Golden Ocean Group Limited Price & Performance (GOGL)

Good afternoon, and welcome to the Golden Ocean Q4 twenty twenty four earnings release. My name is Pedersen, and I am the Interim CEO and CFO of Gold Motion. Today, I will present our Q4 numbers and forward outlook. In the fourth quarter of twenty Our adjusted EBITDA in the fourth quarter of twenty twenty four ended at 69,900,000.0 compared to €124,400,000 in the third quarter. We delivered a net income of $39,000,000 and earnings per share of $0.2 compared to a net income of $56,300,000 and earnings per share of $0.28 for the third quarter. Our full year 2024 net profit was $223,200,000 up from an annual result of 112,300,000.0 in 2023. RTCE rates were about $24,700 per day for capesizes and about $14,800 per day for our Panamax vessels.

And a fleet wide net TCE of about $20,800 the quarter.

We have during Q4 recorded drydocking costs of $34,300,000 relating to 13 vessels. Compared to $9,700,000 in Q3 relating to five vessels. We have declared a purchase option under our lease agreement with SFL Corp. For eight Capesize vessels for an aggregate sum of $112,000,000 The acquisition will be part financed by a two year $90,000,000 non amortizing revolving credit facility and will reduce our Capesize cash breakeven by approximately $1,000 per day. For Q1, we have secured a net TCE of about 15,100 per day for 77% of Capesize days, and about 9,900 per day for 81% of our Panamax days. For Q2, we have locked in a net TCE percent of our Capesize days and about 14,200 per day for 10% of our Panamax days. Finally, we are pleased to declare a dividend of $0.15 for the fourth quarter of twenty twenty four. Let's look a little deeper into the numbers. Total fleet wide TCE rate was 20,800 in Q4, down from 23,700 in Q3. We are in a period with frequent dry docks From Q4 and including Q2 twenty twenty five, we will have drydocks close to 30 of our Capesize and new custom axes. [indiscernible] We had 13 ships drydocked in Q4 compared to five ships in Q3.

Contributing to approximately three sixty four days of off hire in Q4 versus two fifty three days in Q3. Nine ships are scheduled to drydock in Q1 twenty twenty five, with four vessels completed as of today. And further seven ships are expected to dry dock in Q2 twenty twenty five. We recorded net revenues of $174,900,000 down from $206,600,000 in Q3. Our OpEx recorded €95,600,000 versus €69,400,000 a €26,000,000 increase.

Running expenses ended at €59,700,000 €4,800,000 up from Q3 mainly due to bunkers related to drydock and expensed ballast water treatment system upgrades. We expense all our drydocking costs, and we saw an increase in the OpEx [indiscernible] of $24,600,000 quarter on quarter relating to drydocking. OpEx classified from charter hire was $2,000,000 Golden from Q3. Our general and administrative expenses ended at $6,400,000 up from $5,300,000 in Q3. Daily G and A came in at $7.00 $9 per day, net of cost we charge to affiliated companies. Hundred and $37 per day up from Q3. Now charter hire expense we recorded €4,200,000 versus €6,400,000 in Q3. With a lower number of vessel days for the trading portfolio and profit sharing expense accounting for the difference.

Net financial expense ended at €23,300,000 versus €25,500,000 in Q3 reduction mainly due to lower software rates as well as lower average debt the quarter. On derivatives and other financial income, we recorded a gain of €13,600,000 compared to a loss of $12,000,000 in Q3. On derivatives, we recorded a gain of $11,800,000 versus a loss of 11,000,000 in Q3. For results from investments in associates, we recorded a gain of €1,600,000 compared to 700,000.0 loss in Q3 relating to investments in Swiss Marine, TFG and UFC. [indiscernible] a net profit of $39,000,000 or $0.2 per share and adjusted net profit of $12,700,000 or $0.06 and a dividend of $0.15 declared for the quarter. Looking at our cash flow, we recorded cash flow from operations of 71,700,000.0 down from $100,800,000 in Q3.

