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Star Bulk Carriers Corp.
2/19/2025
Thank you for standing by, ladies and gentlemen, and welcome to the Star Bull 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. Simos Spirou, and Mr. Christos Iguaras, Co-Chief Financial Officers, Mr. Nikos Reskos, Chief Operating Officer, and Mrs. Harris Platan-Tanaki, 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 one 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. Spirou. Please go ahead, sir.
Thank you, operator. I'm Simos Spirou, Co-Chief Financial Officer of Star Bull 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 EagleBulk 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 at 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 percent 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 nine cents, payable on or about March 18, 2025, and we repurchased 500,000 stable shares for a total amount of 7.4 million on an average price of $14.83 per share. Overall, since December 2024 that we renewed our share repurchase program, we have bought back and subsequently canceled ,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 ,127,531. Our pro forma total cash today stands at 452 million. Meanwhile, our pro forma total debt stands at 1.3 billion. In February 2025, we received the credit committee approval for a senior secured 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 cash 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 OPEC and net cash GNA expenses per vessel per day amounted to $6,320. Therefore, our PC, less OPEC and cash GNA is around $9,809 per vessel per day. Since the A-PAL transaction was completed on April 9, 2024 until today, the senior disachieve 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 4 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 fleet buyouts by issuing shares at or above an AV. 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 per vessel, a reduction of more than 50%. As a result of this deleveraging process, our current net debt is covered by the fleet 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, cap tax 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,
Simos. 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 the crew of the former Eagle fleet, phasing out spare parts managers and having centralized procurement on all store 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 implementation of uniform maintenance protocols and marine safety standards, reflected in our long general administrative expenses. For Q4, all tax 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 drag on cost of the former Eagle fleet, $4.4 million for the quarter. Interest expense savings have accumulated thanks to refinancing of the former Eagle fleet, which stood in place in Q2 of 2024. Humanity cost synergies since close installed at $22 million. Our Q4 2024 synergies stand at $12.6 million, including the run rate of $50 million in annualized synergies that Simos mentioned before. Please turn to slide 7, where we provide an operational update. All tax for the fourth quarter stood at $5,056 and $5,123 for the full year of 2024. Net tax GMA expenses were $1,264 per day and $1,284 per day for the same period respectively. In addition, we continue to rank at the top among our listed peers in terms of rideship safety scores. Slide 8 provides a fleet update and some guidance around the future drag on cost and the relevant total of hard days. On the bottom of the page, we provide our expected drag expense schedule, which for 2025 is estimated at $68 million with drag docking of 53 vessels. In total, we expect to have approximately 1,640 of hard days for the same period. In order to take advantage of the current slower market, we have arranged the drag on cost during Q1 2025. On the top right of the page, we have our capex schedule, illustrating our new building capex and vessel 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 to our fleet, and we are looking to be able to continue refinancing and just deliver new buildings. In line with the EXI and CII regulations, we will continue investing in upgrading our fleet, with the latest operation of technologies available, and improving our fuel consumption and reducing our environmental footprint, further enhancing the commercial attractiveness of the startup fleet. Regarding our energy saving devices retrofit program, we have completed 42 installations by the end of 2024. We will plant retrofit after 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 non-necro vessels of our fleet for the winter season. In 2024, 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 more than a vessel bigger than is expected to be delivered to renew owners in Q2 2025. Following the roll over of vehicle bulk, existing chartering contracts, we now have a total of 10 chartering vessels. We have five friendship building contracts with Indow Shipyard for the construction of five capsule-machining buildings. Considering the affordability changes in our fleet mix, we operate on the largest drive-out fleet among US 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, Harris Plakatelaki, for an EFT update.
Thank you, Nico. Please turn to slide 10, where we highlight our continued leadership on the EFT front. In 2024, Starbuck sustained a big score in the carbon disclosure project, indicating effective environmental management. We also attained a big score on water management and new requirements under the CPB submitted for the first time. Starbuck has achieved a significant number of staff-wide years in the Protection Blue Whales and Blue Skies special speed reduction program in Southern California and the San Francisco regions, meeting the highest requirement of over 85% of distance traveled at less than 10 knots. During Q4 2024, the Starbuck fleet retained its average C-plus score in the greenhouse gas rating from Wrightship. We further improved the company's AftereAnalytics ESG Risk Mark Score to 18.4, indicating low risk and maintaining Starbuck's position among US listed peers. Starbuck was recognized with the automated mutual assistance vessel rescue award by the US Coast Guard for rescue operations that saved 17 people in total. During Q4 2024, we actively engaged with our stakeholders to closely monitor the IMO developments regarding global market-based 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 1st, 2025. We continue our employee well-being and engagement programs, having an increasing retention rate of our sole employees, as well as our corporate social responsibility initiatives. On the technologies front, we are progressing with the upgrade of digital infrastructure and cybersecurity systems on board the Starbuck fleet. In December 2021, we announced that we will be launching the Starbuck fleet. In March 2021, the company received the Deal of the Year Award and the Low-Lease Receiving Award for accomplishing the merger with E-Crew. I would now pass the floor to our CEO, Petros Tafas, for a market update and his closing remarks.
