Star Bulk Carriers Corp. (SBLK) Q4 2012 Earnings Report, Transcript and Summary

Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Conference Call on the Fourth Quarter and Year End 2012 Financial Results. We have with us Mr. Spyros Capralos, President and Chief Executive Officer, and Mr. Simos Spyrou, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by question-and-answer session. (Operator Instructions) I must advise you that this conference is being recorded today, Tuesday, March 19, 2013. We now pass the floor to one of your speakers today, Mr. Spyros Capralos. Please go ahead, sir.

Thank you, operator. I am Spyros Capralos, President and Chief Executive Officer of Star Bulk Carriers, and I would like to welcome you to the Star Bulk Carriers’ fourth quarter and 12 months 2012 financial results conference call. Along with me today to discuss our financial results is our CFO, Mr. Simos Spyrou. Before we begin, I kindly ask you to take a moment to read the Safe Harbor statement on slide number two of our presentation. Let us now turn to slide number three of the presentation for a preview of the fourth quarter 2012 financial highlights. In the three months ended December 31, 2012, gross revenues amounted to $17.9 million, representing a 37% reduction versus the same period of 2011. Our revenues were mainly affected by the low freight rate environment and the off hire of the Star Polaris that was undergoing main engine repairs. During the fourth quarter, the Star Polaris was off hire for 45 days nearly half of the quarter. We are trying to recuperate the loss of hire from a claim to the shipyard, which constructed the vessel. General and administrative expenses were reduced by 17% to $2 million in Q4 2012 versus $2.4 million in Q4 2011. Overall, during the fourth quarter of 2012, the company had a net loss of $1.4 million compared to a net loss of $69.9 million in Q4 2011, the latter including an impairment loss on Star Sigma and Star Epsilon. Excluding non-cash items, our net income for the fourth quarter amounted to $300,000 compared to an adjusted net loss of $3.1 million in Q4 2011. Adjusted EBITDA for the fourth quarter 2012 was $6.3 million compared to $12.7 million last year. Our Time Charter Equivalent during this quarter was $14,877 per day compared to $19,557 last year…

Thank you, Spyros. Let us now move to slide 10 for an overview of our balance sheet as of December 31, 2012. Our total cash balance stood at $31.8 million, other current assets were $15.7 million, and our fixed assets following the $303 million impairment loss during the third quarter amounted to $291.2 million. Fair value of above market acquired time charters stood at $14.3 million, and other non-current assets at $1.6 million. Summing up the above, total assets amounted to $354.7 million. Total debt stood at $224.1 million, while other liabilities were $13.8 million and stockholders’ equity was at $116.7 million. If we can now turn to slide 11 to discuss our fourth quarter 2012 income statement, I would like to point out that our results include non-cash items, which are depicted in the middle column while the adjusted figures exclude them. For the fourth quarter of 2012, non-cash adjusted revenues amounted to $19.5 million compared to $30.2 million in the same period last year. In particular, non-cash items include a $1.6 million related to the amortization of above market acquired time charters. Voyage expenses amounted to $2.1 million for the fourth quarter 2012 from $5.5 million in the same quarter last year. Adjusted revenues net of voyage expenses amounted to $17.4 million this quarter compared to $24.8 million the same period last year, a reduction of 30%. I believe that this number is the most accurate measure of our actual comparable revenue as it nets out the effect of the voyage charters on the revenue and the voyage expenses lines. This 30% reduction was mainly due to the off hire related to the Star Polaris and our higher spot market exposure under a low freight rate environment plus the fact that we repositioned part of our Supramax fleet…

