Golden Ocean Group Q1 2025 Earnings Call Transcript

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May 21, 2025

There are 3 speakers on the call.

Operator

and thank you for standing by. Welcome to the First Quarter twenty twenty five Golden Ocean Group Earnings Conference Call and Webcast. At this time, all participants are in listen only mode. After the speakers' presentation, there will be the question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to our speaker today, Peter Simonson, CEO. Please go ahead.

Speaker 1

Good afternoon, and welcome to the Golden Ocean Q1 twenty twenty five release. My name is Peders Simonsson, and I'm the CEO and CFO of Golden Ocean. I will today present the Q1 twenty twenty five numbers and forward outlook. In the first quarter of twenty twenty five, we have the following main highlights. Our adjusted EBITDA in the first quarter ended up at $12,700,000 compared to $69,900,000 in the fourth quarter.

Speaker 1

We recorded a net loss of $44,100,000 and a loss per share of $0.22 compared to a net income of $39,000,000 and earnings per share of $0.20 in the fourth quarter. Our TCE rates were about $16,800 per day for Capesizes and about $10,400 per day for Panamax vessels and a fleet wide net TCE of about $14,400 per day for the quarter. We continue our intensive drydocking program, recording drydocking cost of $38,300,000 for three eighty drydocking days in Q1 compared to $34,300,000 in Q4 relating to three twenty drydocking days. Following the share purchase by CMB Tech of close to 50% of the shares in Golden Ocean, a contemplated share for share merger between Golden Ocean and CMB Tech was announced after quarter end. In line with our fleet renewal strategy, we have entered into agreements for the sale of two older Camsemax vessels at attractive prices.

Speaker 1

For Q2, we have fixed a net TCE of about $19,000 per day for 69% of Capesize days and about $11,100 per day for 81% of our Panamax days. For Q3, we have fixed a net TCE of about $20,900 per day for 16% of Capesize days and about $12,900 per day for 38% of Panamax days. Finally, we declared a dividend of $05 per share for the first quarter of twenty twenty five. Let's look a little bit closer into the numbers. As mentioned, we had a total fleet YTCE of 14,400 in Q1, down from 20,800 in Q4.

Speaker 1

We are in a period of frequent dry docks. From Q4 to and including Q2 twenty twenty five, we will have dry docked around 30 of our Capesizes and Newcastle MAX vessels. We recorded four forty five days of total off hire in Q1 versus three sixty four days in Q4. Dry dock constitutes three eighty days in the quarter and three twenty days in Q4, respectively. For Q1, in addition to the nine dry dockings, we recorded 93 due to spillover effects from delays in completion of drydockings in Q4.

Speaker 1

'7 ships scheduled for drydock in Q2 twenty twenty five, of which three vessels have completed drydock as of today. The rest will enter the yard in June. This resulted in net revenues of $114,700,000 down from $174,900,000 in Q4. On operating expenses, we recorded $95,300,000 versus $95,600,000 in Q4. Our running expenses ended at $53800000.05900000.0 dollars down from Q4, mainly due to less calendar days in the quarter and lower expenses for ballast water treatment systems recorded in Q4.

Speaker 1

We expensed all drydocking costs, and we saw an increase in the OpEx result of $4,100,000 quarter on quarter relating to drydocks, ending at $38,400,000 versus $34,300,000 in the previous quarter. OpEx reclassified from charter hire was $1,000,000 1 million dollars down from Q4. And we incurred $2,100,000 in fuel efficiency enhancements and other vessel upgrades in the first quarter of twenty twenty five. Our G and A ended at $5,400,000 down from $6,500,000 in Q4. Daily G and A came in at $614 per day, net of cost recharge to affiliated companies, dollars 95 per day down from Q4 due to lower legal fees.

Speaker 1

On charter hire expense, we recorded $1,500,000 versus $4,200,000 in Q4 as a result of lower vessel dates for the trading portfolio. On depreciation, we saw a reduction in depreciation by $3,600,000 to $31,900,000 in Q1 as a result of the declaration of purchase options for leased vessels with SFL and thereby extension of their useful life in our balance sheet. On net financial expenses, we recorded $22,000,000 versus $23,300,000 in Q4, a reduction mainly due to lower software rates in the quarter. On derivatives and other financial income, we recorded a loss of $2,500,000 compared to a gain of $13,600,000 in Q4. On derivatives, we recorded a loss of $3,000,000 versus a gain of $11,800,000 in Q4.

