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Baltic Trading Q1 2013 earnings presentation
 

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    Baltic Trading Q1 2013 earnings presentation Baltic Trading Q1 2013 earnings presentation Presentation Transcript

    • Baltic Trading LimitedQ1 2013 Earnings PresentationMay 2, 2013
    • 1 BALTIC TRADING LIMITEDForward Looking Statements"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995This presentation contains forward-looking statements made pursuant to the safe harbor provisions of thePrivate Securities Litigation Reform Act of 1995. Such forward-looking statements use words such as“anticipate,” “budget,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and termsof similar meaning in connection with a discussion of potential future events, circumstances or futureoperating or financial performance. These forward looking statements are based on management’s currentexpectations and observations. Included among the factors that, in our view, could cause actual results todiffer materially from the forward looking statements contained in this presentation are the following: (i)declines in demand or rates in the drybulk shipping industry; (ii) prolonged weakness in drybulk rates; (iii)changes in the supply of or demand for drybulk products, generally or in particular regions; (iv) changes inthe supply of drybulk carriers including newbuilding of vessels or lower than anticipated scrapping of oldervessels; (v) changes in rules and regulations applicable to the cargo industry, including, without limitation,legislation adopted by international organizations or by individual countries and actions taken by regulatoryauthorities; (vi) increases in costs and expenses including but not limited to: crew wages, insurance,provisions, lube, oil, bunkers, repairs, maintenance and general, administrative and management feeexpenses; (vii) whether our insurance arrangements are adequate; (viii) changes in general domestic andinternational political conditions; (ix) acts of war, terrorism, or piracy; (x) changes in the condition of theCompany’s vessels or applicable maintenance or regulatory standards (which may affect, among otherthings, our anticipated drydocking or maintenance and repair costs) and unanticipated drydockexpenditures; (xi) the amount of offhire time needed to complete repairs on vessels and the timing andamount of any reimbursement by our insurance carriers for insurance claims including offhire days; (xii) theCompany’s acquisition or disposition of vessels; (xiii) our ability to leverage Genco’s relationships in theshipping industry; (xiv) the completion of definitive documentation with respect to charters; (xv) charterers’compliance with the terms of their charters in the current market environment; and other factors listed fromtime to time in our public filings with the Securities and Exchange Commission including, without limitation,the Company’s Annual report on Form 10-K for the year ended December 31, 2012 and its reports onForm 10-Q and Form 8-K. Our ability to pay dividends in any period will depend upon various factors,including the limitations under any credit agreements to which we may be a party, applicable provisions ofMarshall Islands law and the final determination by the Board of Directors each quarter after its review ofour financial performance. The timing and amount of dividends, if any, could also be affected by factorsaffecting cash flows, results of operations, required capital expenditures, or reserves. As a result, theamount of dividends actually paid may vary. We do not undertake any obligation to update or revise anyforward-looking statements, whether as a result of new information, future events or otherwise.
    • 2 BALTIC TRADING LIMITEDAgendaFirst Quarter and Year to Date HighlightsFinancial OverviewIndustry Overview
    • 3 BALTIC TRADING LIMITEDFirst Quarter and Year to Date Highlights
    • 4 BALTIC TRADING LIMITEDFirst Quarter 2013 HighlightsNet loss of $5.1 million for the first quarter of 2013– Basic and diluted loss per share of $0.23Paid a $0.01 dividend per share for the fourth quarter of 2012Declared a $0.01 dividend per share for the first quarter of 2013
    • 5 BALTIC TRADING LIMITEDVessel Type Vessel Name Year Built Charterer Charter Expiration (1) EmploymentStructureCapesizeBaltic Bear 2010 Swissmarine Services S.A. May 2013 101.5% of BCI (2)Baltic Wolf 2010 Cargill International S.A. May 2014 100% of BCI (3)SupramaxBaltic Leopard 2009 Resource Marine PTE Ltd. (partof the Macquarie group of companies)February 2014 95% of BSI (4)Baltic Panther 2009 Klaveness Chartering June 2013 $9,100 (5)Baltic Jaguar 2009 Resource Marine PTE Ltd. (partof the Macquarie group of companies)April 2014 95% of BSI (6)Baltic Cougar 2009 Bulk Marine Ltd. May 2013 $5,000 (7)Baltic Wind 2009 Cargill International S.A. May 2013 115% of BHSI (8)Handysize Baltic Cove 2010 Cargill International S.A. February 2014 115% of BHSI (8)Baltic Breeze 2010 Cargill International S.A. July 2014 115% of BHSI (8)Existing Fleet Overview1) The charter expiration dates presented represent the earliest dates that our charters may be terminated in the ordinary course. Under the terms of each contract, the charterer is entitled to extend the time chartersfrom two to four months in order to complete the vessels final voyage plus any time the vessel has been off-hire.2) We have agreed to an extension with Swissmarine Services S.A. on a spot market-related time charter at a rate based on 101.5% of the