Golden Ocean Group Limited (GOGL) on Q1 2021 Results - Earnings Call Transcript
Operator: Thank you for standing by and welcome to today’s Q1 2021 Golden Ocean Group Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I must advise you that this conference is being recorded today. And I would now like to hand the conference over to Ulrik Andersen, CEO. Please go ahead. Ulrik Andersen: Good afternoon and a warm welcome to Golden Ocean's Q1 release presentation. My name is Ulrik Andersen. I am the CEO of Golden Ocean and I am delighted to present our results today together with Peder Simonsen, the company's CFO. In a moment, I will talk you through the highlights of the quarter. Thereafter, Peder will provide details on our financial results and we will round the session off with a market outlook and by discussing the company’s cash flow generation potential. After the presentation, as always, we look forward to answering any questions that you may have. Peder Simonsen: Thank you Ulrik. If we move to Slide 5, as Ulrik mentioned, we achieved Capesize TCE rates of 16,600 and Panamax TCE rates of just below 15,000 for the quarter. And this averaged out at a total TCE rate of 15,900, which is equal to achieved rates in Q4. Our TCE revenue came in at $119.5 million, which is down from $125 million in the previous quarter and reduction is largely due to having six ships drydocked in the quarter, which resulted in a 280 day of – eight days of hire representing approximately 3.5% of total days. Ulrik Andersen: Thank you, Peder. And with that, we turn the attention to the market outlooks, but first a quick look at what happened in Q1. As those who follow Golden Ocean will know, we have been optimistic about the recovery in drybulk rates for several quarters. And so say that our expectations have been met would be understatement. Q1 turned out to be the best quarter in more than a decade. Remember that first quarter of the year is usually the weakest due to seasonal factors. While the sharp increase in rates last year was almost entirely driven by the reopening of the Chinese economy, the global trade is now recovering more broadly as vaccinations rise and COVID-19 cases decline across many countries obviously with the exception of India. The drybulk market is highly dynamic and two important related factors positively impacted the market in the first quarter of 2021. First, the Chinese ban on Australian imports widened to a larger group of commodities. This translated into longer sailing distances between exporter and importer and of course, effectively decreasing the fleet supply. The iron ore trade from Brazil to China is the most notable, but not the only example. Secondly, there was an unusual cold winter in China, where coal derived electricity represents around 70% of total electrical output. Chinese coal inventories were relatively low heading into the winter moths and with the ban on Australian imports, trade lanes changed. This reflected in the strengths of the Panamax market. That gave rise to the special situation that the Panamaxes traded above the Capes for a sustained period of time. The strength that has now reversed again. The market strength has of course persisted in Q2 and despite a correction over the past weeks, we remain bullish for the rest of the year. Turning to Slide number 10, and looking forward, the stage is set for prolonged period of demand growth for drybulk commodities. GDP growth is a good proxy for drybulk demand and looking at the years ahead, we expect that at least two years of high GDP growth ahead of us driven by force of retraction of COVID, but also as a consequence of the huge stimulus packages that are being employed currently by China, the U.S. and EU. Turning to the next slide, and looking more specifically at the commodities, then the recovery from the pandemic is also expected to resolve in multiple years of demand growth across all commodity groups really. Its forecast that would have been hard to imagine a few years ago, but we see this stay in the freight markets. Operator: And we do have a question from the line of Greg Lewis of BTIG. Please go ahead. Greg Lewis: Yes. Thank you and good afternoon, and thank you for the presentation and that forward guidance around Q2. Those are some pretty healthy numbers. But I was kind of curious and maybe looking for a little more color. There has clearly been a pickup in time charters and vessels being fixed on 6, 12 months, even longer, kind of curious, not necessarily thinking about forward days booking in the second half, but is there any way to think about vessels in the fleet that are already locked in at attractive rates in the second half? Any kind of color around that? Ulrik Andersen: Yes. Hi. It’s Ulrik here. The deals that we have done now is about as much color as I can give you, because that’s what we have done so far. We did the three conversions recently. But we would be looking to do more when the market did picks up. As you may have noticed, the market took a bit of a correction in recent weeks, but it’s now planning up again and as soon as we risk value reward that is – that we see this as reasonable and which covers Q1 next year. Then, we will build the book a little bit more. So, we will derisk going forward. We don’t see a lot of value in a three year time charter at this point. I think it’s undervaluated further out of the curve and that may change, but for now, we are focusing on the, let’s say 12 months horizon where we see the best value. Does that answer your question, Greg? Greg Lewis: Yes. Yes. That was perfect. And then, as I think about the balance sheet and leverages you are taking the delivery of the rest of the acquisition. Congratulations on that by the way. How should we be