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Star Bulk Carriers Corp. (SBLK) Q4 2022 Earnings Call Transcript

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Star Bulk Carriers Corp. (NASDAQ:SBLK) Q4 2022 Results Conference Call February 17, 2023 11:00 AM ET

Company Participants

Petros Pappas - Chief Executive Officer

Hamish Norton - President

Simos Spyrou - Co-Chief Financial Officer

Charis Plakantonaki - Co-Chief Financial Officers

Nicos Rescos - Chief Operating Officer

Christos Begleris - Chief Strategy Officer

Conference Call Participants

Chris Robertson - Deutsche Bank

Omar Nokta - Jefferies

Operator

Thank you for opinionated by, ladies and gentlemen, and invited to nan Star Bulk Carriers Conference Call connected nan Fourth Quarter 2022 Financial Results. We person pinch america Mr. Petros Pappas, Chief Executive Officer; Mr. Hamish Norton, President; Mr. Simos Spyrou; and Mr. Christos Begleris, Co-Chief Financial Officers; Mr. Nicos Rescos, Chief Operating Officer; and Mrs. Charis Plakantonaki, Chief Strategy Officer of nan Company. At this time, each participants are successful a listen-only mode. There will beryllium a position followed by question-and-answer session. [Operator Instructions] I must counsel you that this convention is being recorded today.

I will now walk nan level to 1 of your speakers today, Mr. Spyrou, please spell ahead, sir.

Simos Spyrou

[Foreign Language] Thank you, operator. I'm Simos Spyrou, Co-Chief Financial Officer of Star Bulk Carriers, and I would for illustration to invited you to our convention telephone regarding our financial results for nan 4th fourth of 2022.

Before we begin, I kindly inquire you to return a infinitesimal to publication nan Safe Harbor connection connected Slide number 2 of our presentation. In today's presentation, we will spell done our Q4 results, costs improvement during nan quarter, an overview of our equilibrium sheet, an update connected banker use and alloy operations, nan latest connected nan ESG beforehand and our views connected manufacture fundamentals, earlier opening up for questions.

Let america now move to Slide number 3 of nan position for a summary of our 4th fourth 2022 highlights. Net income for nan 4th amounted to $86 cardinal and adjusted nett income of $93 cardinal aliases $0.84 per share, adjusted net per share. Adjusted EBITDA was $135 cardinal for nan quarter. For nan 4th quarter, arsenic per our existing dividend policy, we declared a dividend per stock of $0.60 payable connected aliases about March 14, 2023.

The chart connected nan bottommost of nan page highlights nan cumulative capacity complete nan past 12 months, which illustrates nan spot of nan level successful a robust drybulk market. Our past 12 months, adjusted EBITDA is $809 cardinal and adjusted nett income is $609 million. Over nan aforesaid period, we person returned a cumulative dividend of $5.1 per stock aliases $526 cardinal to our shareholders.

Since 2021, we person declared a full dividend of $9.35 per stock aliases $961 million. On nan apical correct of nan page, you will spot our regular figures per alloy for nan quarter. Our clip charter balanced complaint was $19,590 per alloy per day. Our mixed regular OpEx and nett rate costs G&A expenses per alloy per time amounted to $5,182. Therefore, our TCE little OpEx and G&A is astir $14,400 per day.

Slide 4 graphically illustrates nan rate travel span for Q4. We started nan 4th pinch $393 cardinal successful cash, and generated affirmative rate travel for operating activities of $116 million. After including indebtedness proceeds and repayments, CapEx payments for power redeeming devices and ballast h2o curen strategy installments and nan 3rd 4th dividend payment, we arrived astatine a rate equilibrium of $286 cardinal astatine nan extremity of nan quarter. For nan calculation of our dividend distribution, we person backed nan indebtedness prepayment of $44 cardinal that we drew from January 2023 to extremity astatine an adjusted equilibrium of $331 million.

Please move to Slide 5 wherever we item nan spot of our equilibrium sheet. Our pro forma full liquidity to-date stands astatine $356 million. Meanwhile, our full indebtedness stands astatine $1.32 billion. Since 2022, we person completed refinancings totaling $430 cardinal that reduced our liking costs by astir $5.2 cardinal per twelvemonth arsenic a consequence of achieving importantly little margins. Our adjacent 12 period amortization is $186 million.

We person 13 unlevered vessels pinch marketplace worth of $176 cardinal and nary indebtedness maturities until 2024. In an expanding liking complaint environment, we person liking complaint swaps pinch an outstanding notional of astir $722 cardinal fixed astatine an mean complaint aliases 46 ground points for an mean remaining maturity of 1.1 years. As of December 31, 2022, nan mark-to-market worth of these swaps was $33 million.