average of the daily rates of the Baltic Capesize Index (BCI), published by theBaltic Exchange, as reflected in daily reports. Hire is paid in arrears net of a 6.25% brokerage commission which includes the 1.25% commission payable to Genco Shipping & Trading Limited. The duration of theextension is 10.5 to 13.5 months.3) We have agreed to an extension with Cargill International S.A. on a spot market-related time charter based on 100% of the average of the daily rates of the BCI, as reflected in daily reports. Hire is paid every 15 daysin arrears net of a 5.00% brokerage commission, which includes the 1.25% commission payable to Genco Shipping & Trading Limited. The duration of the spot market-related time charter is 21.5 to 26.5 months.4) We have reached an agreement with Resource Marine PTE Ltd. on a spot market-related time charter for a minimum of 18.5 months to a maximum end date of May 30, 2014 based on 95% of the average of the dailyrates of the Baltic Supramax Index (BSI), published by the Baltic Exchange, as reflected in daily reports. Hire is paid every 15 days in arrears net of a 6.25% brokerage commission, which includes the 1.25%commission payable to Genco Shipping & Trading Limited.5) We have agreed to an extension with Klaveness Chartering on a time charter for 2.5 to 5.5 months at a rate of $9,100 per day. Hire is paid every 15 days in advance net of a 6.25% brokerage commission, whichincludes the 1.25% commission payable to Genco Shipping & Trading Limited. The extension began on March 18, 2013.6) We have reached an agreement with Resource Marine PTE Ltd. on a spot market-related time charter for a minimum of 20.5 months to a maximum end date of July 11, 2014 based on 95% of the average of the dailyrates of the BSI, as reflected in daily reports. Hire is paid every 15 days in arrears net of a 6.25% brokerage commission, which includes the 1.25% commission payable to Genco Shipping & Trading Limited.7) We have reached an agreement with Bulk Marine Ltd. on a time charter for approximately 25 days at a rate of $5,000 per day. Hire is paid every 15 days in advance net of a 6.25% brokerage commission, whichincludes the 1.25% commission payable to Genco Shipping & Trading Limited. The vessel delivered to charters on April 5, 2013.8) The rate for each of these spot market-related time charters is based on 115% of the average of the daily rates of the Baltic Handysize Index (BHSI), published by the Baltic Exchange, as reflected in daily reports.Hire is paid every 15 days in advance net of a 6.25% brokerage commission, which includes the 1.25% commission payable to Genco Shipping & Trading Limited.
    • 6 BALTIC TRADING LIMITEDFinancial Overview
    • 7 BALTIC TRADING LIMITEDYear to Date EarningsThree Months EndedMarch 31, 2013 March 31, 2012INCOME STATEMENT DATA:Revenues 5,986$ 6,294$Operating expenses:Voyage expenses 582 53Voyage expenses to parent 73 81Vessel operating expenses 3,864 3,922General, administrative and technical management fees 1,291 1,309Management fees to parent 608 614Depreciation 3,643 3,683Total operating expenses 10,061 9,662Operating loss (4,075) (3,368)Other (expense) income:Other income (expense) 7 (8)Interest income 1 2Interest expense (1,016) (1,075)Other expense, net (1,008) (1,081)Loss before income taxes (5,083) (4,449)Income tax expense - (7)Net loss (5,083)$ (4,456)$Net loss per share - basic (0.23)$ (0.20)$Net loss per share - diluted (0.23)$ (0.20)$Shares used in per share calculation - basic 22,357,844 22,176,102Shares used in per share calculation - diluted 22,357,844 22,176,102(Dollars in thousands, except share and per share data)(unaudited)
    • 8 BALTIC TRADING LIMITEDMarch 31, 2013 Balance Sheet(1) EBITDA represents net (loss) income plus net interest expense, taxes and depreciation and amortization. EBITDA is included because it is used by management and certain investors as a measure ofoperating performance. EBITDA is used by analysts in the shipping industry as a common performance measure to compare results across peers. Our management uses EBITDA as a performancemeasure in our consolidating internal financial statements, and it is presented for review at our board meetings. The Company believes that EBITDA is useful to investors as the shipping industry iscapital intensive which often results in significant depreciation and cost of financing. EBITDA presents investors with a measure in addition to net income to evaluate the Company’s performance priorto these costs. EBITDA is not an item recognized by U.S. GAAP and should not be considered as an alternative to net income, operating income or any other indicator of a company’s operatingperformance required by U.S. GAAP. EBITDA is not a source of liquidity or cash flows as shown in our consolidated statement of cash flows. The definition of EBITDA used here may not becomparable to that used by other companies.March 31, 2013 December 31, 2012(Dollars in thousands)(unaudited)BALANCE SHEET DATA:Cash 954$ 3,280$Current assets 5,909 7,117Total assets 359,431 364,370Current liabilities 2,368 2,458Total long-term debt 101,250 101,250Shareholders equity 255,813 260,662Three Months EndedMarch 31, 2013 March 31, 2012(unaudited)OTHER FINANCIAL DATA:Net cash used in operating activities (2,096)$ (176)$Net cash used in investing activities - -Net cash used in financing activities (230) (2,951)March 31, 2013 March 31, 2012(unaudited)EBITDA Reconciliation:Net loss (5,083)$ (4,456)$+ Net interest expense 1,015 1,073+ Depreciation 3,643 3,683+ Income tax expense - 7EBITDA(1)(425)$ 307$Three Months Ended(Dollars in thousands)(Dollars in thousands)