thinking about, maybe what like a pro forma fully built out debt looks like? And then, as we think about it, what is the company? What is kind of the sweet spot knowing that, hey your fleet is very young and modern. And so, maybe you can maybe maintain more leverage versus some other owners that have top to bottom older fleets. Just kind of how do you think about that? And how – as cash accelerate – as we see this cash windfall come in over the next few quarters, maybe next few years, how were we thinking about that? Peder Simonsen : Well, I think, as we - this is Peder. Hi, Greg. I think as we communicated previously that we are not seeking to lever up the company. I think in terms of risk, we have – we want to maintain the flexibility to be fully exposed to the spot market when that makes sense. And I think with that, we want to moderate our leverage. We have indicated, we will finance the transaction that we did with Hemen at 55% and it’s around those levels that we expect to finance the ships. And I think that’s also sort of a target for us. We are more focused on the cash breakeven levels that that would entail rather than the absolute or the relative leverage that that will entail, because if that is – at the end of the day what drives our cash flow. We are with that leverage able to, as we see it maintain a very strong cash breakeven, because we can afford to have quite long repayment profile and that would also give us the opportunity to attract very, very healthy terms on our financing. So, I think around those levels is where we expect to be positioned us in terms of financial leverage. Greg Lewis: Okay, great. Super helpful. Thank you very much. Operator: Thank you. And there are no questions coming through at this time. Ulrik Andersen: Alright. Then, we say thank you very much for your time today and if there are any further questions, we can always be reached on our Investor Relationship email. Thank you very much. Have a nice day. Operator: Thank you. Ladies and gentlemen, that does conclude your conference call for today. Thank you for participating and you may now all disconnect.
Golden Ocean Group Limited Surpasses Q1 Earnings Expectations
- Golden Ocean Group Limited reported a strong financial performance in Q1 2024, with an EPS of $0.29 and revenue of $246.74 million, surpassing estimates.
- The company highlighted its operational efficiency with Time Charter Equivalent (TCE) rates, showcasing robust revenue maximization from its fleet.
- Financial indicators such as a P/E ratio of 15.15, a P/S ratio of 3.02, and a debt-to-equity ratio of 0.72 reflect investor confidence and a balanced financial structure.
Golden Ocean Group Limited (NASDAQ:GOGL), a leading name in the maritime industry, specializes in the ownership and operation of large-size dry bulk vessels. On May 22, 2024, the company reported its first-quarter earnings, showcasing a strong financial performance that exceeded analysts' expectations. With an earnings per share (EPS) of $0.29, GOGL surpassed the estimated EPS of $0.23, and its revenue of approximately $246.74 million also exceeded the estimated revenue of about $195.62 million. This performance highlights the company's robust operational efficiency and market position, especially when compared to its competitors in the dry bulk shipping sector.
During the earnings conference call, key company participants, including CEO Lars-Christian Svensen and CFO Peder Simonsen, provided valuable insights into GOGL's financial health and strategic direction. Analysts from prestigious firms like BTIG and Jefferies participated, emphasizing the significance of the company's achievements in the first quarter of 2024. The call, detailed in a Seeking Alpha article, was part of GOGL's commitment to transparency and investor relations, offering a platform for discussing the company's progress and future plans.
GOGL's operational performance further underscores its financial success. The company reported Time Charter Equivalent (TCE) rates for its Capesize and Panamax vessels at $27,222 per day and $14,978 per day, respectively, with the entire fleet averaging $22,628 per day in the first quarter of 2024. This performance is indicative of the company's ability to maximize revenue from its fleet amidst fluctuating market conditions. Additionally, the sale of one Panamax vessel for a net consideration of $15.7 million demonstrates GOGL's strategic asset management and its impact on the company's bottom line.
Financially, GOGL exhibits a solid investment profile with a price-to-earnings (P/E) ratio of approximately 15.15, indicating investor confidence in the company's earnings potential. The price-to-sales (P/S) ratio of about 3.02 and the enterprise value-to-sales (EV/Sales) ratio of roughly 4.42 reflect the market's valuation of the company's sales. Furthermore, the enterprise value to operating cash flow (EV/OCF) ratio of approximately 13.53 highlights the company's valuation in terms of its operating cash flow, suggesting a healthy financial standing. The debt-to-equity (D/E) ratio of about 0.72 and a current ratio of approximately 1.25 indicate a moderate level of debt and an ability to cover short-term liabilities, respectively, portraying a balanced financial structure.
In summary, Golden Ocean Group Limited's first-quarter earnings report for 2024 paints a picture of a company that is not only performing well financially but also strategically positioning itself for sustained growth. The detailed financial metrics and operational achievements discussed during the earnings call and in subsequent reports provide a comprehensive view of GOGL's market strength, operational efficiency, and financial health, making it a noteworthy entity in the dry bulk shipping industry.