I will now walk nan level to our COO, Nicos Rescos, for an update connected our operational performance.

Nicos Rescos

Thank you, Spyrou. In Slide 6, we will exemplify really Star Bulk continues to use from a widening of nan substance dispersed betwixt HSFO and VLSFO. 120 scrubber fitted vessels surpassed 131,000 operating days pinch nan mean strategy readiness of 99.5%. At nan existent Hi5 dispersed astatine patient levels, our scrubbers meaningfully contributed to our profitability.

The mean powerfulness substance dispersed presently hovers astatine astir $230 per ton based Singapore export prices, erstwhile we cater astir 60% of our yearly substance demand. Indicatively, nan mean life dispersed achieved successful Q4 was $253 per ton and $274 dollars per ton for nan afloat twelvemonth of 2022.

For restructuring purposes, connected nan apical near of nan slide, we coming a sensitivity array that shows nan effect that marketplace use tin person connected our bottom-line based connected depletion of astir 700,000 tons of HSFO per annum for our scrubber-fitted vessels.

Please move to Slide 7, wherever we supply nan operational update. OpEx excluding non-recurring expenses was $4,205 for Q4 2022. Net rate G&A expenses were $977 per alloy per time for nan aforesaid period. During almanac 2022, Star Bulk assumes guidance of an further 19 vessels for third-party managers, streamlining vessel guidance operations and costs spread. In addition, we proceed to complaint astatine nan apical of our listed peers successful position of Rightship information score.

Turning to Slide 8, we supply our fleet snapshot and guidance astir our early drivers and alloy upgrade expenses and nan applicable full off-hire days. We person completed our first 4th installation programme crossed nan fleet and successful statement pinch EEXI and CII regulations. We will proceed investing successful upgrading our fleet further pinch power redeeming devices and telemetry, aimed successful improving our substance depletion and reducing our biology footprint, further enhancing nan commercialized attractiveness of nan cargo fleet.

Our expected task disbursal for almanac 2023 is estimated astatine $27.8 cardinal pinch a barren docking of 31 vessels pinch $141.1 cardinal towards our vessels upgrade CapEx. In total, we expect astir 870 days off-hire for nan aforesaid period. The supra numbers are based connected existent estimates astir barren dock and retrofit planning, alloy employment and gait capacity.

I will now walk nan level to our Chief Strategy Officer, Charis Plakantonaki, for an update connected our ESG efforts.

Charis Plakantonaki

Thank you, Nico. Please move to Slide 9, wherever we supply an update connected nan ESG margins. For nan 2nd twelvemonth successful a row, Star Bulk has participated successful nan Carbon Disposal Project exceeding its people of B and improving its capacity versus past twelvemonth for a people of B minus. B standing continues to summation nan Company's guidance level, indicating a maturity of taking coordinated action and ambiance issues. It besides plays Star Bulk supra maturation nan manufacture mean of C, and nan world mean of C which indicates Awareness Level.

During 2023 Star Bulk will purpose to proceed improving its biology stewardship, by measuring and reporting for nan first clip besides its Scope 3 emissions, namely nan emissions which we indirectly affects successful our worth chain. On nan regulatory front, Star Bulk has taken each basal method and operational measures to guarantee compliance pinch nan EEXI and CII targets arsenic group by nan world maritime organization, which came into unit successful January 2023.

We proceed enhancing our well-being program, connected committee its vessels and onshore and besides making contributions towards susceptible groups, biology protection, acquisition and sports. With regards to nan Company’s governance, Star Bulk is deploying caller systems to optimize its commercialized and operational performance, and is besides further strengthening its cyber information systems, processes and controls.

I will now walk nan level to our CEO, Petros Pappas for a marketplace updates and closing remarks.

Petros Pappas

Thank you, Charis. Please move to Slide 10 for a little update of supply. During 2022, a full of 31.2 cardinal dwt was delivered and 4.5 cardinal dwt was sent to demolition for a nett fleet maturation of 26.7 cardinal dwt aliases 2.8% year-over-year. The proviso outlook continues to beryllium nan champion we person seen successful nan caller history of barren bulk shipping. Uncertainty connected early proportion, precocious vessel building costs and constricted vessel gait capacity until 2025 person helped support caller orders nether control.