Thank you, Harris. Please turn to slide 11 for a brief update of supply. During 2024, a total of 33.8 million dead weight was delivered and 3.8 million dead weight was sent to demolition for a net fleet growth of 30 million dead weight or 3% year on year. The new building order book increased over the last two years, but still stands at a relatively low level of .5% of the fleet. Contracting decreased to 47.3 million dead weight during 2024 due to limited available CBL capacity up to 2026 building costs and future grid propulsion uncertainty. Vessels above 20 and 15 years of age stand at .8% and .9% of the fleet, while scrap prices have stabilized at relatively elevated levels and along with high dry cost should induce demolition of overage and energy in efficient tunnels during seasonal downturns. Moreover, an increasing number of vessels delivered during the 2009-2011 shipbuilding boom will go through their third special survey during 2025 and 2026 and help train effective capacity by approximately .5% per annum. The average steaming speed of the fleet has decreased to a new low of 10.8 knots as reduced Hoe costume, high bunker costs and stricter environmental regulations provide a strong incentive to slow steam. Global poor congestion has fully normalized during the second half of 2024 following a strong reduction that gradually inflated supply by approximately 6% over the last two years. Congestion presently stands slightly above last year's levels and is expected to follow seasonal trends. Focusing on canal inefficiencies, Panama's transit of dry-bought vessels have almost fully recovered. While the recovery of Red Sea crossings is expected to take time as the ceasefire agreement looks fragile and will mainly affect smaller vessel sizes. As a result of the above trends, fleet capacity growth will not exceed 3% per annum during 2025 and 2026, while effective supply growth might drop below 2% per annum after adjusting for changes in speed, congestion, and dry-bought off-hires. Let us now turn to slide 12 for a brief update of demand. According to Clarkson's, during 2024, total dry-bought trade expanded by .3% in tons and 5% in ton miles supported by record high coal, iron ore, and minor bulk exports. Canal inefficiencies and favorable weather conditions for Atlantic exporters during the first half of the year inflated ton mile growth, but a strong correction in grain trade since July and weaker iron ore trade gradually reversed the positive effect and led to a weaker fourth quarter. Despite weak economic performance and a struggling property sector, China's total dry-bought imports increased by .5% over the last two years supported by post-COVID recovery and strength in infrastructure, manufacturing, and exports. 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, dry-bought trade is projected to increase by .4% in tons and .9% in ton miles, with the IMF forecasting global GDP growth at 3.3%. China's GDP is projected to slow down to .6% from .8% in 2024, while India's GDP should remain stable at 6.5%. Trump's administration prototype policy is expected to create headwings for global trade, but the direct impact on dry-bought is relatively small and difficult to forecast. Chinese dry-bought imports are expected to slow down during 2025 as domestic production of iron ore, coal, and grains increase throughout 2024, while stocks stand at high levels. Having said that, Chinese authorities announced strong stimulus measures in September with a target to boost private consumption, help stabilize the property market, and minimize the negative effect of a potential trade war. Iron ore trade expanded by .3% during 2024 and is projected to expand by 1% during 2025. Crude steel production in China declined by .9% during 2024, but during the fourth quarter showed signs of stabilization and increased by .1% year over year. Crude steel production in the rest of the world increased .1% during 2024, driven by strong growth in India and Turkey. Iron ore trade will most likely underperform during the first half of 2025, as the La Nina wet weather conditions will lead to a return of seasonal disruptions for exports at a time that Chinese stockpiles and domestic production have increased. Nevertheless, new iron ore 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 keepsized on Mars. Coal trade expanded by .5% during 2024 and is projected to contract by .7% during 2025. Global focus on energy security during the last years inflated coal trade volumes, but growth has come primarily from short haul Indonesian exports. Chinese coal imports increased by .5% in 2024, following higher thermal electricity production and the country's strategic decision to lift stockpiles. Indian coal imports were stable during most of 2024, 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 international coal prices may incentivize Chinese and Indian coal imports during the next few years, while strong demand from Southeast Asian economies will continue to provide support. Coal trade expanded by .9% during 2024 and is projected to expand by .2% during 2025. Coal exports contracted by .5% during the second half of 2024, driven by a strong reduction of Brazil's corn exports to China and weakness in Australian and Russian wheat exports, with a strong negative effect on tonnage of smaller sizes during the fourth quarter. US exports recovered during the last quarter, while the Brazilian soybean season is projected to be strong, due to rising uncertainty on US, China geopolitics, creating an incentive for import from Latin America