Speaker 1

Included in derivatives was a mark to market loss of $7,000,000 on interest rate swaps in addition to a $2,700,000 realized cash gain. And finally, FFA and FX derivatives, a positive result of $1,300,000 For results in investments and associates, we recorded a gain of $700,000 compared to a $1,600,000 gain in Q4 relating to investments in Swiss Marine, TFG and UFC. A net loss of 44,100,000.0 or a $0.22 loss and a dividend of $0.5 per share declared for the quarter. Cash flow from operations came in at negative $3,300,000 down from $71,700,000 in Q4. Cash flow used in financings were $15,800,000 mainly comprising of net proceeds from new financings of $50,000,000 which was a drawdown under our revolving credit facility 35,900,000.0 in scheduled debt and lease repayments and a dividend payment of $29,900,000 relating to the Q4 results.

Speaker 1

A total net decrease in cash of 19,100,000.0 On our balance sheet, we had cash and cash equivalents of $112,600,000 including $5,900,000 of restricted cash. In addition, we've had $100,000,000 of undrawn available credit lines at quarter end. Our debt and finance lease liabilities totaled 1,440,000,000.00 by end Q1, up by approximately $73,000,000 quarter on quarter. Average fleet wide loan to value under the company's debt facilities per quarter end was 39.2% and a book equity of $1,800,000,000 and a ratio of total equity to total assets of approximately 54%. In Q1, we saw seasonality play out for the main drybulk commodities in addition to a reduction in sailing distances year on year.

Speaker 1

Ton miles fell 1.5% with grains and coal being the main contributors, as China reduced their imports by 1425%, respectively, compared to Q1 twenty twenty four. This has impacted the smaller shipping segments the most, which Panamaxes were supported by an increase in the relative share of coal volumes. Iron ore volumes fell in line with seasonality, driven by weather related trade disruptions, in particular for Australia. In fact, Brazilian exports were slightly positive year on year despite more heavy rain season, which indicates infrastructure improvements. Bauxite volumes from Guinea, which had their high season in Q1, recorded a 37% year on year growth in Q1 with 48,800,000 tonnes exported, of which approximately 85% goes to China.

Speaker 1

On iron ore, Australian iron ore exports were impacted by an extensive cyclone season in Q1, with volumes reduced by 9.7% compared to Q4 and 2.2% year on year. Rain season in Brazil also impacted export volumes, but interestingly ended higher compared to Q1 twenty twenty four. Despite geopolitical unrest and lowered global growth forecasts, we have seen supportive signals from Australian and Brazilian miners on their expected annual export volumes. Both Rio Tinto and Vale expect twenty twenty five full year volumes to reach three twenty five million to three thirty five million tonnes, while BHP reiterates their two fifty five million to two sixty five million tonnes target. The target represents flat year on year development for all three exporters.

Speaker 1

China continues to be the main importer of iron ore. As for coal and grains, Chinese iron ore import volumes have been lower during the period with geopolitical unrest. Chinese steel production has come down quarter on quarter in light with seasonality and compared to Q1 twenty twenty four. However, the Chinese government are continuing to stimulate the economy through lowering interest rates. And according to recent announcements from the China Iron and Steel Industry Association, they forecast a 2% year on year growth in steel demand backed by further stimuli in the industrial sector, counterbalancing the weak property market and consumer demand.

Speaker 1

The quality of Chinese domestic iron ore is poor and deteriorating, with an estimated Fe content of around 20% to 30%. On the back of increased pressure to decarbonize the steel industry, the Chinese government focused on high quality coal and high Fe content, and this is highly supportive to Tonmile with the largest new deposits of high grade iron ore found in Brazil and Guinea. In Q4 this year, we will see the Simandou project in Guinea, West Africa commence exports. The Simandou high grade iron ore mine is expected to ramp up production over two years, adding an additional 120,000,000 tonnes export capacity annually. In addition, new expansions are underway in Brazil, adding 50,000,000 tonnes in new capacity over the next years.

