Star Bulk Carriers Corp. (SBLK) Q1 2013 Earnings Report, Transcript and Summary

Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Conference Call on the First Quarter 2013 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 a question-and-answer session. (Operator Instructions). I must advise you that this conference is being recorded today, on Tuesday, May 28, 2013. We now pass the floor to one of our speakers today, Mr. Spyros Capralos. Please go ahead, sir.

Thank you, operator. I'm Spyros Capralos, the President and Chief Executive Officer of Star Bulk Carriers and I would like to welcome you to the Star Bulk Carriers' first quarter 2013 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 2 of our presentation. Before we begin the presentation and while you read our Safe Harbor statement, I would like to remind you that we recently announced a 75 million full backstopped equity rights offering. We'll touch upon this issue in more detail later in the presentation. However, I would like to share my belief that this offering allows us to grow our company as a low part of the shipping cycle, strengthen our balance sheet and make sure Star Bulk's position among the healthiest and most promising companies in the dry bulk shipping industry. Let us now turn to slide number 3 over the presentation for a preview of our first quarter 2013 financial highlights in comparison to last year's. In the three months ended March 31, 2013, net revenues amounted to 17.4 million representing a 17% reduction versus the same period of 2012. Our revenues were mainly affected by the low freight rate environment and the lower average number of vessels due to the sale of the Star Ypsilon. Net revenues represent our total revenues adjusted for non-cash items [less] voyage expenses. The reason we refer to our net revenues is because this figure nets out any difference in the number of voyage charters we performed in each period and therefore is directly comparable to other periods. General and administrative expenses were reduced by 34% to 2.1 million…

Thank you, Spyros. Let us now move to slide number 9 for an overview of our balance sheet as of March 31, 2013. Our total cash balance stood at $30.7 million, while other current assets were $9.8 million. Star Sigma, which represents the vessel held for sale, was at 8.4 million and the remaining fleets, our fixed assets amounted to 279.1 million. Fair value of above market acquired time charter stood at $12.8 million and other non-current assets at $1.5 million. Summing up the above, total assets amounted to $342.1 million. Total debt stood at $211.4 million and other liabilities were at $12.8 million and stockholders' equity was at $119 million. If we can now turn to slide 10 to discuss our first quarter 2013 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 first quarter of 2013, non-cash adjusted revenues amounted to $20 million compared to $29.6 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 for the vessels Star Big and Star Mega with a long-term charter in a well known (inaudible). Voyage expenses amounted to $26 million for the Q1 2013 from $8.7 million in the first quarter of 2012. Adjusted net revenues, net of voyage expenses, amounted to $17.4 million this quarter compared to $20.9 million the same period last year, a reduction of 17%. I believe that this number is an 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 17% reduction was mainly due to our smaller other number of vessels…

Thank you, Simos. In conclusion, as you can see on slide 17, we believe that Star Bulk is positioned to sustain through the current challenging environment. On top of a 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 newbuildings, and we have $27.6 million of cash in the banks. Last but not least, our recently announced equity offering will supply the company with a minimum of 75 million additional ammunition to support our future growth plans. 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'll continue our efforts to grow our fleet with high quality eco‐efficient vessels and through the company's long-term viability and navigate safely through this challenging low freight rate 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 comes from the line of Harsha Gowda from Blue Shore Capital. Please go ahead.

Good morning, gentlemen.

Hi, Harsha.

Hi. I have a few questions. Number one, can you give us an idea what type of vessels or the quantity of vessels you're looking to potentially buy with the capital that's been raised and also the targeted leverage ratio?

We are looking to buy quality newbuilding vessels, therefore we are targeting some of the Japanese and top Chinese yards. We are going to remain in the dry bulk sector and always to the areas where we have a competitive advantage, we have a knowhow and knowledge how to operate them, and I mean the Capesize vessels and the Supramax vessels. Of course, those vessels are going to be more than vessels, probably a little bigger than the current size of our existing fleet and we think that we are aiming for deliveries in 2015.

Okay, great.

The number of vessels will depend according to what we find in the market and of course it has to do with the pricing of those vessels. And so we'll be negotiating hard with the yards to get the best possible deal of a company.

Okay, great. Then you have any view on how much leverage you expect or to target once you enter into these agreements…?

We think that…

…relative to--

Yes, relatively to second hand vessels, we think that in today's market conditions we can secure something around 60%, 65% leverage.

Okay, great. Now you mentioned that you are expecting about 35 vessels to be managed – third party vessels to be managed by 2015, which – that's a very nice surprise. Are you going to maintain that, I guess, 750 a day pricing on these vessels?

Yes, that is correct. The vessels that we have full technical and operational management, we charge $750 per day. For some others that we have only partial management which means that before the tankers, we only take the insurance of purchasing and accruing, we get $130 per day.

Okay, great. Can you give us an idea what the rough range operating margin you expect from this business because it looks like it could become relatively significant?

No, we cannot display at this point what type of margins we're having.

Okay, great. I just want to commend you again on the great cost cutting. I think that's unique in the sector and I love to see that you keep working on efficiency especially in such difficult times today, so thank you for that and great job as usual. Thank you.

Thank you very much, Harsha.

(Operator Instructions). There are no further questions at this time. Please continue.

All right, thank you very much. If there are no questions, would like to thank you for joining for the conference call. Our 2013 second quarter results are scheduled sometime end of August and we look forward to have you with us at that time. Thank you very much for your attention and talk to you soon.

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