Star Bulk Carriers Corp., a global shipping company focusing on the transportation of dry bulk cargoes, announced its unaudited financial and operating results for the third quarter and the nine months ended September 30, 2019.
Petros Pappas, Chief Executive Officer of Star Bulk, commented:
“Star Bulk returned to profitability during the third quarter 2019, reporting TCE Revenues of $131.3 million, Adjusted EBITDA of $72.2 million and a Net Profit of $5.8 million. The average TCE increased to $14,688/ day per vessel despite our fleet being affected by the repositioning to the Pacific due to our scrubber installation program. Daily Opex and Net Cash G&A expenses per vessel were reduced to $3,693/day and $828/day respectively.
We continued making significant progress in executing our scrubber retrofit program, having installed 88 towers, 50 of which are certified as of today. We are expecting to complete the certification process for the vast majority of our vessels by the end of the year aiming to realize commercial and operational benefits from the scrubber investment.
On the basis of the above results and our scrubber investment, we are pleased to announce a cash dividend for the quarter of $0.05 per share. We are also establishing a transparent dividend policy, under which the Company will distribute dividends once our cash balance has reached set thresholds. We believe the policy safeguards our strong balance sheet, whilst creating value by returning cash to our shareholders.”
Declaration of Dividend
• The Company’s Board of Directors (the “Board”) declared a quarterly cash dividend of $0.05 per share on November 20, 2019, payable on or about December 16, 2019, to all shareholders of record as of December 2, 2019 (“Record Date”). The ex-dividend date is expected to be November 29, 2019.
Dividend Policy
• On November 20, 2019, the Board also established a future dividend policy pursuant to which the Board intends to declare a dividend in each of February, May, August and November in an amount equal to (a) SBLK’s Total Cash Balance minus (b) the product of (i) the Minimum Cash Balance per Vessel and (ii) the Number of Vessels.
• “Total Cash Balance” means (a) the aggregate amount of cash on SBLK’s balance sheet as of the last day of the quarter preceding the relevant dividend declaration date minus (b) any proceeds received by SBLK and its subsidiaries from vessel sales or securities offerings in the last 12 months that have been earmarked for share repurchases, debt prepayment and vessel acquisitions.
• “Minimum Cash Balance per Vessel” means:
A. $1.00 million for December 31, 2019;
B. $1.15 million for March 31, 2020
C. $1.30 million for June 30, 2020
D. $1.45 million for September 30, 2020
E. $1.60 million for December 31, 2020
F. $1.75 million for March 31, 2021
G. $1.90 million for June 30, 2021
H. $2.10 million for September 30, 2021
• “Number of Vessels” means the total number of vessels owned or leased on a bareboat basis by Star Bulk and its subsidiaries as of the last day of the quarter preceding the relevant dividend declaration date.
• Any future dividends remain subject to approval of our Board each quarter, after its review of our financial performance and will depend upon various factors, including but not limited to the prevailing charter market conditions, capital requirements, limitations under our credit agreements and applicable provisions of Marshall Islands law. There can be no assurance that our Board will declare any dividend in the future.
Recent Developments
Fleet Update
• In October, 2019, we agreed to sell the Star Cosmo, a 2005 built Supramax vessel and the Star Epsilon, a 2001 built Supramax vessel. We expect to deliver both vessels to their new owners by the end of November. The proceeds from these sales, after prepayment of the debt related to the two vessels, are expected to be approximately $6.0 million and we expect to incur a non-cash loss of approximately $4.5 million in the fourth quarter of 2019.
Scrubber Update
• During Q3 2019 we have completed the installation of 44 scrubber systems, bringing the total number of scrubbers installed to 78, as of September 30, 2019.
• The Company continues to execute on its plan to install scrubbers on 114 out of 116 vessels in its fleet, having installed a total of 88 scrubbers as of November 20, 2019.
Financing Activities
• In October 2019 and November 2019, we drew down an aggregate amount of $106.5 million under the CEXIM $106.5 million Facility, which we entered into in September 2019. The proceeds were used to refinance $101.5 million outstanding under the previous lease agreements of the Katie K, the Debbie H, and the Star Ayesha.
• In September 2019, we entered into a committed term sheet with a major European bank for an amount of up to $30.0 million in order to finance working capital requirements, which remains subject to execution of customary definitive documentation.
