Genco Shipping & Trading (GNK) - 2024 Q2 - Quarterly Results

Q2 2024 Financial Results Genco Shipping & Trading Limited announced strong Q2 2024 financial results, highlighting key operational metrics and strategic initiatives Financial and Operational Highlights Genco reported strong Q2 2024 results with a net income of $23.5 million, declared a $0.34 dividend, and advanced its deleveraging and fleet renewal strategies - Declared a $0.34 per share dividend for Q2 2024, marking the 20th consecutive quarterly dividend. The cumulative dividend payout reached $5.915 per share[3] - The company continued its strategic initiatives, including paying down $65.0 million of debt in Q2 and agreeing to sell the Genco Warrior (Supramax) and Genco Hadrian (Capesize)[3] - For Q3 2024, the company estimates a Time Charter Equivalent (TCE) of $19,291 for 67% of its owned fleet's available days, based on current fixtures[3] Q2 2024 Key Financial Metrics | Metric | Value | Note | | :--- | :--- | :--- | | Net Income | $23.5 million | Basic and diluted EPS of $0.54 | | Adjusted Net Income | $19.9 million | Basic and diluted EPS of $0.46 | | Adjusted EBITDA | $39.8 million | - | | Voyage Revenues | $107.0 million | - | | Net Revenue | $74.4 million | - | | Average Daily Fleet-wide TCE | $19,938 | - | Management Commentary and Corporate Strategy Management commentary highlights strong earnings, strategic value creation through dividends, deleveraging, and fleet renewal to capitalize on market dynamics CEO Commentary CEO John C. Wobensmith emphasized strong quarterly earnings, continued execution of the value strategy, and strategic positioning for favorable market dynamics - The company has now declared 20 consecutive dividends, totaling $5.915 per share, which represents 33% of its stock price as of August 6, 2024[4] - Genco is divesting older, non-core assets at firm prices and intends to redeploy the proceeds toward high-specification vessels to modernize the fleet and enhance earnings power[4] - The company is well-positioned for the second half of the year due to its significant operating leverage, barbell fleet composition, strong balance sheet, and access to capital, enabling it to pursue fleet renewal and growth opportunities[4] Comprehensive Value Strategy Genco's value strategy focuses on three pillars: significant quarterly dividends, balance sheet deleveraging, and opportunistic fleet growth and renewal for long-term shareholder value - The company's strategy focuses on three pillars: Dividends, Deleveraging, and Growth[6] - As of June 30, 2024, Genco maintains a strong liquidity position of $370.0 million, consisting of $42.3 million in cash and $327.7 million in revolver availability[7] - The company reports an industry-low cash flow breakeven rate and a net loan-to-value ratio of just 2%[7] Financial Deleveraging Genco has significantly reduced debt by $349 million (78%) since 2021, with a Q2 2024 payment of $65.0 million, aiming for zero net debt - Debt has been reduced by ~$349 million (78%) since the value strategy was implemented in 2021[7] - Total debt outstanding was $105.0 million as of June 30, 2024. An additional $5.0 million was paid down in Q3 to date[7] - The company's medium-term goal is to achieve zero net debt to enhance its ability to pay meaningful dividends and pursue strategic opportunities[7] Fleet Renewal Genco is actively renewing its fleet by selling older vessels for $36.95 million, avoiding $5.0 million in drydocking expenses, and exiting smaller Capesize vessels - Agreed to sell the Genco Warrior (2005-built Supramax) for $11.95 million and the Genco Hadrian (2008-built Capesize) for $25.0 million[8] - The sale of these two vessels, which were scheduled for drydocking in 2025, will save the company approximately $5.0 million in expenses[8] - Proceeds from vessel sales are intended to be reinvested in high-quality, fuel-efficient Capesize vessels to modernize the asset base and improve earnings capacity[9] Shareholder Returns and Commercial Operations This section details Genco's dividend policy, which distributes excess cash flow, and its commercial operating platform, emphasizing a flexible fleet deployment strategy Dividend Policy Genco declared a Q2 2024 dividend of $0.34 per share, based on distributing 100% of excess operating cash flow after a $19.50 million voluntary reserve Q2 2024 Dividend Calculation | Description | Amount (in millions) | | :--- | :--- | | Net