Star Bulk Carriers Corp.

Thank you for standing by, ladies and gentlemen, and welcome to the Star Bowl Carriers Conference call on the fourth quarter 2024 financial results. We have with us Mr. Petros Papas, Chief Executive Officer, Mr. Hamish Norton, President, Mr. Simo Spirou and Mr. Christos Begleras, Co-Chief Financial Officers, Mr. Nikos Reskos, Chief Operating Officer, and Mrs. Harris Plotantinaki, Chief Strategy Officer of the company. At this time, participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session, at which time, if you would like to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today. We will now pass the floor to one of our speakers, Mr. Spiro. Please go ahead, sir.

Thank you, operator. I'm Simo Spiro. Co-Chief Financial Officer of Starball Carriers, and I would like to welcome you to our conference call regarding our financial results for the fourth quarter of 2024. Before we begin, I kindly ask you to take a moment to read the safe harbor statement on slide number two of our presentation. In today's presentation, we will go through our Q4 results Starbucks investment proposition, actions taken to create value for our shareholders, cash evolution during the quarter, an update on the Equibalk integration, vessel operations, fleet update, the latest on the ESG front, and our views on industry fundamentals, before opening up for questions. Let us now turn to slide number three of the presentation for a summary of our fourth quarter 2024 highlights. For the fourth quarter 2024, the company reported the following. Net income amounted to 42 million with adjusted net income of 41 million or 35 cents adjusted earnings per share. Adjusted EBITDA was 104 million for the quarter. On December 2024, we announced and amended our dividend policy alongside the new 100 million share repurchase program. Under this policy, the company may allocate up to 60% of excess cash flow towards dividends, with the remainder reserved for opportunistic share buybacks, growth initiatives, and fleet renewal. For the fourth quarter, the excess cash flow amounted to $17.6 million, and as per our new dividend policy, we declared a dividend per share of $0.09, payable on or about March 18, 2025, and we repurchased 500,000 Starbucks shares for a total amount of $7.4 million on an average price of $14.83 per share. Since December 2024, that we renewed our share repurchase program, we have bought back and subsequently canceled 893,000.5 shares for a total cost of $13.5 million at an average price of $15.08. As of today, the number of shares outstanding is 117,127,531. Our pro forma total cost today stands at 452 million. Meanwhile, our pro forma total debt stands at 1.3 billion. In February 2025, we received a credit committee approval for a senior secure revolving facility of an amount up to 50 million. Finally, we currently have 13 debt-free vessels with an aggregate market value of $250 million, and we will have raised additional costs of approximately $28 million to be used for fleet renewal and general corporate purposes. On the top right of the page, you will see our daily figures per vessel for the quarter. Our time charter equivalent rate was $16,129 per vessel per day. Our combined daily OPEX and net cash GNA expenses per vessel per day amounted to $6,320. Therefore, our CC, less OPEX and cash GNA, is around $9,809 per vessel per day. Since the EGLIPAL transaction was completed on April 9, 2024, until today, the synergies achieved from the integration resulted to an amount approximately 22 million, and we have reached the threshold of 50 million in annualized synergies almost 12 months before our original schedule. Slide four provides an overview of the company's capital allocation policy over the last three years and the various levers we have used to strengthen the company, increase the intrinsic value of our shares, and return capital to shareholders. Starbuck has been growing the platform through consecutive free buyouts by issuing shares at or above NAV. In total, since 2021, we have taken actions of 2.6 billion to create value for our shareholders. On the bottom of the page, we show our net debt evolution per vessel. Our average net debt per vessel has decreased from 12.9 million per vessel to 5.4 million dollars per vessel, a reduction of more than 50%. As a result of this deleveraging process, our current net debt is covered by the fleet's crop value. Slide 5 graphically illustrates the changes in the company's cash balance during Q4. We started the quarter with $473 million in cash. We generated positive cash flow from operating activities of $76 million. After including debt proceeds and repayments, CAPEX payments for ESD and ballast water treatment installations, and the third quarter dividend payment, we arrived at a cash balance of $441 million at the end of the fourth quarter. And I will now pass the floor to our Chief Operating Officer, Nikos Reskos, for an update on the EagleBulk integration and our operational performance.