during the second quarter of 2025. Furthermore, a potential resolution of the war in Ukraine is viewed as a tailwind for grains trade inflating black sea demand for middle-sized vessels. Minor bulk trade expanded by .7% during 2024 and is projected to expand by 2% during 2025. Minor bulk trade has the highest correlation to global GDP growth and is supported by improving global macroeconomic fundamentals. China's steel exports reached record high levels during 2024 and are expected to pull back due to rising protectionist measures by importing nations, while Bokside exports out of West Africa increased by 13% during 2024 and should continue to generate strong tonnage for Cape-sized vessels. As a final comment, we expect the volatile market in 2025 as the aggressive approach of the new US administration implies changes in international trade patterns amid the imposition of tariffs and subsequent retaliation acts. We nevertheless remain cautiously optimistic about the medium-term outlook for the global market, given the favorable supply picture, stricter environmental regulations and the recent steps by the Chinese government to stimulate the economy. In a period of increased geopolitical uncertainty, we remain focused on actively managing our diverse scrubber-feeted fleet to take advantage of emerging market opportunities and to continue creating value for our shareholders. 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 one on your telephone keypad. The confirmation tone will indicate your line is in the question key. You may press star two if you'd like to remove your questions from the queue. For participants, even speaker equipment may be necessary to pick up your handset before pressing the star keys. 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 EWOD 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 counter forces that might 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 improve these margins further. I will reserve any comments to what we expect, but we think it can 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 to realizing the full scale of the efficiencies. And
Chris, hey, Mr. Norton, the cost savings are easy to prove, but there are probably also some revenue synergies which are very hard to prove out, but we think they're there. Yeah, especially on the Supreme Court side. Yeah.
I guess turning to the market for a moment, you guys talked a little bit about 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 US? And what kind of impact that would have if the Chinese diversify and go more heavily into Brazilian crop?
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 US ports, so that might create more congestion.
Okay, got it. And the last question for me, just to make sure, just as it relates to the fleet renewal program and you guys mentioned the best thing, 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, 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 Nakhda with Jeffries. Please proceed with your question.
Thank you. Hey guys, good afternoon. Good morning. Just a couple of questions from me, more just on sort of the capital allocation or the updated policy on that. I'm gonna go first and it's very simple. 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, lesser 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 dry dock expenses for a specific quarter. Of course, subject to the 2.1 million cash threshold that we have for each vessel that we have in our fleet. 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.
Okay, thank you. And then just maybe kind of following up on that part, you mentioned the 40%. So clearly the nine cent dividend is seems to be that 60% of excess cash. Shared buybacks look like they in January lined up with that 40% remainder. I guess the first question on that is, is that by design? And then the other question is sort of, in the past you had earmarked dividends kind of with 100% of your excess cash. Now we've shifted to 60. Prior to the latest update to the policy, ship sales funded buybacks, if the valuation makes 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 40% or even more of cash to buyback shares, but we also may use sales of ships to buyback shares. We're retaining the flexibility frankly to use the cash for the best 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. Basically what we're saying is that we're not gonna pay out more than 60% of cash flow as a dividend. And 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 nine 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.
So that's it. Okay, well thank you. That's clear. So we have definitely, capital returns are not contained with the net excess cash and the vessel 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 one 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 ten chartered in 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 10-year contract 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 chartering expense for these seven vessels. We have in addition chartering in the normal course of business, a few vessels during the quarter. We have three remaining legacy chartering vessels from the Eagle Balcalf as a company that are re-delivered by the end of June, these three vessels. So this chartering expense that you 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 chartering? 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. Poplar for any closing remarks.
Thank you, very good. No further closing remarks. Thank you for listening in.
This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.