revenue | $74.41 | | Less: Operating expenses | ($35.34) | | Less: Capex for drydocking/BWTS/ESDs | ($4.58) | | Operating cash flow less DD capex | $34.49 | | Less: Voluntary quarterly reserve | ($19.50) | | Cash flow distributable as dividends | $14.99 | | Dividend per share | $0.34 | - The dividend policy distributes 100% of excess quarterly operating cash flow, defined as net revenue less operating expenses, drydocking capex, and a voluntary reserve[10][11] - The voluntary quarterly reserve for Q3 2024 is expected to be $19.50 million. This reserve can be used for vessel acquisitions, debt repayments, or general corporate purposes, and is set at the Board's discretion[12][13] Commercial Operating Platform and Fleet Deployment Genco employs a portfolio approach favoring short-term spot market fixtures and a 'barbell' fleet composition, with 67% of Q3 2024 fleet days fixed at an estimated TCE of $19,291 - The company utilizes a portfolio approach combining short-term spot market employment with opportunistic longer-term coverage, currently favoring short-term fixtures for optionality[14] - A 'barbell approach' to fleet composition provides exposure to both major bulk (Capesize) and minor bulk (Ultramax/Supramax) commodities[15] Estimated Net TCE - Q3 2024 to Date | Vessel Type | Estimated TCE ($) | % Fixed | | :--- | :--- | :--- | | Capesize | $27,944 | 58% | | Ultra/Supra | $15,021 | 72% | | Total Fleet-wide | $19,291 | 67% | Financial Review This section provides a detailed financial review of Genco's performance for Q2 and the first six months of 2024, highlighting revenue, net income, and operating expenses Second Quarter 2024 Financial Review Genco's Q2 2024 net income more than doubled to $23.5 million, driven by higher TCE rates, despite increased vessel operating expenses and a one-time $3.9 million expense Q2 2024 vs Q2 2023 Performance | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net Income ($ million) | $23.5 | $11.6 | | Revenues ($ million) | $107.0 | $90.6 | | Average Daily TCE ($) | $19,938 | $15,556 | | Vessel Operating Expenses ($ million) | $27.0 | $22.6 | | Daily Vessel Operating Expenses ($) | $6,855 | $5,641 | - Adjusted net income for Q2 2024 was $19.9 million, excluding a $13.2 million gain on vessel sales, $5.6 million in impairment charges, and $3.9 million in other operating expenses related to the annual meeting[18] - The increase in daily vessel operating expenses (DVOE) was primarily due to the timing of the purchase of stores and spares, higher crew costs, and increased repair and maintenance costs[20] Six Months 2024 Financial Review Genco's net income for the first six months of 2024 nearly tripled to $42.3 million, driven by higher TCE rates averaging $19,564 per day, with Adjusted EBITDA reaching $81.6 million First Half 2024 vs First Half 2023 Performance | Metric | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Net Income ($ million) | $42.3 | $14.2 | | Revenues ($ million) | $224.5 | $184.9 | | Average Daily TCE ($) | $19,564 | $14,757 | | Adjusted EBITDA ($ million) | $81.6 | $49.9 | - The increase in revenues and net income for the six-month period was primarily due to higher rates earned by the company's major bulk vessels[25] - Vessel operating expenses for the first half of 2024 increased to $52.9 million from $47.0 million in H1 2023, with DVOE rising to $6,558 from $5,899[26] Liquidity, Capital Resources, and Fleet Information This section details Genco's liquidity, capital resources, and fleet information, including cash flow, debt management, and planned capital expenditures for fleet maintenance and upgrades Liquidity and Capital Resources Net cash from operating activities increased to $61.3 million in H1 2024, while investing activities provided $65.1 million from vessel sales, and financing activities used $130.9 million for debt and dividends Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2024 (in millions) | 2023 (in millions) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $61.3 | $38.9 | | Net Cash from Investing Activities | $65.1 | ($3.5) | | Net Cash used in Financing Activities | ($130.9) | ($45.6) | - The increase in cash from investing activities was primarily due to $67.7 million in proceeds from the sale of three vessels during H1 2024[28] - The increase in cash used for financing was driven by a $77.5 million increase in debt repayments and a $7.7 million increase in dividend