The bid book stands astatine complaint beneath levels of 7.3% of nan fleet pinch conscionable 25.9 cardinal dwt reported arsenic patient orders during 2022. Furthermore, scrap prices person stabilized astatine elevated levels and should make nan demolition of overage and fuel-efficient tonnage an charismatic action during seasonal downturns connected nan backmost of nan EEXI and CII regulation. The mean steaming velocity of nan barren bulk fleet decreased by 3.2% to 11.3 knots during nan past twelvemonth owed to grounds precocious bunker costs and a weaker freight market.

We expect lipid prices and banker costs to stay inflated successful nan mean term, amid nan sanctions connected Russian lipid and beardown request of power related commodities. The business on pinch a caller biology regularisation will proceed to incentivize slow steaming and support higher scrubber savings. Global larboard congestion knowledgeable a correction during nan 2nd half of 2022.

You do a gradual easing of restrictions and nan beardown alteration of Chinese imports during nan first half. Nevertheless, world congestion remains supra pre-COVID levels, particularly for smaller alloy types owed to changes successful trading patterns related to nan warfare and seasonal bottlenecks. As a consequence of nan bulk trends, maturation is improbable to transcend 2% per annum complete nan adjacent 3 years.

Let's now move to Slide 11 for a little update of demand. According to Clarksons, full barren bulk waste and acquisition during 2022 is estimated to person contracted by 1.9% successful ton miles. Trade was affected by nan warfare successful Ukraine, weaker Chinese imports, and a slowdown of world economical activity owed to surging commodity prices, ostentation liking complaint hikes, and a beardown U.S. dollar.

During 2023, barren bulk request is projected to summation by 2% soul miles pinch nan IMF forecast for world GDP maturation presently opinionated astatine 2.9%. We judge that nan relaxation of nan strict zero COVID argumentation and reopening of nan Chinese system will person a beardown affirmative effect for nan barren bulk marketplace pinch larger sizes benefiting nan astir during nan 2nd half of nan year.

Furthermore, nan displacement of coal, grain, and insignificant bulk waste and acquisition patterns to agelong -- longer haul way owed to inefficiencies related to nan warfare successful Ukraine will proceed to inflate ton miles. Iron aliases waste and acquisition contracted by 3.4% during 2022, and is projected to grow by 0.4% during 2023. China crude alloy accumulation decreased by 2% during 2022 arsenic a strict COVID argumentation constricted economical activity and offered nary support to nan spot marketplace downturn that began successful 2021.

Crude alloy accumulation from nan remainder of nan world decreased by 6.5% affected by surge successful power costs and weaker alloy margins pursuing nan warfare successful Ukraine, nevertheless, China's alloy productions showed signs of stabilization during nan 2nd half, while little home robust ore output and stockpiles provided affirmative parameter for imports constituent forward.

Coal waste and acquisition expanded by 1.8% during 2022 and is projected to grow by 4.2% during 2023. Global attraction connected power information and precocious state prices person upgraded nan ember waste and acquisition outlook for nan adjacent fewer years while nan suffering of European and Russian ember waste and acquisition is benefiting ton miles. Coal prices accrued to grounds precocious levels successful 2022 owed to nan disruptions and inefficiencies affecting export capacity.

During nan past month, a resumption of Chinese ember -- Australian root is taking spot marking nan extremity of nan unofficial prohibition that started during nan 4th fourth of 2020. Grain waste and acquisition contracted by 3.1% during 2022 and is projected to rebound by 5.3% during 2023. At nan commencement of 2022, atom waste and acquisition marketplace acquisition nan proviso daze arsenic nan warfare abrupt really did nan Ukrainian export for six months, which relationship for 10% of full atom trade.

From August onwards, Ukrainian export partially resumed done nan Ukraine inaugural astatine astir 40% of free world levels. The outlook for 2023 is affirmative arsenic results of waste and acquisition way is already taking place, different exporting nations filling nan spread of nan mislaid Ukrainian supply. Furthermore, a grounds precocious Brazilian soybean harvest is presently harvested while nan betterment of nan Chinese system should important summation nan request of soybean crops.

Minor bulk waste and acquisition contracted by 2.1% during 2022 and is projected to grow by 1.3% during 2023. Minor bulk waste and acquisition has nan highest relationship to world GDP maturation and nan economical slowdown has affected waste and acquisition volumes. Moreover, nan instrumentality vessel marketplace correction is moderating support of smaller geared barren bulk vessels.

On nan different hand, nan warfare successful nan Ukraine disrupted European Union of fertilizing and alloy accumulation creating Atlantic shortages that should use bulk waste and acquisition trades. Furthermore, West Africa bauxite exports proceed to grow pinch nan precocious guidelines and make beardown ton miles for Capesize vessels.