Speaker 1

Iron ore prices continue to be well supported, trading around $100 per tonne for a long period. This compares very favorably to the breakeven rate of the major miners of around $50 per tonne delivered China. Further, when new high grade volumes come on stream, ore prices may fall from current levels. And with domestic Chinese iron ore in the high end of the cost curve, a lower iron ore price is expected to favor more tonne mile heavy trading routes. With significant Chinese investment in mining and infrastructure in Guinea, we expect these volumes to be prioritized as a replacement for its domestic ore, supporting the long term positive outlook for the Capesize vessels.

Speaker 1

The Guinea government has, together with Chinese industrial conglomerates and global mining giants, developed infrastructure and port facilities in an area where the largest deposits of high quality bauxite and iron ore is found. Kenyan Bauxite have, over the last five years, seen an average growth rate of 22%. Bauxite, which is used in the production of aluminum, is supplying the booming EV industry as well as other industries in China. The Q1 export volumes from Guinea showed the export capacity with volumes exceeding 48,000,000 tonnes, 37% up from Q1 twenty twenty four. The first quarter is the high season for bauxite exports, and this year, exports have surprised on the upside, which substantiates the consensus expectation for a 5% to 10% growth annually for the next two years.

Speaker 1

As the Guinean bauxite trade constitutes 12% to 15% of the total Capesize ton mile demand, a 5% to 10% growth in volumes will represent a 1% to 1.5% growth in the ton mile demand, representing the full 2025 order book. We are currently seeing some instability in Guinea, whereby mining licenses have been temporarily revoked, having a shorter potential impact on exports. Due to the high importance of the iron and bauxite ore exports for the country's economy, we expect that this will be resolved. The order book remains attractive for the Capesize fleet with around 8% order book to fleet ratio. Shipyard capacity for Capesizes in Newcastle Maxes is limited and yards prioritize container and LNG and tanker orders over drybulk vessels.

Speaker 1

Despite historically high newbuilding prices, the profit margins for drybulk is limited compared to other vessel segments. We are in a period with increasing competitive advantages for modern vessels, both in terms of fuel efficiency and carrying capacity, but also tightening regulations relating to safety, crew welfare and emissions. As seen on the left hand graph, the Capesize fleet is aging rapidly, and by 2028, over half of the global Capesize fleet will be over fifteen years in a period where environmental regulations are tightening. The global Capesize fleet will, over the next two years, experience high proportion of dry docks compared to an average five year cycle. A large share of these vessels are fifteen year dry dockings, normally requiring substantial investments to meet class requirements.

Speaker 1

The focus by major miners and traders on safety, technical additions and emissions are increasing, which has substantially increased the investment needed to maintain a trading flexibility for older ships. The fleet continues to operate at high level of efficiency with port disruptions in the lower end of the historical range. While we do not expect conditions to increase meaningfully, there is no remaining downside to fleet efficiency. Sailing speeds remain low and expect this to continue, particularly for the large portion of the older inefficient fleet. We are still only seeing marginal transits for the Capesizes through the Suez Canal, and while reopening will provide some reduction in ton mile at face value, It may also reopen tonne mile accretive trades.

Speaker 1

I will now pass the word back to the operator and welcome any questions.

Operator

Thank you. Please standby. We'll compile the Q and A roster. This will take a few moments. Once again, if you wish to ask a question, please press 11.

Operator

Dear participants, as a reminder, if you wish to ask a question, please press 11. Just give us a moment and now we're going to take our first question. And the question comes from the line of Peter Hogan from ABG Sundal Collier. Your line is open. Please ask your question.

Speaker 2

Good afternoon. I was wondering if you could shed some light on the timing for the contemplated merger in terms of well, yeah, I suppose more if you can be specific on dates to look forward to in this context?

Speaker 1

Hi, Petit. No, I think as of dates, it's really hard to say. We are working in accordance with the plan that was announced in the press release and there are obviously in such processes a lot of different work streams, so it's hard to be more specific than what has been announced.

Speaker 2

Okay. Okay. I don't know, is it looking at the prices for the two related equities here, it seems to be a detachment between market prices and the agreed 0.925 exchange ratio. Should we interpret that as if the market is not expecting the merger to go through with such an exchange ratio? Or are there any other elements to this that well, I don't understand.

Speaker 1

I have to say that's something that you should probably interpret on my behalf, isn't it? I mean, it's priced in the way it's priced and for whatever reason. I guess some of it has to do with liquidity in the stock, but I leave that to you to interpret.