Thank you, Simon. Slide 6 provides an update on the Eagle integration and synergies. We continue to realize savings on the operating expense front, as we take in-house accruing of the former Eagle fleet, phasing out third-party managers, and having centralized procurement on all stores, spare parts, bunkers, and lubricants. Oversight of technical management of the former Eagle fleet has been consolidated in the company's headquarters in Athens, along with the implementation of uniform maintenance protocols and marine safety standards, reflected in our long general administrative expenses. For Q4, the OPEX and GMA savings for the Eagle fleet stood at $1,685 per vessel per day. In addition, due to our scale in relation to the yards and service providers, we have reduced significantly the driving costs of the former... 4.4 million for the quarter. Interest expense savings have accumulated thanks to the refinancing of the former legal debt, which still lays in Q2 of 2024. Cumulative cost synergies since closing stand at 22 million. Our Q4 2024 synergies stand at 4.6 million, implying the run rate of 50 million in annualized synergies that Simos mentioned before. Please turn to slide 7, where we provide an operational update. OPEX for the fourth quarter stood at $5,056 and $5,123 for the full year of 2024. Net cash GMA expenses were $1,264 per day and $1,284 per day for the same period, respectively. We continue to rate at the top among our listed peers in terms of rideship safety scores. Slide A provides a quick update and some guidance around our future dry dock and the relevant total of hired days. On the bottom of the page, we provide our expected driver expense schedule, which for 2025 is estimated at 68 million for the dry docking of 53 vessels. In total, We expect to have approximately 1,340 of these for the same period. In order to take advantage of the current slower market, we have arranged the front-load dry documents during Q1 2025. On the top right of the page, we have our CAPEX schedule, illustrating our new-building CAPEX investment energy efficiency upgrades. Based on our latest construction schedule, Our new building vessels are expected to be delivered in Q4 2025 and the first half of 2026. For these vessels, we have secured $130 million worth of debt refinancing and debt delivery installments. In line with the EXI and CII regulations, we continue to invest in upgrading our fleet with the latest operational technologies available, aimed at improving our fuel consumption and reducing our environmental footprint. further enhancing the commercial attractiveness of the start-up fleet. Regarding the energy saving devices retrofit program, we have completed 42 installations by the end of 2024. We will launch retrofit on over 23 vessels with ESDs during 2025. Please turn to slide 9 for an update of our fleet. On the vessel sales front, we will continue disposing low-level vessels . we sold 13 vessels for total gross profits of $233 million, reducing our average fleet base and improving overall fleet efficiency. During Q1, we agreed to sell module vessel Peter that is expected to be delivered to our new owners in Q2 2025. Following the rollover of the Eagle bulk, existing chartering contracts, we now have a total of 10 chartering vessels. for the construction of five new buildings. Considering the formation changes in our fleet mix, we operate on the largest drywall fleet among U.S. and European leaders with 155 vessels on a fully-delivered basis and an average age of 11.8 years. I will now pass the floor to our Chief Strategy Officer, Haris Plakatonaki, for an energy update.

Thank you, Nico. Please turn to slide 10, where we highlight our continued leadership on the ESG project. In 2024, Starbuck obtained a B score in the Carbon Disclosure Project, indicating effective environmental management. We also obtained a B score on water management, a new requirement under the CPB submitted for the first time. Starbuck has achieved the top five years in the Protecting Blue Whales and Blue Skies special speed reduction program in Southern California and the San Francisco regions, meeting the highest requirements of over 85% of distance traveled and less than 10 knots. During Q4-24, the Starbuck fleet retained its average C-plus score in the greenhouse gas rating from Brightship. We further improved the company's satellite analytics ESG risk mark score to 18.4, indicating low risk, and maintaining Starbucks' proposition among U.S. listed peers. Starbucks was recognized in the automated nuclear assistance vessel rescue award by the U.S. Coast Guard for rescue operations that saved 17 people in total. During Q4 of 24, we actively engaged with our stakeholders to closely monitor the IMO developments regarding global marketplace measures for the reduction of greenhouse gas emissions. We also explored optimal compliance strategies for the fueling of maritime regulation, which came into force on January 1, 2025. We continue our employee well-being and engagement programs, having increased the retention rate of our sole employees, as well as our corporate social responsibility initiatives. On the technology front, we are progressing with the upgrade of digital infrastructure and cyber security systems on board the StarWars fleet. In December 24th, the company received the Deal of the Year Award and the lowest-list Greek shipping awards for accomplishing the merger with Microsoft. I will now pass the floor to our CEO, Petros Papas, for a market update and his closing remarks.