Cash flow used in financings of 91,500,000.0 mainly comprising of net proceeds from new financings and new building drawdowns, of 26,900,000.0 thirty one point nine million euros in scheduled debt and lease repayments dollars €19,000,000 in repayments of debt relating to vessels sold, dollars $5,700,000 in debt fees paid and share repurchases and dividend payment of €60,000,000 relating to the Q3 year starts. Total net increase in cash of $14,100,000 Looking at our balance sheet. We recorded cash and cash equivalents of €131,000,000 including €2,600,000 of restricted cash. In addition, we have €150,000,000 euros of undrawn available credit facilities Debt and finance lease liabilities totaled SEK 1,400,000,000.0, at end of Q4 down by approximately €23,000,000 quarter on quarter. Average fleet wide loan to value under the company's debt facilities per quarter end was 38.3%, and book equity of €1,900,000,000 and a ratio of equity to total assets of approximately 56%. Golden Ocean has in Q4 started and will in the first half twenty twenty five continue in a intensive drydocking period for its Capesize fleet. Close to half of its other fleet completing special surveys over a period of nine months. We believe that the timing of the drydocks is favorable ahead of a seasonal stronger second half of twenty twenty five and onwards.

Golden Ocean Golden the position of the largest listed owner in the Capesize and New Castle Max segment Caves And New Gosselinaxes represent over 80% of Golden Ocean's deadweight tons and thereby earnings capacity. And we are the only listed drybulk company offering CapExposure and at the same time significant market capitalization and trading liquidity. In Q4, we saw cargo volumes start off healthy but volumes fell by November ahead of the seasonally weaker winter season. Brazilian R and R volumes were down 13% quarter on quarter while annual export volumes were up 3%. Volo reported record exports in the upper end of guidance range while the Australian exports continued in strong volumes, but slightly down quarter on quarter. We saw Vale reduced production after reaching their annual targets Weather impacting mining and port operations, [indiscernible] Brazil, Australia. In its high season, the Guinea bauxite volumes have grown 14% year on year, have during Q4 averaged over $13,500,000 per month run rate exports, up from average 10,500,000 tons. Month in Q3. Call volumes continued in healthy levels in Q4 but whereas Colombian coal export increased tonnage in the first half of twenty twenty four, Q4, we saw volumes being replaced by Australia and Indonesia.

China is providing steady demand for most cargo types, representing 74% of iron ore volumes [indiscernible] 85% of bauxite volumes for 2024. Further supplemented by other Southeast Asian economies. As a comment to the various tariffs and taxes being announced, U. S. Exports are largely limited to grain and coal volumes, which in an adverse scenario we expect will be replaced by other sources. As an example, of the five forty three million tons of coal that China imported last year, only 12,200,000 came from The U. S. Iron ore and bauxite are not U. S. Related cargoes. However, an ongoing trade war will be negative for the sentiment and over time impact dry bulk demand. Looking at drybulk volumes, from an historical perspective, we have over the last twenty five years seen volumes grow at a multiple of 1.1% to GDP growth. This is mainly due to demand for drybulk commodities being higher in emerging economies, which who have had a higher an average growth rate. Although the growth in emerging economies driven by China and India has come down from historical highs, we expect the trend to continue. In addition, because emerging economies are located away from exporting regions, the ton mile effect of this growth will add another boost to shipping demand.

This is the case for most major drybulk commodities. Latest growth projections for 2025 and 2026 from IMF forecast an annual GDP growth of 3.3% globally, while China and India are expected to grow 4.56.5%, respectively. Brazilian miners have delivered a full year export of three ninety million tons which is in the upper end of the full year guiding. Both Vale and Australian miners are continuing to guide post also emerging in both basins. Australia and Brazil continue to be the largest exporters of iron ore. Brazil with around three times the sailing distance to Asia compared to Australia is the most important tonn mile demand contributor to the capesize market. Chinese steel production has remained flat quarter on quarter, but is up 6% compared to Q4 twenty twenty three. Sentiment among steel mills is more positive and Chinese authorities have reiterated their commitment to stimulate the economy if needed. But analysts claim that new stimulus news has been postponed due to the ongoing tariff discussions. China continued its attempt to decarbonize its heavy industry, including steel production. By using higher quality commodities, are able to reduce emissions per tonne steel produced. Increased demand for high grade iron ore and coal is highly supported to Tonmile, which with the largest new deposits of high grade iron ore being found in Brazil and Guinea.