    • 9 BALTIC TRADING LIMITED1st Quarter Highlights(1) Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as a measured by the sum of the number of days eachvessel was part of our fleet during the period divided by the number of calendar days in that period.(2) We define ownership days as the aggregate number of days in a period during which each vessel in our fleet has been owned by us. Ownership days are anindicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period.(3) We define available days as the number of our ownership days less the aggregate number of days that our vessels are off-hire due to scheduled repairs orrepairs under guarantee, vessel upgrades or special surveys and the aggregate amount of time that we spend positioning our vessels between time charters.Companies in the shipping industry generally use available days to measure the number of days in a period during which vessels should be capable ofgenerating revenues.(4) We define operating days as the number of our available days in a period less the aggregate number of days that our vessels are off-hire due to unforeseencircumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generaterevenues.(5) We calculate fleet utilization by dividing the number of our operating days during a period by the number of our available days during the period. The shippingindustry uses fleet utilization to measure a companys efficiency in finding suitable employment for its vessels and minimizing the number of days that itsvessels are off-hire for reasons other than scheduled repairs or repairs under guarantee, vessel upgrades, special surveys or vessel positioning.(6) We define TCE rates as our net voyage revenue (voyage revenues less voyage expenses) divided by the number of our available days during the period,which is consistent with industry standards. TCE rate is a common shipping industry performance measure used primarily to compare daily earningsgenerated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charterhire rates for vessels on voyage chartersare generally not expressed in per-day amounts while charterhire rates for vessels on time charters generally are expressed in such amounts.(7) We define daily vessel operating expenses to include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance(excluding drydocking), the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses. Daily vessel operating expenses arecalculated by dividing vessel operating expenses by ownership days for the relevant period.Three Months EndedMarch 31, 2013 March 31, 2012(unaudited)FLEET DATA:Total number of vessels at end of period 9 9Average number of vessels (1) 9.0 9.0Total ownership days for fleet (2) 810 819Total available days for fleet (3) 798 819Total operating days for fleet (4) 797 814Fleet utilization (5) 100.0% 99.4%AVERAGE DAILY RESULTS:Time charter equivalent (6) 6,685$ 7,521$Daily vessel operating expenses per vessel (7) 4,771 4,788
    • 10 BALTIC TRADING LIMITEDDividend Declaration & PolicyDeclared dividend of $0.01 per share payable on or about May 20, 2013 to all shareholders of record on May13, 2013Dividend policy established as follows:− Net income less cash expenditures for capital items related to fleet, such as drydocking and specialsurveys, other than vessel acquisitions and related expenses− Plus non-cash compensation− Subject to reserves established by our boardCredit facility places no restrictions on amounts of dividendsDividend HistoryQ2 2010 $0.16Q3 2010 $0.16Q4 2010 $0.17Q1 2011 $0.06Q2 2011 $0.10Q3 2011 $0.12Q4 2011 $0.13Q1 2012 $0.05Q2 2012 $0.05Q3 2012 $0.01Q4 2012 $0.01Q1 2013 $0.01Total $1.03
    • 11 BALTIC TRADING LIMITEDQ2 2013 Estimated Break-Even Levels (1)Daily Expenses by Category Free Cash Flow(2) Net IncomeDirect Vessel Operating(3) $5,400 $5,400G&A, Management Fees(4) 1,713 2,111Interest Expense(5) 1,142 1,284Depreciation(6) - 4,495Daily Break-Even(7) $8,255 $13,290(1) Breakeven levels are based on an average number of 9.00 vessels for Q2 2013.(2) Free Cash Flow is defined as net income plus depreciation less capital expenditures, primarily vessel dry dockings, and other non-cash items, namelyrestricted stock compensation and deferred financing charges.(3) Direct Vessel Operating Expenses is based on management’s estimates and budgets submitted by our technical managers. We believe DVOE are bestmeasured for comparative purposes over a 12-month period.(4) General & Administrative amounts are based on a budget which includes incentive compensation and may vary, including as a result of actual incentivecompensation. Management Fees are based on the contracted monthly rate per vessel for the technical management of our fleet, including amounts paid toGenco.(5) Interest Expense is based on our outstanding debt of $101.3 million, unused commitment fees of 1.25% under our amended $150 million credit facility, anassumed LIBOR rate of 0.32% plus 300 bps and amortization of deferred financing costs. As part of the commitment fee portion of interest expense, thereare semi-annual commitment fee reductions of $5.0 million. Four reductions have taken place, with the first occurring on May 31, 2011 and the nextscheduled for May 31, 2013.(6) Depreciation is based on the acquisition value of the current fleet, including the vessels to be acquired and amortization of dry docking costs. Depreciationexpense utilizes a residual scrap rate of $245 per LWT.(7) The amounts shown will vary based on actual results.