Finally, contempt nan existent seasonal spot marketplace weakness, nan agelong word prospects of nan barren bulk marketplace stay encouraging fixed nan 25-year debased bid book, nan biology regulations and nan affirmative effect connected barren bulk request from nan opening of nan Chinese economy. Star Bulk is well-positioned owed to its scrubber fitted successful divers fleet, return advantage of betterment successful freight rates.

Without taking immoderate much time, I will now walk nan level complete to nan usability to reply immoderate questions you whitethorn have.

Question-And-Answer Session

Operator

Thank you. We will now beryllium conducting a question-and-answer session. [Operator Instructions] Our first mobility is from Amit Mehrotra pinch Deutsche Bank. Please proceed pinch your question.

Chris Robertson

Hi. Good morning, everyone. This is Chris Robertson connected for Amit. Sorry, he's walking this morning. Just wanted to talk astir nan rate travel activity benignant of expected successful nan coming quarter, I think, astir apt group are beautiful hyper focused connected nan upcoming dividend present and past testing nan bottommost of seasonally anemic rates. So tin you talk america done astir really you are reasoning astir benignant of moving superior movements? You person laid retired benignant of nan attraction superior and barren docking costs beautiful good connected Slide 8, but could you besides punctual america benignant of nan regular indebtedness amortization expected this twelvemonth arsenic well?

Petros Pappas

Hi, Chris. So, let's commencement pinch easy which is nan indebtedness amortization. As we said, this is astir $190 cardinal for 2023 for nan full year. So, it's somewhat down from what we had successful 2022 owed to amended amortization schedules that we obtained during our refinancing. Now for nan first 4th of 2023 successful marketplace that is fundamentally decreasing, we would expect nan alteration successful moving superior to beryllium somewhat positive.

Simos Spyrou

That is to beryllium a root of cash.

Petros Pappas

Correct.

Chris Robertson

Okay. That makes sense. Any different things that we could beryllium alert too benignant of nan ballast h2o strategy installations, barren docking, moving capital, immoderate different rate travel movements that could effect nan dividend there?

Petros Pappas

We are providing nan macro figures successful our investor presentations. So if you spell to that, connected our website, you will find. It's really Page 8 of our investor presentation. You will find each CapEx items arsenic good arsenic barren dock estimates that we expect for nan adjacent fewer quarters.

Chris Robertson

Okay, great. Just arsenic a follow-up. You guys had immoderate beautiful bully costs power present connected nan OpEx front. I deliberation past Q nan non-recurring OpEx was reported astir $4,700 dollars per day, now it's down astir $4,200 dollars per day. Can you talk astir really you achieved nan savings? And are location immoderate costs pressures retired location correct now that we should beryllium alert of that mightiness put upward unit backmost connected OpEx? Or do you deliberation you tin support it astatine this caller level for nan coming quarters?

Nicos Rescos

Hi, Chris. This is Nicos. This is our consequence of our offshore auction we person taken. As we mentioned a spot earlier, it is taking successful a large number of third-party managed ships and trying to streamline nan costs basis. We are trying to summation our scope connected getting amended discounts and existent ostentation unit we are getting connected our spares and supplies, and that's really nan root of it.

Chris Robertson

Okay. Sorry, past question.

Simos Spyrou

Chris. This is Simos. Just to adhd to [visa]. I would not expect and I would not fund for 2023, nan fig that you person location for Q4, 4,200, it would beryllium a spot much conservative, and I would springiness a fig of astir 4,500, which is successful nan mediate betwixt Q3 and Q4 figures for nan full 2023.

Chris Robertson

Got it. No, that's really helpful. Just really speedy past mobility for me, I mean, I deliberation superior subject is very overmuch a characteristic of Star Bulk. You guys person done an unthinkable occupation complete nan years doing a imaginative acquisitions, successful nan past utilizing your shares arsenic currency. So I conjecture that said, you mightiness not beryllium looking astatine immoderate deals connected nan array astatine nan moment. But benignant of looking forward, do you deliberation there's absorbing opportunities retired there, mostly speaking for either en bloc acquisition aliases benignant of thing that's travel to you that you recovered compelling?

Hamish Norton

Well, Chris, we are looking astatine things now and we're hopeful that nan situation whitethorn beryllium a small easier to adjacent deals successful than it has been successful nan past twelvemonth aliases so. So, we're optimistic really that we whitethorn beryllium capable to get things done.

Operator

Our adjacent mobility is from Omar Nokta pinch Jefferies. Please proceed pinch your question.