Outside China and India, crude steel production has started recovering. But only by a conservative 1.5% quarter on quarter. As weak demand from construction and high interest rates is limiting growth. However, as the recovery is coming closer, it presents a significant upside to potential steel demand. In Q4 this year, we will see the Simondour mine in Guinea, West Africa commence exports. Simondu high grade iron ore mine is expected to ramp up its production over two years, adding an expected 120,000,000 tons In addition, new expansion projects are underway in Brazil, an additional capacity of approximately 50 millitons, coming on stream during 2025 and 2026. Iron ore prices have been volatile but stayed at historically healthy levels despite negative macro backdrop. And actually increased amidst an escalating trade uncertainty. Iron ore is currently trading at around $107 per ton, which compares very favorably to the breakeven rate for the major miners approximately $40 per ton delivered in Asia. At current iron ore prices, most producers are profitable but it's expected that new volumes will put pressure on prices. The cost curve among the key producers shows that Australian, Brazilian ore highly resilient at lower prices and outcompete more expensive producers.

Including Chinese domestic production. Given the quality of the new iron ore coming into the market, analysts are expecting that the high grade ore will replace Chinese domestic which is of significantly poor quality. If we conservatively assume that the Siemandu volumes will replace Australian volumes, will triple the sailing distance to Asia boosting ton mile demand for Cape Sizes significantly. Guinea in West Africa has become a major exporter and holds vast deposits of high grade bauxite and iron ore. The Guinea government has together with mining majors and large Chinese industrial conglomerates made significant investments in infrastructure and mine development. [indiscernible] the majority of demand being located in Southeast Asia, this provides steady growth in ton mile for the largest vessel. Golden bauxite exports over the last five years has grown with an average compounded growth rate of 22%. Bauxite, which is used in production of aluminum, is feeding the booming EV industry as well as other sectors in China. The Guinean bauxite replaces volumes from Indonesia, which in addition to significant growth in traded volumes and ton mile represents a switch to capesizes from smaller vessel segments. The average monthly export volumes in 2024 were $12,000,000 While Q1 to date in high season exports have exceeded 15,500,000 tons per month.

Following infrastructure improvements, analysts are expecting an annual export of 155,000,000 tons, 2025 representing a 5% to 10% year on year growth. As bauxite exports currently contributing to about 13% to 15% of ton mile for Capesize vessels, This will represent the demand growth covering most, if not all, of the scheduled deliveries of Capesizees in twenty twenty five. The order book development has followed last year's pattern. With container ships filling up most of the capacity on shipyards able to build new Despite elevated newbuilding prices, The largest dry bulk vessels remain unfavored by the shipyards as they provide for lower profit margins compared to other shipping segments. In addition, limited shipyard capacity leads to long dated delivery dates currently quoting 2028 as the earliest delivery for any meaningful capacity volume. [indiscernible] fleet is entering into a period of frequent dry dockings. An analyst estimate an additional 0.5% to 1% in fleet capacity reduction during both 2025 and 2026 compared to 2024. We are in a period with increasing [indiscernible] and carrying capacity, but also increasing requirements to safety, crew welfare and emissions. The large sized dry bulk fleet is aging and over half of the Capesize fleet will be about fifteen years of age in 2028.

