Golden Ocean Group Limited

Good day and thank you for standing by. Welcome to the Golden Ocean Group Limited Q4 2024 earnings conference call and webcast. At this time, all participants will be in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Mr. Peter Simonsen, Interim CEO and CFO.

Please go ahead.

Good afternoon and welcome to the GoldenOcean Q4 2024 earnings release. My name is Peter Simonsen and I am the Interim CEO and CFO of GoldenOcean. Today I will present our Q4 numbers and forward outlook. In the fourth quarter of 2024, we have the following main highlights. Our adjusted EBTA in the fourth quarter of 2024 ended at 69.9 million compared to 124.4 million in the third quarter. We delivered a net income of 39 million and earnings per share of 20 cents. compared to a net income of 56.3 million and earnings per share of 28 cents for the third quarter. Our full year 2024 net profit was 223.2 million, up from an annual result of 112.3 million in 2023. Our TCE rates were about $24,700 per day for Cape sizes and about $14,800 per day for our Panamax vessels and a fleet-wide net TCE of about $20,800 for the quarter. We have during Q4 recorded dry docking costs of $34.3 million relating to 13 vessels compared to $9.7 million in Q3 relating to five vessels. We have declared a purchase option under our lease agreement with SFL Corp for eight Cape-sized vessels for an aggregate sum of $112 million. The acquisition will be part financed by a two-year $90 million non-amortizing revolving credit facility and will reduce our Cape-sized cash breakeven by approximately $1,000 per day. For Q1, we have secured a net TCE of about 15,100 per day for 77% of Cape size days and about 9,900 per day for 81% of our Panamax days. For Q2, we have locked in a net TCE of about 20,900 per day for 16% of our Cape size days and about 14,200 per day for 10% of our Panamax days. Finally, we are pleased to declare a dividend of 15 cents per share for the fourth quarter of 2024. Let's look a little deeper into the numbers. Our total fleet-wide TCE rate was 20,800 in Q4, down from 23,700 in Q3. We are in a period with frequent dry docks. From Q4 and including Q2 2025, we will have dry docks close to 30 over our Cape size and Newcastle maxes. We had 13 ships dry docked in Q4 compared to five ships in Q3, contributing to approximately 364 days of off-fire in Q4 versus 253 days in Q3. Nine ships are scheduled to dry dock in Q1 2025 with four vessels completed as of today. And further seven ships are expected to dry dock in Q2 2025. We recorded net revenues of 174.9 million down from 206.6 million in Q3. Our OPEX recorded 95.6 million versus 69.26 million increase. Running expenses ended at 59.7 million, 4.8 million up from Q3, mainly due to bunkers related to dry dock and expense ballast water treatment system upgrades. We expense all our dry docking costs and we saw an increase in the OPEX result of 24.6 million quarter on quarter relating to dry docking. OPEX classified from charter hire was 2 million, 0.4 million down from Q3. Our general and administrative expenses ended at $6.4 million, up from $5.3 million in Q3. Daily G&A came in at $709 per day, net of cost recharged to affiliated companies, $137 per day up from Q3. On our charter hire expense, we recorded 4.2 million versus 6.4 million in Q3, with a lower number of vessel days for the trading portfolio and profit sharing expense accounting for the difference. Our net financial expense ended at 23.3 million versus 25.5 million in Q3, a reduction mainly due to lower software rates, as well as lower average debt in the quarter. On derivatives and other financial income, we recorded a gain of 13.6 million compared to a loss of 12 million in Q3. On derivatives, we recorded a gain of 11.8 million versus a loss of 11 million in Q3. For results from investments in associates, we recorded a gain of 1.6 million compared to 0.7 million loss in Q3 relating to investments in Swiss Marine, TFG, and UFC. a net profit of 39 million or 20 cents per share and an adjusted net profit of 12.7 million or 6 cents and a dividend of 15 cents declared for the quarter looking at our cash flow we recorded cash flow from operations of 71.7 million down from 100.8 million in q3 cash flow used in financings of 91.5 million mainly comprising of Net proceeds from new financings and new building drawdowns of 26.9 million. 31.9 million in scheduled debt and lease repayments. 