Financial Data and Key Metrics Changes - In the first half of 2024, the company generated an underlying profit of USD 44 million and a net profit of USD 58 million, with an EBITDA of USD 158 million, resulting in a 6% annualized return on equity and basic earnings per share of HKD 8.7 [2][3] - The company maintained a healthy financial position with USD 537 million in committed liquidity and net borrowings of just USD 32 million [3][13] - The interim dividend declared was HKD 4.1 per share, amounting to USD 28 million, representing 50% of the net profit for the period, excluding vessel disposal gains [3] Business Line Data and Key Metrics Changes - The large core business generated USD 77 million before overheads, with Handysize vessels contributing 41% and Supramax vessels contributing USD 36 million [2] - Operating activities saw significant growth, with an increase in vessel numbers and operating days, contributing an additional USD 8 million for the business [3][9] - The average market spot freight rates for the Baltic Exchange Handysize Index and the Baltic Exchange Supramax Index were USD 10,970 and USD 13,280 net per day, respectively [5] Market Data and Key Metrics Changes - Global dry bulk loading volumes grew approximately 2% year-on-year, with minor bulk loading volumes also up by 2% [17] - Grain loadings increased by 4%, driven by significant contributions from Argentina, Ukraine, and Brazil, with Argentina experiencing a 29% increase in grain loadings [17][18] - The company observed a nearly 13% decline in new building orders for Handysize and Supramax vessels, attributed to rising new building costs and uncertainties surrounding environmental regulations [21] Company Strategy and Development Direction - The company aims to optimize its capital structure, invest in value-adding and countercyclical growth opportunities, and distribute profits to shareholders in accordance with its distribution policy [4] - The long-term strategy focuses on expanding and renewing the fleet, particularly growing the Supramax and Ultramax fleet while replacing older Handysize vessels with younger, larger, and more efficient ships [21][24] - The company is committed to decarbonization and is collaborating with Japanese partners to design dual-fuel low-emission vessels [25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the supportive fundamentals of the industry and the overall global economic outlook, despite challenges such as high interest rates and geopolitical conflicts [26] - The company anticipates an increase in global dry bulk loadings and tonnage demand due to limited transit of dry bulk vessels to the Suez and Panama Canals [27] - Management noted that the disruptions in the Suez and Panama Canals have created fleet inefficiencies, impacting market dynamics positively [5][20] Other Important Information - The company has launched a share buyback program of up to USD 40 million, with approximately 42.7 million shares repurchased and canceled for about USD 14.6 million [4][15] - The cash position remains unchanged at USD 261 million, with operating cash inflow for the period at USD 103 million [13][14] - The company has maintained optionality in its long-term charter portfolio with purchase and extension options [16] Q&A Session Summary Question: Specific commodity types expected to see increased demand in the second half of 2024 - Management indicated that the grain season from the Northern Hemisphere, particularly from the U.S. and Europe, is expected to drive increased activity starting in October [29] Question: Environmental regulations and scrapping timeline - Management explained that scrapping of older ships is expected to pick up closer to 2030 due to market conditions and environmental regulations, with no significant incentive to scrap as long as older ships remain profitable [30][31] Question: Plans for dual-fuel ships - Management stated that while there is room for various fuels, methanol is currently seen as the best option for their smaller ships due to cost considerations [34] Question: Supply growth versus demand growth for Handysize vessels - Management expressed optimism about demand outlook, indicating that while there are uncertainties, the overall demand picture remains positive [39][40] Question: Share buyback acceleration - Management confirmed that they will not accelerate the share buyback program but will continue with the existing plan [42] Question: Current NAV compared to share price - Management disclosed that the fair market value of their assets is USD 2.4 billion, indicating a significant difference from the book value, which supports the rationale for the share buyback [43][44] Question: Short-term charter costs and strategy changes - Management acknowledged elevated short-term charter costs due to market disruptions and indicated a potential adjustment in covering strategy to maintain flexibility [46][52]
PACIFIC BASIN(PCFBY) - 2024 Q2 - Earnings Call Transcript