In a period where environmental regulations are tightening. The fleet continues to operate at record efficiency. And although we have seen some seasonal disruptions, it has not reduced the operating fleet capacity capacity meaningfully. For drybulk, full verminization of transit through the Suez Canal will have a marginal negative effect. To provide some reduction in ton miles, but will also open for further transatlantic trades. The company has over the last year outperformed indexes by close to $4,500 per day on the full fleet. [indiscernible] We continue to push for lower cost, retaining conservative and meaning The recently announced refinancing of leases for eight vessels SFL Corp, will reduce the cash breakeven rate for the Cape fleet with $1,000 per day. As mentioned, we are using the weakness in the market to significantly upgrade the vessels. This will provide us with highly competitive fleet ahead of the seasonally strong second half and onwards. These investments are funded with a combination of sales proceeds and cash on hand. We continue our strategy to reward our shareholders through dividends as well as previously announced share buybacks. Although we expect volatility in the near term, With ongoing geopolitical uncertainty, we continue to remain fundamentally positive on the market outlook and have positioned ourselves thereafter.

On the left hand side, we illustrate the significant cash flow potential of Golden Ocean as we move into the stronger market. Sentiment. I will now pass the word back to the operator and vote to any questions. Thank you. Thank you. Thank you. We are now going to proceed with our first question questions come from the line of Umar Nokta from Jefferies.

Please ask your question. Your line is open.

Hi, Simon. Thank you. Good update as usual and kind of Golden a good overview of the market and how things look big picture. Just a couple of questions as a follow-up to that. Maybe and I know it's a little too short term, but what do you make of what we've been seeing here this week in the cake market [indiscernible] I know it's still early days and rates haven't really run away, but there seems to be a good amount sentiment looks like it's improving You can see that obviously in the in the futures and whatnot. Want to get your sense of what do you think is behind this latest move we've been seeing in freight rates? Hi, Omar.

Thanks for the question. I think what we're seeing now is A little bit of a rebound in sentiment, which is based on improvement in weather conditions in Australia, which has started to ramp up some volumes there, which disappeared for a while when the cyclones were were active. In addition, we've seen due to the boost in Panamax Rates, We've Seen Some Coal Volumes Move Into The Capes as well, which is created a bit of a squeeze in the Pacific that you've you see now with rates moving. We're still not sort of seeing a lot of volume increases in Brazil. It's still at fairly muted levels.

But I think that's what's driving the sentiment now. But it does show that the market is very responsive and we are sort of in the In the end of maybe the seasonal downturn and then remains to be seen how long we will need to wait before it it sort of firmly moves upwards. [indiscernible] Okay. Thank you. Good color. And then just kind of on the dry dockings, as you mentioned, you've perhaps you've accelerated the dry docks or at least are going through some upgrades You spent $34,000,000 in the fourth quarter on those 13 ships. What are you thinking or what are you budgeting for dry docks you have earmarked for the first half of twenty five.

I think we it depends very much on which which sort of is it the five year or ten year or fifteen year dry dock? I think in general, What we are doing is we're putting a lot of efforts into upgrading the vessels within use paints, the best sound blasting of the whole We are also investing in maverstock and BOSSCAP fins on some of the ships. So we are, in addition to moving ships up to class standard and and making them sort of fully maintained. We Golden also investing additional money into them. I think the sort of the the average that you saw in this quarter was Maybe slightly higher than what we would see normally going forward because we have had quite a few of the fifteen year old drydockings in this quarter. But I think Due to the regulations that we have seen come in and the requirements to the quality of the vessels moving into the drybulk space as well, we have seen that cost have moved well. And expenses have moved up. Addition to sort of the value of having a high performing vessel commercially. Got it. Okay, that's very helpful. Thank you.

I'll pass it back. [indiscernible] Are now going to proceed with our next question The questions come from the line of Craig Lewis from BTIG. Please ask your question.

Hey, thanks and good afternoon and thanks for taking my question. I was hoping you could talk a little bit about Opportunities you're seeing on the sales and purchase side? Obviously, the purchase options you exercised were in the money. So I guess that was I mean, I guess I would think that was kind of a no brainer just given the pricing of that. But I guess, like as you think about positioning the fleet over the next one to two years How are you thinking about opportunities maybe to to add tonnage or following this eight vessel acquisition thinking about maybe maybe even selling some vessels now?

Yes. Hi, Greg. I think From where we are in the cycle at the moment, we are maybe more sellers than buyers.