Speaker 2

I understand, Peter. I do understand that it's probably closer to my profession to try to explain. But as you understand, it's quite difficult to grasp that now, so 15%, sixteen %, seventeen % discount. Okay. But towards the market then, we've had sort of, I would say, a conventional sort of Q1, perhaps somewhat on the low end.

Speaker 2

If you go back a few weeks, we had some good momentum here. But over the past well, few trading days, it's stagnant again. In terms of near term expectations here, should we think that we need to see Simonsu volumes coming and trying to get covered with ships? Or are there significant or sort of meaningful catalysts in the marketplace to be expected prior to that?

Speaker 1

I think what has happened in the recent couple of weeks is that we've seen some disruptions on the Guinea export side. There's been some turmoil on force majeure being invoked on some of the mines and export facilities there. And also, we saw a breakdown of some technical equipment in Peru, disrupting some of the markets. And these things do not necessarily give a lot of less volumes into the market, but they impact the sentiment. Given the sort of general economic sentiment, that can impact the FFA curve, which is what prices freight.

Speaker 1

So I think incidents like that will impact the market given the nervousness in general, but the volumes are picking up in line with seasonality. We see that Vale is now approaching $900,000 tonnes per day, which is very solid. And I don't see that there's going to be gravity will find its way here as well. So I don't think we need to wait for Simandou. We are still very positive for the second half.

Speaker 1

Expect volumes to be healthy for the Capes. So that's our expectation, but it may take some time given the way the sentiment works as of now.

Speaker 2

Okay. And in light of what is now, I would as I said before, not a very, at least, good quarter in hindsight that we saw in Q1 and with current rates also perhaps at least not in the high end, the asset prices continue to be strong here. Is it from your perspective well, is it to be expected that we'll continue to see, well, according to Clarkson quotes, $9,000,000 to $80,000,000 for a resale Newcastlemax if rates continue for the standard capes sort of mid teen level. Doesn't something have to give here? Either rates come up or asset prices would see would see some pressure?

Speaker 1

Yes. I mean, you've asked this question now for quite a long time that there's been a disconnect between asset prices and sort of the rates. I think that newbuilding prices are high as a function of both sort of supportive long term fundamentals for the market, but also lack of yard capacity. So I think those are very well supported. We see it also on the second hand values, which we don't expect to come down.

Speaker 1

I mean, have Seamandu, we have a lot of the demand sort of fundamentals being positive for the big ships and not least historically well good visibility on the supply side. So I don't really see what's going to bring values down. And I think it is a matter of time before this gravity trickles into the freight market as well. There are a lot of one offs that impact this market as of now. We had obviously a good Q1 last year, sort of unusually good.

Speaker 1

And this year it was more in line with seasonality. And we've seen that the big miners are still very much guiding positively for full year volumes in line with last, which means that they would need to ramp up their exports significantly for the second half. So I don't think fundamentally there's anything that has changed that picture and obviously supported risk constrained shipyard capacity and willingness to build the Capesizes and Nickels and Maxes, I think that's not going to change in the near term.

Speaker 2

Okay. No. Well, okay. It's it's going to be an interesting still market. I hand it back here to the operator.

Speaker 2

Thank you.

Speaker 1

Thank you, Petru.

Operator

Thank you. There are no further questions. I would now like to hand the conference over to Peter Simonsson for any closing remarks.

Speaker 1

Thank you. I just want to thank you for joining in, and have a great rest of the week.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect. Have a nice day.

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Key Takeaways

  • For Q1 2025 Golden Ocean reported an adjusted EBITDA of $12.7 million and a net loss of $44.1 million (LPS $0.22), down from $69.9 million EBITDA and $39 million net income in Q4.
  • The fleet-wide net TCE rate fell to $14,400/day as intensive drydocking (380 days) drove $38.3 million of off-hire costs and maintenance upgrades.
  • CMB Tech acquired nearly 50% of Golden Ocean’s shares, and the companies announced a contemplated share-for-share merger after quarter-end.
  • Through Q2 and Q3 the company has fixed roughly 70% of Capesize days at $19,000–$20,900/day and 38–81% of Panamax days at $11,100–$12,900/day, providing forward revenue visibility.
  • Management cited a positive long-term outlook for Capesize demand driven by high-grade iron ore and bauxite exports (including Simandou ramp-up), limited newbuilding capacity and an aging fleet.
A.I. generated. May contain errors.
Earnings Conference Call
Golden Ocean Group Q1 2025
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