Thank you, Haris. Please turn to slide 11 for a brief update of supply. The new building order book increased over the last two years, but still stands at a relatively low level of 10.5% of the fleet. Contracting decreased to 47.3 million that way during 2024 due to limited available CPI capacity up to 2026 building costs. levels, and along with high dried-up costs, should induce demolition of over-aged and energy-inefficient tunnels during seasonal downturns. Moreover, an increasing number of vessels delivered during the 2009-2011 shipbuilding a cent per annum. Let us now turn to slide 12 for a brief update of demand. According to Clarkson's, during 2024, total dry bulk trade expanded by 3.3% in tons and 5% in ton miles, supported by record high coal, iron ore, and minor bulk exports. Canal inefficiencies and favorable weather Imports to the rest of the world experienced a strong recovery during the last five quarters, as lower commodity prices and easing monetary policy helped boost demand for raw materials. During 2025, the airbag trade is projected or nor Atlantic mines of high quality will come online towards the end of 2025, gradually substituting low-quality Chinese domestic production and Indian exports positively impacting keep-sized stone mills. but suffered a strong pullback during the fourth quarter. Domestic production of coal in China and India grew at a higher pace than consumption during the second half, being a negative indicator for coal imports during the first half of 2025. Having said that, increasingly competitive support. Trace rates expanded by 2.9% during for middle-sized vessels. Mineral bulk trade expanded by 4.7% during The final comment, we expect a volatile market Without taking any more of your time, I will now pass the floor over to the operator to answer any questions you may have.

Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question key. You may press star 2 if you'd like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we call for questions. Thank you. Our first question is from Chris Robertson with Deutsche Bank.

Please proceed with your question. Hey, good morning, everybody, and thank you for taking my questions. This might be a question for Nikos. Just going back to the cost synergies and savings from the evil bulk merger, you guys mentioned you were able to pull forward some of the savings ahead of schedule. So I'm just wondering here how much runway you think we have left in terms of Future savings, have we reached kind of a floor for OPEX per day from your perspective? And are there any inflationary counterforces that might, you know, be a counterbalance to that?

Thank you, Chris. I think we have more margin for improvement here, whether it is on crew wages. We're still aligning crew wages. I think we have a good way to go to improve these margins further. I will reserve any comments to what we expect, what we think could be significant. And we're still aligning operating expenses as we're restructuring the entire way things were done in the past. So I think we are not there yet realizing the full scale of the efficiencies.

And, Chris, it's Hamish Norton. The cost savings are easy to prove. There are probably also some revenue synergies, which are very hard to prove out, but we think they're there. Yeah.

I guess turning to the market for a moment, you guys talked a little bit about a potential trade war and how it could impact the grain trade here. But can you remind us, what is the ton mile advantage, let's say, of Brazilian soybeans versus U.S.? And what kind of impact that would have if the Chinese diversify and go more heavily into Brazilian crops?

I do not know offhand, but I would suppose it's about 10% to 15% longer ton miles, plus the fact that I think that South American ports are probably not as efficient as U.S. ports, so that might create more congestion.

Okay, got it. And the last question for me, just as it relates to the fleet renewal program and you guys mentioned the best thing, you know, the non-eco vessels over time, there's quite a number of cancer max vessels that kind of fit that age profile. So just any comments around how the S&P market, you know, the appetite for some of those types of vessels is in the current market?

Prices have fallen, especially more on older vessels than younger vessels. We expect that the market will improve in the next several months, and that it will give us an opportunity to continue to sell older and perhaps less efficient vessels as time goes by.