19 million in prepayments of debt relating to vessels sold. 5.7 million in debt fees paid and share repurchases, and dividend payments of 60 million relating to the Q3 results. Total net increase in cash of 14.1 million. Looking at our balance sheet, we recorded cash and cash equivalents of 131.7 million, including 2.6 million of restricted cash. In addition, we have 150 million of undrawn available credit facilities at quarter end. Debt and finance lease liabilities totaled 1.4 billion at end of Q4, down by approximately 23 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 and a ratio of equity to total assets of approximately 56%. GoldNotion has in Q4 started and will in the first half 2025 continue an intensive dry docking period for its Cape size fleet. It's close to half of the fleet completing special surveys over a period of nine months. We believe that the timing of the dry docks is favorable ahead of a seasonal stronger second half of 2025 and onwards. Golden Ocean maintains the position as the largest listed owner in the Cape size and Newcastle Max segment. Capes and Newcastle Maxes represent over 80% of Golden Ocean's deadweight tons and thereby earnings capacity. We are the only listed dry bulk company offering Cape exposure and at the same time significant market capitalization and trading liquidity. In Q4, we saw cargo volumes start off healthy, but volumes fell by end of November ahead of the seasonally weaker winter season. Brazilian R&R volumes were down 13% quarter-on-quarter, while annual exports volumes were up 3%. Vale reported record exports in the upper end of guidance range, while the Australian exports continued in strong volumes, but slightly down quarter on quarter. We saw Vale reduce production after reaching their annual targets, and further we've seen bad weather impacting mining and port operations, both in Brazil and Australia. In its high season, the Guinea bauxite volumes have grown 14% year on year, and have during Q4 averaged over 13.5 million per month run rate exports, up from average 10.5 million tons per month in Q3. Coal volumes continued in healthy levels in Q4, but whereas Colombian coal export increased one mile in the first half of 2024, Q4 we saw volumes being replaced by Australia and Indonesia. China is providing steady demand for most cargo types, representing 74% of iron ore volumes and 85% of bauxite volumes for 2024, further supplemented by other Southeast Asian economies. As a comment to the various tariffs and taxes being announced, US exports are largely limited to grain and coal volumes, which in an adverse scenario we expect will be replaced by other sources. As an example, of the 543 million tons of coal that China imported last year, only 12.2 million came from the U.S. Iron ore and bauxite are not U.S.-related cargoes. However, an ongoing trade war will be negative for the sentiment and over time impact dry bulk demand. Looking at dry bulk volumes from an historical perspective, we have over the last 25 years seen volumes grow at a multiple of 1.1 to GDP growth. This is mainly due to demand for dry bulk commodities being higher in emerging economies who have had a higher and average growth rate. Although the growth in emerging economies driven by China and India has come down from historical highs, we expect the trend to continue. In addition, because emerging economies are located away from exporting regions, the ton-mile effect of this growth will add another boost to shipping demand. This is the case for most major dry bulk commodities. Latest growth projections for 2025 and 2026 from IMF forecast an annual GDP growth of 3.3% globally, while China and India are expected to grow 4.5% and 6.5% respectively. Brazilian miners have delivered a full year export of 390 million tons, which is in the upper end of their full year guiding. Both Vala and Australian miners are continued to guide positively on production targets for 2025, with new expansion projects also emerging in both basins. Australia and Brazil continue to be the largest exporters of iron ore. Brazil, with around three times the sailing distance to Asia compared to Australia, is the most important ton-mile demand contributor to the Cape size market. Chinese steel production has remained flat quarter on quarter, but it's up 6% compared to Q4 2023. Sentiment among steel mills is more positive, and Chinese authorities have reiterated their commitment to stimulate the economy if needed. But analysts claim that new stimulus news has been postponed due to the ongoing tariff discussions. China continues its attempt to decarbonize its heavy industry, including steel production. By using higher quality commodities, they are able to reduce emissions per ton steel produced. Increased demand for high-grade iron ore and coal is highly supported to ton mile, with the largest new deposits of high-grade iron ore being found in Brazil and Guinea. Outside China and India, crude steel production has started recovering, but only by a conservative 1.5% quarter-on-quarter, as weak demand from construction and high interest rates is limiting growth. However, as the recovery is coming closer, it presents a significant upside to potential steel demand. In Q4 this year, we will see the Simandour mine in Guinea, West Africa, commence exports. Simandou high-grade iron ore mine is expected to ramp up its production over two years, adding an expected 120 million tons export capacity annually. In addition, new expansion projects are underway in Brazil, with an additional capacity of approximately 50 million tons coming on stream during 2025 and 