Globus Maritime(US:GLBS)2024-11-29 21:11Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Globus Maritime Limited provides global maritime transportation services for dry cargo, operating a fleet of dry bulk motor vessels managed by its wholly-owned Greek subsidiary, Globus Shipmanagement Corp - The company's principal business is owning and operating a fleet of dry bulk motor vessels for worldwide transportation of dry cargo9 - Vessel operations, including commercial, technical, and accounting services, are managed by the wholly-owned subsidiary Globus Shipmanagement Corp35 Fleet Composition as of September 30, 2024 | Vessel Name | Delivery Date | | :--- | :--- | | m/v River Globe | December 18, 2007 | | m/v Galaxy Globe | October 29, 2020 | | m/v Power Globe | July 20, 2021 | | m/v Diamond Globe | June 9, 2021 | | m/v Orion Globe | November 29, 2021 | | m/v GLBS Hero | January 25, 2024 | | m/v GLBS Might | August 20, 2024 | | m/v GLBS Magic | September 20, 2024 | | Hull No: S-K192 | - | | Hull No: S-3012 | - | Results of Operations For the nine months ended September 30, 2024, net income decreased to $2.4 million from $4.9 million in the prior-year period, primarily due to lower gains from vessel sales and impairment reversals, coupled with increased administrative expenses, partially offset by a 9% rise in voyage revenues from a 50% increase in the daily Time Charter Equivalent (TCE) rate to $13,450 Consolidated Statement of Comprehensive Income Highlights (Nine Months Ended Sep 30) | Metric (in thousands of U.S. Dollars) | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenues | 26,179 | 24,095 | | Operating income | 4,289 | 5,555 | | Net income | 2,430 | 4,894 | | Basic & diluted earnings per share | $0.12 | $0.24 | | EBITDA (unaudited) | 10,973 | 13,269 | - The 9% increase in Voyage revenues was mainly attributed to a 50% increase in the daily Time Charter Equivalent (TCE) rate, from $8,979 in 9M 2023 to $13,450 in 9M 2024, reflecting better market conditions51 - Total administrative expenses more than doubled to $6.5 million from $3.2 million, primarily due to a $3 million bonus awarded to a consultant affiliated with the CEO55 - Gain from the sale of vessels dropped significantly to $2 thousand in 9M 2024 from $3.9 million in 9M 2023, with reversal of impairment also decreasing from $4.4 million to $1.9 million2286 Revenues Total revenues for the nine months ended September 30, 2024, increased to $26.2 million from $24.1 million in the prior year, driven by a 9% rise in voyage revenues to $25.9 million due to higher time charter rates, despite a smaller average fleet size, while management and consulting fee income remained stable at $0.3 million Revenue Breakdown (Nine Months Ended Sep 30, in thousands of U.S. Dollars) | Revenue Source | 2024 | 2023 | | :--- | :--- | :--- | | Voyage revenues | 25,905 | 23,822 | | Management & consulting fee income | 274 | 273 | | Total Revenues | 26,179 | 24,095 | - The company generates revenue primarily from time charters, where a vessel is contracted for a specific period at a specified daily rate, with revenue recognized on a straight-line basis over the charter period11 Expenses For the nine months ended September 30, 2024, voyage expenses decreased sharply to $0.9 million from $3.8 million due to fewer ballast days, and vessel operating expenses fell to $9.9 million from $12.8 million, with average daily operating expenses down 4% to $5,326, while total administrative expenses surged to $6.5 million from $3.2 million, mainly driven by a $3 million executive-affiliated bonus - Voyage expenses dropped significantly from $3.8 million to $0.9 million, mainly because of a decrease in ballast days from 252 to 35, which substantially lowered bunker expenses80 - Average daily operating expenses per vessel decreased by 4% to $5,326 in 9M 2024 from $5,557 in 9M 202353 - Depreciation increased to $4.1 million from $3.7 million due to the addition of three new vessels (m/v GLBS Hero, m/v GLBS Might, and m/v GLBS Magic) in 202454 Finance Costs and Other Items In the first nine months of 2024, net finance losses widened to $1.9 million from $0.7 million in the prior year, driven by a rise in interest expense to $4.3 million from increased total borrowings of $96 million, partially offset by increased interest income of $2.3 million due