All right. Great. Thank you for taking my questions. I'll turn it over. Thank you.

Thank you. Our next question is from Omar Nocta with Jefferies. Please proceed with your question.

Thank you. Hey, guys, good afternoon. Good morning. Just a couple questions for me, more just on sort of the capital allocation or the updated policy on that. Maybe just first, and it's very simple, but what would you say is kind of, for us, the best way to calculate or reconcile the definition of excess cash? Should we just assume it's basically operating cash flow, less your debt payments, and scheduled dry docks? Is it as simple as that?

Hi, Omar, this is Christos. That's actually pretty accurate. So it's operating cash flow, less our debt principal repayments, less drive dock expenses for a specific quarter. Of course, subject to the 2.1 million cash threshold. So that should essentially generate what is available for dividends, as well as the 40% that we have announced that is for other general corporate purposes.

And then just maybe kind of following up on that part, you mentioned the 40%. So, you know, clearly the 9 cent dividend seems to be that 60% of excess cash. Shared buybacks look like they, in January, lined up with that 40% remainder. I guess maybe the first question on that is, is that by design? And then... The other question is sort of, you know, in the past, you had earmarked dividends kind of with 100% of your excess cash. Now we've shifted to 60%. You know, back, you know, prior to the latest update to the policy, you know, ship sales funded buybacks that the valuation made sense. Kind of when you think about it going forward, is the plan to keep the buybacks contained within that 40% or up to 100% presumably of ongoing cash, or do vessel sales continue to be a source of buyback if that opportunity makes sense?

Well, the answer is we may use, you know, 40% or even more of cash to buy back shares or but we also may use sales of chips to buy back shares. We're retaining the flexibility, frankly, to use the cash for the best best, you know, use from the shareholders' point of view. We sometimes will be share buybacks and sometimes maybe keeping the cash on hand for possible better opportunities later. You know, basically what we're saying is that we're not going to pay out more than 60% of cash flow as a dividend. And, Norma, just to give an example,

The excess cash that we announced for the fourth quarter was 17.6 million. The 60%, which is the maximum distribution available for a dividend, corresponds to the 9 cents per share dividend that we announced. The remaining, this is about 10.2 million. The remaining 7.4 million has been already used to buy within January the 500,000 Starbucks shares out of this excess cash, as we said. at $14.83 per share. But in the meanwhile, since we announced the new share repurchase program, we have also bought, in addition to that, an additional 393,000 shares, which were financed by the vessel sales. So it's a combination of the excess cash flow that we described in the dividend formula and the vessel sale proceeds.

Okay. Well, thank you. That's clear. So we have definitely capital returns are not contained within that excess cash and investment sales can fund it. Well, good. Well, that's it for me. I'll turn it over.

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question is from Clement Mullins with Value Investors. Please proceed with your question.

Good afternoon. Thank you for taking my questions. Most has already been covered, but I wanted to ask about the seven vessels under long-term agreements. Could you confirm whether those seven contracts are at a fixed rate? And secondly, could you talk a bit about what portion of the 26 million in chartering expenses for the quarter were attributable to those vessels?

The first part of the question I can answer, yes, there are fixed levels. They're chartered in at fixed levels for the initial seven-year duration. And there are a couple of optional years. But the fixed duration is at the same levels, yes.

And on the second part of your question, this is not only the charter-in expense for these seven vessels. We have, in addition, charter-in in the normal course of business, a few vessels during the quarter. We have three remaining legacy charter-in vessels from the Eagle-Balkan fleet. as a company that are re-delivered by the end of June, these three vessels. So this chartering expense that we have in the P&L includes both the long-term chartering vessels that we have, and you've mentioned the seven vessels, plus the additional shorter durations.

Makes sense. And could you provide some color on what portion of the $26 million was actually attributable to the long-term charter? About 50%. All right. That's very helpful. I'll turn it over. Thank you for taking my questions.

Thank you. Thank you. There are no further questions at this time. I'd like to hand the floor back over to Mr. Popper. Thank you.

There are no further

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.