a staggering 52% increase year-on-year, and a bauxite trade from West Africa, which reached record high exports volumes and close to 10% increase year-on-year. China and India received most of the volumes, with an import increase of 8% and 12% year-on-year growth for the first quarter of 2024. In addition to the mentioned high seaborne trade volumes, vessel transit through sewers are down 43% in Q1-24 versus Q1-23. The dry Panama Canal produced even fewer transits, with a 73% reduction over the same time period. As we look further into the iron ore, we note that China increased the iron ore imports with 5% year-on-year in the first quarter. More interestingly, the country has increased its import from the Atlantic by over 30%, which is mostly handled on Cape-sized vessels and act as a solid ton-mile contributor, as mentioned previously in the presentation. In 2025, we can also expect the Simundu iron ore mine in Guinea to start shipping the first of its forecasted 60 million tons export capacity, which will further strengthen the ton-mile scenario, which we believe will continue to boost the Cape-sized sector. I would like to draw your attention steel production the chinese steel production inventories remain flat compared to q123 albeit the steel consumption related to the property sector is down china's had a solid increase in consumption related to infrastructure plus four percent the auto industry plus six percent and the energy sector has seen a seven percent increase so far in 2024 the steel exports from the country are continuing at a high pace with a 30 percent increase year on year Shaking off the inflation ghost, the rest of the world has increased their steel production by about 6% and is forecasted to increase at the same pace throughout the year and in 2025. In the previous quarter, we emphasized the capeside sector as the most attractive place to be in the dry space. Based on the last quarter, we're even more convinced about this thesis. The order book remains at a 30-year low for the Cape sizes, and to put it in perspective, the additional volumes from the new Simandou mine in Guinea, when fully operational, will be able to absorb the 6% Cape size order book on a standalone basis. 30% of the Cape size fleet will hit 20 years of age in 2030 and will either have to be modified to handle the environmental regulations or look towards the scrap yards as we enter a new decade. I would like to remind you that the Golden Ocean fleet has a current average age just north of 7 years. As a last comment to this slide, the congestion continues to be low and the downside has already been priced in into the Cape size segment. We round off this presentation as we normally do, illustrating the Golden Ocean cash flow potential. The market outlook is positive and our fleet composition is well situated to reap the rewards of what we believe will be solid years for large size dry bulk. We're excited to create further value for our shareholders and to reach new milestones when it comes to yield and fleet optimization as we continue to navigate 2024. I will now pass the word back to the operator and welcome any questions. Thank you.

Thank you. As a reminder, to ask any questions, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. We will now take our first question. Please stand by. And the first question comes from the line of Sheriff Almagrabi from BTIG. Please go ahead. Your line is now open.

Hi. Thanks for taking my questions. So first, on the recent flooding in Brazil, is the impact on grain exports there being felt by Panamaxes at all, or is it isolated to smaller vessel classes?

Hey there, thanks for the question. For now, we don't see the massive impact on the Panamaxes on this incident, so it's pretty much business as usual for what we can observe so far.

Okay, and then any thoughts on chartering in more tonnage to flex the size of the fleet, given current spot market strength ahead of the seasonally stronger part of the year? For example, SFL has a handful of smaller bulkers, I believe, that are trading spot.

Yeah, we always look to optimize the fleet, and sometimes we take time chargers in as well to see the need. We'd like to first of all see a trend first before we time chart her in, but if we do, it's definitely going to be in the Cape size and the Panamax space where we believe the strengths will lie in the second half of the year.

That's helpful. Thanks for taking my question.

Thank you.

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Omar Nocta from Jefferies. Please go ahead. Your line is now open.

Lars Christian and Petr, good afternoon. Just had a couple questions for you just on the broader market, and you provided some good insight and detail in the last part of your presentation. I just wanted to ask from a big-picture perspective, what do you think is driving the market right now? We've seen figures for Chinese steel production coming off recently, and yet despite that, the Cape market has been very strong and resilient. What would you say is If you could identify maybe one driving force of the market, is that something that you can identify or give any perspective on?

Yeah, nice to speak to you again, Omar. I think there's two things that we're not going to be able to avoid in this market, and that is the Panama Canal and the Suez Canal. In addition to that, we have a lot of coal from Colombia moving. The bauxite and iron ore has been flowing everywhere. very strong, and it's very 10-mile intensive. The only way to find these ships are going to be via the Cape of Good Hope. It's not possible to get them through any canals anymore. So we see appetite, especially on the cold side, India as being a strong importer still, and the Chinese are preferring, as far as we can observe this year, to import their volumes from Brazil instead of Australia. So it's been a good steady flow, and it takes me a little bit back to last year where we saw the headlines on macro news from China and the property sector, etc., but we see record volumes being shipped every week, and that still continues.

Okay, yeah, that's interesting. And you mentioned also, I guess, the Chinese steel exports being up 30% year over year in the first quarter, and I think last year they were up tremendously as well. Do you think there's a story that could develop for Chinese steel exports and you know, assuming that those remain strong and tariffs don't eat into it. Is that something that could become a bullish thesis for drywall as well? And if it were to be, what segment do you think would be best positioned?

Yeah, no, it seems the steel, obviously, export from China has been solid now for a good period of time. And most of it has been lifted on the smaller sizes, ISU for maxes and handy sizes. And that hasn't really been enough to kick that market off properly. But if there's more steel trends coming out of China, we might see more backhaul cargoes on the Panamaxes as well, which can be interesting for the steel business.

Yeah, okay. And maybe just one final one for me, and as you mentioned, you positioned nicely with the focus on the capes and you have the Panamaxes, but generally you're very top-heavy and positioned to take advantage of this tight market for the larger vessels. On your slide 13, you You discussed the order book where capes continue to be, even though it's the one market that is shining for the past, say, six to nine months, it has the lowest order book percentage. Given that, how are you thinking about new buildings from here? I know your Sharif was just asking about chartering in-ships to flex the fleet. How about in general, just in terms of adding new capacity? Do you feel the need or is there an opportunity, you think, to go into the new building market and take advantage of the low size?

Over the last three years, Omar, we've been quite active on acquiring tonnage to be ready for this cycle and the demand tightness that we see now. The last done on the Newcastle max was 73 million, and we bought six of those sisters for $50 million pop last year. So for us, we don't have to do anything at the moment. We're quite happy with the position that we have, but we will obviously always look for accretive deals to the fleet, and we have the balance sheet to lift as well.

Yeah. Yeah, no, it makes sense. I appreciate that. That's it for me. Thank you.

Thanks, Omar.