Omar Nokta

I was going to inquire but earlier I get to what I was readying connected asking, possibly Hamish, could I ask, I cognize it's astir apt a spot sensitive, but successful position of getting deals done, is that -- would that beryllium benignant of on nan Star Bulk measurement successful nan past of utilizing shares successful those deals?

Hamish Norton

Everything, we're looking astatine would impact shares.

Omar Nokta

Okay. Thank you. So, I did want to inquire possibly conscionable a spot broadly astir nan net powerfulness of nan Company. It looks for illustration based disconnected of connected Slide 13 that nan bookings you've sewage truthful acold successful nan first 4th that moreover if rates stay arsenic soft arsenic they are, you'll stay profitable successful nan first quarter.

And my mobility is, I conjecture one, do you work together that you could stay successful affirmative territory present successful nan first quarter? And past also, if we presume nary changes successful nan marketplace from here, and holding each other adjacent successful position of say, substance spreads aliases eco spreads aliases possibly nan size premium you're capable to seizure pinch your bigger vessels, would you beryllium profitable nan 2nd 4th also?

And I conjecture what I'm getting astatine is really conscionable trying to get a consciousness for really overmuch of you being profitable successful this down marketplace arsenic a consequence of fixing shifts earlier earlier nan pullback and spot rates, and past really really overmuch of it owed to nan value premiums you were capable to seizure crossed nan different shifts you have?

Petros Pappas

Hi. I am, Petros. Yes, I think, we'll beryllium profitable during Q1. I judge our break giving is astir $12,000, and you spot that we're conscionable supra 15,000 correct now. The bulk of our unfastened position has to do pinch Newcastlemax, and we deliberation that we'll beryllium capable to support nan level depending of people really marketplace goes.

One point you person to understand is nan following. You look astatine nan spot complaint being for illustration $2,500 connected nan capes, but that is according to a velocity of I deliberation 13 knots. What we usually do successful situations for illustration this is for illustration that, we slow steam nan vessels and a travel that would cipher nan 2.500 really ends up calculating astatine 8,000 because we pain overmuch little substance oil.

If to that you adhd nan scrubber benefit, which for capes Newcastlemax is higher than different vessels, and nan carrying capacity of nan bigger vessels, you tin scope levels which should beryllium very adjacent to what nan mean is, moreover if nan marketplace during March stays wherever it is. Although, nan marketplace during March is simply a small spot nan FFA marketplace astatine slightest is simply a spot amended than what it is correct now.

Now regarding Q2, if you look astatine nan FFA mean is astir $12,500. Now, if you adhd to that, nan scrubber benefits and nan truth that we slow steam vessels during not very bully markets, I deliberation we will beryllium profitable again successful Q2 and probably, hopefully amended than conjecture nan Q1, and we're very affirmative for nan remainder of nan year.

Chris Robertson

Thanks for that Petros. Again, that's very adjuvant to, I conjecture to spot that nan 2,500 that we spot published is really almost, I conjecture it's relevant, but not really suggestive of nan net powerfulness erstwhile you return into relationship speeds simply excluding nan full scrubber and whatnot.

Petros Papas

If you tally cape by 13 knots and you pain 50 tons, past if you spell astatine 11 tons, which is for illustration 15 -- sorry, 11 knots, which is astir 15% little speed, you astir apt pain 25 tons aliases 28 tons, which is almost 50% beneath nan 13 knots consumption, and therefore, that's wherever you gained from.

Chris Robertson

And possibly conscionable 1 last follow-up and possibly related to Chris' first mobility astir nan dividend; obviously, you've had this semipermanent argumentation paying retired rate and excess of 268 cardinal threshold. What does nan dividend look like? If ending rate is beneath that amount, does it conscionable simply, do you instrumentality pinch nan existent argumentation and nan dividend is zero aliases a fewer pennies aliases is location a definite level that you person connected nan payout?

Petros Papas

Well, our argumentation is beautiful clear and we don't frankly expect immoderate marketplace successful nan foreseeable early leaving america pinch little rate than nan minimum magnitude that would telephone for a dividend. But if fundamentally our rate equilibrium declines complete nan 4th and declines beneath nan minimum threshold, past arsenic successful 2020 -- parts of 2020, location mightiness not beryllium a dividend, but we don't expect that really happening.

Operator

[Operator Instructions] There are nary further questions astatine this time. I'd for illustration to manus nan level backmost complete to guidance for immoderate closing comments.

Petros Pappas

No further comments, operator. Thank you very much.

Operator

This concludes today's conference. You whitethorn disconnect your lines astatine this time. Thank you for participating.

Editor: Naga



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