2026. Iron ore prices have been volatile, but stayed at historically healthy levels despite negative macro backdrop, and actually increased amidst an escalating trade uncertainty. Iron ore is currently trading at around $107 per ton, which compares very favorably to the break-even rate for the major miners of approximately $40 per ton delivered in Asia. At current iron ore prices, most producers are profitable, but it's expected that new volumes will put pressure on prices. The cost curve among the key producers shows that Australian and Brazilian ore is highly resilient at lower prices and outcompete more expensive producers, including Chinese domestic production. Given the quality of the new iron ore coming into the market, analysts are expecting that the high-grade ore will replace Chinese domestic, which is of significantly poorer quality. If we conservatively assume that the Simandou volumes will replace Australian volumes, it will triple the sailing distance to Asia, boosting ton-mile demand for cape sizes significantly. Guinea in West Africa has become a major exporter and holds the vast deposits of high-grade bauxite and iron ore. The Guinea government has, together with mining majors and large Chinese industrial conglomerates, made significant investments in infrastructure and mine development. With the majority of demand being located in Southeast Asia, this provides steady growth in ton-mile for the largest vessels. Guinean bauxite exports over the last five years has grown with an average compounded growth rate of 22%. Bauxite, which is used in production of aluminum, is feeding the booming EV industry as well as other sectors in China. The Guinean bauxite replaces volumes from Indonesia, which, in addition to significant growth in traded volumes and ton-mile, represents a switch to cape sizes from smaller vessel segments. The average monthly export volumes in 2024 were 12 million. While Q1 to date, in high season, exports have exceeded 15.5 million tons per month. Following infrastructure improvements, analysts are expecting an annual export of 155 million tons in 2025, representing a 5% to 10% year-on-year growth. As bauxite exports currently contributing to about 13% to 15% of ton mile for capesized vessels, this will represent the demand growth covering most, if not all, of the scheduled deliveries of capesizes in 2025. The order book development has followed last year's pattern, with container ships filling up most of the capacity on shipyards able to build Newcastle Maxis and Cape size vessels. Despite elevated new building prices, the largest dry bulk vessels remain unfavoured by the shipyards as they provide for lower profit margins compared to other shipping segments. In addition, limited shipyard capacity leads to long-dated delivery dates currently quoting 2028 as the earliest delivery for any meaningful capacity volume. The global cape size in Newcastle MAX fleet is entering into a period of frequent dry dockings. An analyst estimates an additional 0.5 to 1% in fleet capacity reduction during both 2025 and 2026 compared to 2024. We are in a period with increasing competitive advantages for modern vessels, both in terms of fuel efficiency and carrying capacity, but also increasing requirements to safety, crew welfare and emissions. The large-sized dry bulk fleet is aging, and over half of the cape-sized fleet will be above 15 years of age in 2028, in a period where environmental regulations are tightening. The fleet continues to operate at record efficiency, and although we have seen some seasonal disruptions, it has not reduced the operating fleet capacity meaningfully. For dry bulk, full normalization of transits through the Suez Canal will have a marginal negative effect to provide some reduction in ton miles, but will also open for further transatlantic trades. The company has over the last year outperformed indexes by close to $4,500 per day on the full fleet. We continue to push for lower cost, retaining conservative but meaningful leverage, and an industry-low cash break-even rate. The recently announced refinancing of leases for eight vessels with SFL Corp. will reduce the cash break-even rate for the Cape fleet with $1,000 per day. As mentioned, we are using the weakness in the market to significantly upgrade the vessels. This will provide us with a highly competitive fleet ahead of the seasonally strong second half and onwards. These investments are funded with a combination of sales proceeds and cash on hand. We continue our strategy to reward our shareholders through dividends as well as previously announced share buybacks. Although we expect volatility in the near term, with ongoing geopolitical uncertainty, we continue to remain fundamentally positive on the market outlook and have positioned ourselves thereafter. On the left-hand side, we illustrate a significant cash flow potential of Golden Ocean as we move into the stronger market sentiment. I will now pass the word back to the operator and welcome any questions. Thank you.