to higher interest rates, while the gain on derivative financial instruments decreased to $0.2 million from $0.8 million Finance Costs Breakdown (Nine Months Ended Sep 30, in thousands of U.S. Dollars) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Interest income | 2,272 | 1,668 | | Interest expense and finance costs, net | (4,330) | (3,077) | | Gain on derivative financial instruments, net | 218 | 781 | | Foreign exchange losses, net | (19) | (33) | | Total finance losses, net | (1,859) | (661) | - Interest expense and finance costs increased to $4.3 million from $3.1 million, primarily due to a higher outstanding balance on loan and sale-and-leaseback agreements, which grew to $96 million8859 - Interest income rose to $2.3 million from $1.7 million, attributed to higher global interest rates and the company's use of short-term time deposits87 Selected Financial and Operational Data For the nine months ended September 30, 2024, fleet utilization was high at 99.3%, with the daily Time Charter Equivalent (TCE) rate significantly increasing by 50% to $13,450, while EBITDA decreased to $11.0 million from $13.3 million, and Adjusted EBITDA more than doubled to $8.9 million from $4.2 million, primarily due to adjustments for non-recurring items in 2023 Key Operational Metrics (Nine Months Ended Sep 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Ownership days | 1,862 | 2,298 | | Available days | 1,862 | 2,225 | | Operating days | 1,848 | 2,181 | | Fleet utilization | 99.3% | 98.0% | | Average number of vessels | 6.8 | 8.4 | | Daily TCE rate | $13,450 | $8,979 | | Daily operating expenses | $5,326 | $5,557 | EBITDA and Adjusted EBITDA Reconciliation (Nine Months Ended Sep 30, in thousands of U.S. Dollars) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Total comprehensive income | 2,430 | 4,894 | | EBITDA (unaudited) | 10,973 | 13,269 | | Adjusted EBITDA (unaudited) | 8,881 | 4,245 | Liquidity and Capital Resources As of September 30, 2024, the company had cash and bank balances of $63.6 million and a working capital surplus of $52.3 million, with net cash from operating activities significantly improving to $10.8 million from a $5.5 million use of cash in the prior year, while net cash used in investing activities was $64.4 million for vessel acquisitions, and financing activities generated $39.2 million from new loan proceeds Cash and Bank Balances (in millions of U.S. Dollars) | Date | Amount | | :--- | :--- | | September 30, 2024 | $63.6 | | December 31, 2023 | $77.8 | Statement of Cash Flow Data (Nine Months Ended Sep 30, in thousands of U.S. Dollars) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash from operating activities | 10,752 | (5,462) | | Net cash (used in)/from investing activities | (64,402) | 21,614 | | Net cash from financing activities | 39,152 | 9,333 | - The company was in compliance with all loan covenants as of September 30, 2024, and management believes it has sufficient resources to continue as a going concern886290 - Total outstanding borrowings under loan and sale-and-leaseback agreements increased to $96 million as of September 30, 2024, up from $54.2 million a year prior59118 Recent Developments Subsequent to the reporting period, on October 23, 2024, the company agreed to acquire two Kamsarmax dry bulk vessels from a related party for a total of $54 million, with the first vessel delivered on November 19, 2024, and the second expected in December 2024, financed with available cash and deferred payment terms - On October 23, 2024, the company entered into an agreement with an entity controlled by the Chairman to acquire two Kamsarmax vessels for a total purchase price of $54 million ($27.5 million for a 2016-built and $26.5 million for a 2014-built)29 - The transaction was approved by a committee of independent directors and involves deferred payment, with a portion of the purchase price for each vessel due up to one year after the agreement date29 - The first vessel, m/v "GLBS Angel", was delivered on November 19, 2024, and the second vessel is expected to be delivered in December 202429 Unaudited Interim Condensed Consolidated Financial Statements Consolidated Statements of Financial Position As of September 30, 2024, total assets increased to $280.1 million from $231.4 million at year-end 2023, primarily due to a significant rise