Thank you, Simos. In conclusion, as you can see on slide 19, we believe that Star Bulk is positioned to sustain through the current challenging environments. On top of our high-quality modern fleet, Star Bulk also has a diverse group of high-quality charters. As we discussed earlier in our presentation, our in-house management has provided tangible results as it has led to a meaningful increase in our efficiency and transparency, a consistent decrease in operating costs, and lastly, in an increase in our revenues going forward due to the management of third-party vessels. We have an experienced and dedicated management team and moderately leveraged balance sheet and a healthy liquidity profile compared to the industry. We have secured our lenders’ trust and support for the next two years. We currently have no capital expenditures related to new buildings, and we have $26.1 million of cash in the banks. From a commercial perspective, our Capesize fleet is mostly covered for the next two years and at above market charter levels, while our operating expenses are being continuously optimized. We believe Star Bulk has a good set of characteristics that placed the company among the most promising in the dry bulk industry. Closing, I would like to thank our shareholders for their support and loyalty and reassure them that we will continue to do everything in our power to ensure the company’s long-term viability and navigate safely through this challenging low freight environment. Without taking any more of your time, I will now pass the floor over to the operator. In case you have any questions, both Simos and myself, will be happy to answer them.

Thank you. (Operator Instructions) Your first question today comes from the line of Noah Parquette from Global Hunter Securities. Please go ahead.

Good afternoon. I just want to ask about the Supramax fleet, you have been very vocal about keeping that open, and you don’t want to fix at the bottom right now, but what kind of rates would you want to see before you start putting some ships away for six months to a year or something like that?

Hi, Noah. Listen, for the time being, we don’t see those rates, therefore, we are chartering our Supramax fleet with short-term charters, and I think we have done quite well in this low freight environment. Supramaxes have done much better than the Capesize vessels and now we are enjoying in the last month or so an improved market environment that has permitted us now to see and experience five digit numbers on the daily charter rates.

Really, I was just going to follow up with you are repositioning those ships last quarter where they are now, have you been able to kind of take advantage of this little pop in rates?

Yes, we have because some vessels that were in the Atlantic experienced much higher rates, going forward, I can give you an example for one of our vessels we are getting rate of $19,000 per day, which is much higher than what we have seen up to now. At the same time, I think the Atlantic is doing much better. The grain season in Brazil seems to be doing very well. And I think there is lot of business in the Atlantic that will permit us to obtain higher rates. We sacrificed some of the rates that we would be getting in the Pacific by going to the Atlantic what this is paying off now.

Okay. And then on the cost side, I just had two questions. You have done a good job of getting your G&A expenses and your vessel OpEx down, as you see further substantial gains here or are we at the bottom?

I think that we’ll continue our efforts to reduce further our expenses. Of course, as the company is growing and we are growing because we are taking under management more vessels. Of course, some of our expenses will grow, but they will grow less than the amount that we’ll be getting from the revenues that we receive for managing those third-party vessels.

Okay. And then do you have any visibility on 2014 drydocking right now?

Well, we do have a few vessels that will go through drydocking. Even this year in the fourth quarter, it’s scheduled and programmed to go through the various drydockings that we have. Right now, I don’t have it on top of my head, but I think for this year we have, I think three Supramax vessels and one Cape, the Aurora that will go with drydock in the third quarter and the Supramaxes will go with the drydock in the last quarter, third and fourth quarter. And then next year, we have again and we can provide you a list if you want with all the drydockings that we have.

That sounds great. Thank you.

Thank you. Your next question today comes from the line of (indiscernible) from Gleacher. Please go ahead.

Good afternoon gentlemen.

Hello, good afternoon.

Great quarter, great job with the cost-cutting and also the fleet strategy, I think it’s been clearly shown that your strategy in the past was good and it’s paying off right now. My question is in line with the last analyst on what room is left on the cost side with daily operating expenses? Can we similar drops or we are getting close to that bottom level?

I think that there is always room for improvement. We by managing third-party vessels what we managed to obtain is additional synergies that reduce the cost not only for those third-party vessels, but also for our fleet by getting a much larger fleet, we can obtain economies of scale, especially on the prices that we pay when we buy spare stores and other or paints, lubricants, so I think that there is still room to further improve.

Great. And again, fantastic job, we expect no less from top management in the sector. So, thank you.

Thank you very much.

Thank you. (Operator Instructions) It appears we have no further questions at this time. Sir, please continue.

Well, for all of you, thank you very much for taking the time to joining us today for our earnings conference call. Our 2013 first quarter results are scheduled sometime in May. And we look forward to have you at that time as well. Thank you very much and have a good day.

Thank you. That does conclude our conference for today. Thank you all for participating. You may now disconnect.