payments compared to H1 2023[29] Capital Expenditures and Fleet Composition Genco's fleet will consist of 41 vessels with an average age of 11.8 years, with estimated Q3 2024 capital expenditures of $8.99 million for drydocking, BWTS, and fuel efficiency upgrades - After consummating agreed-upon sales, the fleet is expected to consist of 41 vessels: 15 Capesize, 15 Ultramax, and 11 Supramax[30] - The company estimates 130 off-hire days in Q3 2024 for one Capesize, two Ultramaxes, and one Supramax vessel undergoing scheduled maintenance[31] Estimated Capital Expenditures (in millions) | Category | Q3 2024 | Q4 2024 | 2025 (Full Year) | | :--- | :--- | :--- | :--- | | Drydock Costs | $6.81 | $5.55 | $36.00 | | BWTS Costs | $1.09 | $0.00 | $1.06 | | Fuel Efficiency Upgrade Costs | $1.09 | $1.23 | $3.98 | | Total Costs | $8.99 | $6.78 | $41.04 | Summary Consolidated Financial and Other Data This section presents summary consolidated financial statements, including income, balance sheet, cash flow data, non-GAAP reconciliations, and key fleet operational metrics Consolidated Income Statement Genco reported Q2 2024 revenues of $107.0 million and net income of $23.5 million, with six-month revenues of $224.5 million and net income of $42.4 million Consolidated Income Statement Data (in thousands) | Description | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Voyage Revenues | $107,047 | $224,482 | | Total Operating Expenses | $80,733 | $176,075 | | Operating Income | $26,314 | $48,407 | | Net Income | $23,493 | $42,436 | | Net Income Attributable to Genco | $23,467 | $42,265 | | Net Earnings Per Share - Diluted | $0.54 | $0.97 | Consolidated Balance Sheet As of June 30, 2024, Genco's total assets were $1.06 billion, total liabilities decreased to $134.7 million due to debt repayments, and total equity increased to $923.3 million Consolidated Balance Sheet Data (in thousands) | Description | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $42,033 | $46,542 | | Total Current Assets | $135,920 | $157,272 | | Vessels, net | $887,897 | $945,114 | | Total Assets | $1,057,974 | $1,141,902 | | Total Current Liabilities | $37,885 | $35,286 | | Long-term debt, net | $96,166 | $190,169 | | Total Liabilities | $134,659 | $227,256 | | Total Equity | $923,315 | $914,646 | Consolidated Statement of Cash Flows For H1 2024, operating activities provided $61.3 million in cash, investing activities provided $65.1 million, and financing activities used $130.9 million, resulting in a net cash decrease of $4.5 million Statement of Cash Flows Data (Six Months Ended June 30, in thousands) | Description | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $61,283 | $38,948 | | Net cash provided by (used in) investing activities | $65,118 | ($3,531) | | Net cash used in financing activities | ($130,910) | ($45,625) | | Net decrease in cash | ($4,509) | ($10,208) | | Cash at end of period | $42,348 | $53,892 | Reconciliation of Non-GAAP Measures The company provides reconciliations for non-GAAP measures, adjusting Q2 2024 net income to $19.9 million and EBITDA to an Adjusted EBITDA of $39.8 million Q2 2024 Net Income to Adjusted Net Income Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | Net income attributable to Genco | $23,467 | | + Impairment of vessel assets | $5,634 | | + Gain on sale of vessels | ($13,206) | | + Other operating expense | $3,924 | | + Unrealized loss on fuel hedges | $121 | | Adjusted net income | $19,940 | Q2 2024 EBITDA and Adjusted EBITDA Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | Net income attributable to Genco | $23,467 | | + Net interest expense | $2,731 | | + Depreciation and amortization | $17,096 | | EBITDA | $43,294 | | +/- Adjustments (Impairment, Gain on Sale, etc.) | ($3,527) | | Adjusted EBITDA | $39,767 | Fleet and Operational Data As of Q2 2024, Genco operated 43.2 vessels with 96.5% utilization, achieving an average daily TCE of $19,938 and DVOE of $6,855, with Capesize vessels leading in TCE Key Operational Metrics (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Average number of vessels | 43.2 | 44.0 | | Fleet utilization | 96.5% | 97.8% | | Average Daily TCE ($) | $19,938 | $15,556 | | Average Daily Vessel Operating Expenses ($) | $6,855 | $5,641 | Average Daily TCE by Vessel Type (Q2 2024) | Vessel Type | TCE ($/day) | | :--- | :--- | | Capesize | $29,145 | | Ultramax | $15,646 | | Supramax | $12,468 | | Fleet Average | $19,938 |