in the net value of vessels from $100.6 million to $195.3 million, while total liabilities also grew substantially to $101.7 million from $55.4 million, driven by an increase in total debt to $95.3 million, and total equity remained stable at $178.4 million Condensed Consolidated Balance Sheet (in thousands of U.S. Dollars) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | 280,082 | 231,401 | | Vessels, net | 195,282 | 100,557 | | Cash and equivalents | 60,827 | 74,292 | | Total Liabilities | 101,682 | 55,431 | | Total debt & Financial liabilities | 95,270 | 52,259 | | Total Equity | 178,400 | 175,970 | Notes to the Financial Statements The notes provide detailed information supporting the financial statements, including the basis of presentation under IAS 34, confirmation of the going concern assumption, details on related party transactions such as a $3 million CEO-affiliated bonus, the significant increase in vessel assets due to acquisitions, the capital structure including 19.7 million outstanding warrants, and the composition of the company's $96 million in debt and financial liabilities from various credit and sale-leaseback facilities Note 4: Transactions with Related Parties During the period, the company engaged in significant related party transactions, including a one-time bonus of $3 million awarded to a consultant affiliated with the CEO, with the first $1.5 million paid in August 2024, and the renewal of its office lease agreement with an affiliate of the company's chairman - A $3 million bonus was awarded to a consultant affiliated with the CEO, with $1.5 million paid on August 26, 2024, and the remaining $1.5 million accrued as of September 30, 2024160 - In August 2024, the company entered into a new office rental agreement with F.G. Europe, an affiliate of Globus's chairman, for a lease period ending in August 2027161 Note 5: Vessels, net and Advances for vessel acquisition The net book value of the company's vessels increased to $195.3 million as of September 30, 2024, from $100.6 million at the start of the year, driven by additions of $110.4 million from new vessel acquisitions, while the company also sold the m/v Moon Globe in July 2024 and recorded a reversal of impairment of $1.9 million related to this sale Vessels, Net Book Value Roll-Forward (in thousands of U.S. Dollars) | Description | Amount | | :--- | :--- | | Balance at January 1, 2024 | 100,557 | | Additions | 110,429 | | Reversal of Impairment | 1,891 | | Depreciation & Amortization | (6,226) | | Sale of vessel (Net Impact) | (11,369) | | Balance at September 30, 2024 | 195,282 | - The company sold the 2005-built m/v Moon Globe for a gross price of $11.5 million, with delivery to the new owners on July 8, 2024141165 Note 8: Long-Term Debt, net As of September 30, 2024, total long-term debt and financial liabilities amounted to $96.1 million, including balances from the CIT loan facility, a new $23 million loan facility with Marguerite Maritime S.A. from May 2024, and a $28 million sale and leaseback agreement with SK Shipholding S.A. from February 2024, with the company remaining in compliance with all debt covenants Debt and Financial Liabilities Breakdown (in thousands of U.S. Dollars) | Lender | Amount | | :--- | :--- | | First Citizens Bank & Trust Company (CIT) | 45,528 | | Marguerite Maritime S.A. | 22,705 | | SK Shipholding S.A. (Sale-Leaseback) | 27,817 | | Total | 96,050 | - In May 2024, the company secured a new $23 million loan facility from Marguerite Maritime S.A. bearing interest at Term SOFR plus a 2.3% margin183 - In February 2024, the company entered a $28 million sale and leaseback agreement for the vessel "GLBS Might", which was accounted for as a financing arrangement, not a sale206 Note 10: Commitments As of September 30, 2024, the company had future minimum revenues of $21.0 million receivable under non-cancellable time charter arrangements, and significant capital commitments of $60.6 million for two fuel-efficient bulk carriers under construction, scheduled for delivery in the second half of 2026 - Future minimum revenues from non-cancellable time charters were $21.0 million as of September 30, 2024208 - The company has commitments of approximately $60.6 million for two newbuild vessels to be delivered in 2026, with an initial $15 million paid as of August 2024211212