Scrubber Financing Activities
• We incurred the following indebtedness to finance our scrubber installation program:
— On August 12, 2019, we drew down $3.3 million under the Attradius Facility.
— In September 2019, we drew down (i) $15.6 million under the DNB $310.0 million Facility, (ii) $1.3 million under the SEB Facility and (iii) $7.6 million under the lease agreements with CMBL.
• Subsequent to September 30, 2019, we drew down (i) another $10.9 million under the DNB $310.0 million Facility, (ii) $1.4 million under the ING Facility and (iii) a further $4.6 million under the lease agreements with CMBL.
• Following these drawdowns, the total drawn amount for scrubber financing is $79.1 million and the remaining available scrubber-related financing under all of our debt and lease agreements is $70.7 million.
Employment update
The below estimated daily TCE rates are provided using the discharge-to-discharge method of accounting, while as per US GAAP we recognize revenues in our books using the load-to-discharge method of accounting. Both methods, recognize the same total TCE revenues over the completion of a voyage, however discharge-to-discharge method recognizes revenues over more days, resulting in lower daily TCE rates. Under the load-to discharge method of accounting, increased ballast days at the end of the quarter will reduce the revenues that can be booked, following the accounting cut-off, in the relevant quarter, resulting in reduced daily TCE rates for the respective period.
As of today, we have fixed employment for approximately 68% of the days in Q4 2019 at average TCE rates of $16,284 per day.
More specifically:
Capesize / Newcastlemax Vessels: approximately 63.7% of Q4 2019 days at $23,599 per day.
Post Panamax / Kamsarmax / Panamax Vessels: approximately 68.3% of Q4 2019 days at $14,064 per day.
Ultramax / Supramax Vessels: approximately 72.6% of Q4 2019 days at $11,743 per day.
Amounts shown throughout the press release and variations in period–on–period comparisons are derived from the actual numbers in our books and records.
Third Quarter 2019 and 2018 Results
Voyage revenues for the third quarter of 2019 increased to $248.4 million from $188.5 million in the third quarter of 2018. Adjusted time charter equivalent revenues (“Adjusted TCE Revenues”) (please see the table at the end of this release for the calculation of the Adjusted TCE Revenues) were $131.0 million for the third quarter of 2019, compared to $129.0 million for the third quarter of 2018. While the average number of vessels in the third quarter of 2019 increased to 116.1 from 98.2 in the third quarter of 2018, the Available days for the third quarter of 2019 were not increased proportionally due to the installation of scrubbers and increased dry docking activity during the third quarter of 2019. The TCE rate for the third quarter of 2019 was $14,688 compared to $14,549 for the third quarter of 2018.
For the third quarter of 2019, operating income was $28.6 million, which includes depreciation of $32.2 million, compared to operating income of $47.5 million for the third quarter of 2018, which included depreciation of $28.8 million. Depreciation increased during the third quarter of 2019 due to a higher average number of vessels in our fleet as described above. Operating income declined in the third quarter of 2019 as compared to the third quarter of 2018, mainly because of higher depreciation expense as well as the significantly higher dry docking expenses also affected by our management’s decision to bring forward to 2019 all the 2020 dry docking services concurrently with the installation of scrubbers in order to avoid any additional off hire days in 2020 due to dry docking.
For the third quarter of 2019, we had a net income of $5.8 million, or $0.06 earnings per share, basic and diluted, based on 94,188,543 weighted average basic shares and 94,276,144 weighted average diluted shares, respectively. Net income for the third quarter of 2018 was $26.1 million, or $0.30 earnings per share, basic and diluted, based on 87,025,267 weighted average basic shares and 87,430,711 weighted average diluted shares, respectively.
Net income for the third quarter of 2019, included the following significant non-cash items, other than depreciation expense mentioned above:
• Unrealized gain on forward freight agreements and bunker swaps of $0.4 million or $0.004 per share, basic and diluted;
• Stock-based compensation expense of $3.5 million, or $0.04 per share, basic and diluted, recognized in connection with common shares granted to our directors and employees; and
• Net amortization of the fair value of below and above market acquired time charters of $0.3 million, or $0.003 per share, basic and diluted, associated with time charters attached to vessels acquired. The respective net amortization was recorded as an increase to voyage revenues.