Where the vessel valuations are are coming in. We do have an ongoing fleet renewal strategy, which means that we have smaller outliers that we we, for that reason, will consider selling. At the same time, we want to maintain as much capacity as we can in the Cape and Newcastle MAX base, which is sort of our strategic sort of long term favorable segment.

I think the SFL transaction is more a refinancing than sort of S and P transaction. I mean, we've had the ships, we had the options, they were structured in a way which which made them sort of very, very highly likely that we will declare the options And so that so we won't be sort of seeing those for more of those. So I think in general in the SME P side, I think we are generally more sellers and buyers at the moment. We are more sort of keen on growing in the Capesize space than the Panamax space over time. And other than that, we will continue to be opportunistic it's It's not been that long until since we sold some vessels. But in order if the opportunity comes up, we may end up buying ships as well. I'd say it's we're always very light footed and nimble here in the building.

Yes. Thank you for that. And then just it's funny how [indiscernible] kind of play out Everyone's a little bit different. I guess In the past, other companies have been a little bit more active in M and A. I guess as you think about that and people always ask about potential for M and A and in the drybulk space. I guess just given your focus on the larger scale or vest I mean, I guess what I would think is as you look out over the next twelve months where we are in the cycle, do you think we could see a pickup in M and A or do you think it's kind of business is usual and that can be private and public fleets?

Yes. No, I think M and A is a wide term think if transactions where we use the share as a collateral. Sort of very much possible. The pricing is right. And obviously, there's different Constellations on the fleet and on the shareholder side on on different players in the space, which may add or not add value to an M and A transaction. But M and A in general has proven to be challenging in the shipping space as sort of the it is the assets that we're everybody's asked and they are pretty generic So if we start to trade a little bit more around the the sort of underlying asset values and sort of the is the right Combination of ownership and fleet composition in terms of age and type. That's very much possible.

Okay. Super helpful. Thanks for the time. Thanks, Greg.

We are now going to proceed with our next question The questions come from the line of Clement Mullins from Value Investors Edge. Please ask your question.

Good afternoon.

I wanted to ask about recent news flow around the potential imposition of port fees on Chinese built vessels stocking in The U. S. It remains to be seen whether those will ultimately come into force. But if so, what impact do you foresee on the overall market? To what extent do you expect those to impact trading patterns?

Hi. I think it is very much Coming from what the analysts and we read about the new view on it. It seems that the that suggested policies are very much on the drawing board still and then that suggestion is very much course and and not in the details enough to make any meaningful assessment of the impact. I think for drybulk in general, The U. S. Is not a major player. It is has some volumes on the on the soybean side and also on coal. These are volumes that are possible to replace from other sources if it becomes economically challenging to lift these volumes from The U. S. Due to the increased cost on freight. So I think that falls in line with a lot of other elements that we see in the drybulk space, where there are things happening in one region, which then we re routes trading patterns from from one place to another. And that's very much possible here [indiscernible] if this suggestion comes into play. But I do also think that it seems that it will hurt as it as it looks more The U. S. Consumer than it will China, which it seems to be seems to be the intention.

And I think also like with the SKU EU or other types of tariffs or taxes or or fees they will be passed on to the end user at the end of the day. And will be sort of included in the in the freight calculations when we fix our ships. So it will not be we do not see this as a massive change to to the shipping outlook for Drabulk.

Yes, makes sense. I was just wondering whether you expected that to have an effect on the, let's say, Korean or Japanese chips taking more of a prominent role in routes towards The U. S? But time will tell, I guess. So I will turn it over. Okay. Thank you. Sorry, go ahead.

No, no. I was just saying that if it comes through and it will come into effect as it is presented, Then I guess more of the ships in the Atlantic Basin will be Korean and Japanese ships. But it is still very much a theoretical exercise.

Alright, it makes sense. I'll turn it over. Thank you for taking my questions.

Thank you.

We have no further questions at this time. I will now hand back you for any closing remarks.

Thank you very much. Thank you for listening in and thank you for the questions. And have a continued great week.

This concludes today's conference call. Thank you all for participating.