    • 12 BALTIC TRADING LIMITEDIndustry Overview
    • 13 BALTIC TRADING LIMITED05001,0001,5002,0002,500Baltic Dry Index(BDI Points)Drybulk IndexSource: Clarkson Research Services Limited 20132011 2012 2013
    • 14 BALTIC TRADING LIMITEDRecent Drybulk Market DevelopmentsVessel deliveries have slowed considerably after peaking in June 2012(1)― Deliveries in the first three months of 2013 were 30% lower than the prior year periodNet additions in the first quarter of 2013 were 37% lower than the same quarter of last year(1)― 14 net additions of Capesize vessels in the first quarter of 2013 versus 56 net additions in the first quarter of 2012Capesize scrapping has increased by nearly 50% through Q1 2013 compared to the prior year period(1)― Remaining sectors scrapping has been moderate as outlook improvesSlippage was approximately 36% of the orderbook during the first quarter of 2013(1)Chinese coal imports rose 30% in the first quarter of 2013 YOY(2)China’s Daqin Railway is currently undergoing scheduled maintenance leading to drawn down coal port stockpiles(2)― Approximately 5 to 7 Mt of domestic coal won’t be railed and instead could be importedActivity for Panamax and Supramax vessels has been supported by South American grain season(1)Chinese steel stockpiles have declined for five consecutive weeks after reaching a high at the end of March(2)― Chinese steel production increased by 9.1% in Q1 2013 YOY(3)Chinese iron ore inventories have decreased to 67.6 Mt, trading at their lowest levels since April 2010(2)Iron ore prices peaked at $159 per ton this year and have since retreated to $134 per ton(4)Bank of Japan plans to inject $1.4 trillion into the Japanese economy over the next two years(5)1) Source: Clarkson Research Services Limited 20132) Source: Commodore Research3) Source: World Steel Association4) Source: ICAP Shipping5) Source: Reuters
    • 15 BALTIC TRADING LIMITEDShort and Long-Term Industry CatalystsHigher Brazil iron ore cargoes possible in 2H 2013following previous years seasonality(1)Low iron ore inventories combined with increasedsteel production could lead to higher ore importsConstruction on Chinese stimulus projects likely tosupport steel production(2)Volume and port capacity expansion as iron ore andcoal miners increase production over the next fewyearsIncreased demand of imported ore against Chinesedomestic ore possible due to price arbitrage― Also in order to offset lower grade domesticore(2)Chinese banks increased lending by 12% in Q1 2013YOY(2)Japan’s latest stimulus plan could trigger domesticconstruction activityAdditional scrapping potential due to a combinationof volatile charter rates and stable scrap steel pricesSlippage of newbuilding vessel deliveries asfinancing concerns continue1) Source: RS Platou2) Source: Commodore Research3) Source: Clarkson Research Services Limited 2013FY 2012(mdwt)Q1 2012(mdwt)Q1 2013(mdwt)Actual Deliveries 98.7 30.0 20.9Scrapping 33.7 8.6 7.5Net Additions 65.0 21.4 13.4ScheduledDeliveries forPeriod138.9 45.6 32.7SlippagePercentage29% 34% 36%Scheduled vs. Actual Drybulk Vessel Deliveries(3)0246810121416 Deliveries Scrapping Net AdditionsDrybulk Vessel Deliveries vs. Scrapping(3)
    • 16 BALTIC TRADING LIMITEDSteel Demand Still Drives the MarketRobust steel production in China, Japan and India pushed global steel production to a record setting 135 Mt in March 2013(1)India’s steel demand is projected to grow by 5.9% in 2013 and 7.0% in 2014(2)― India produced a high of 6.9 Mt of steel in March 2013― India plans to increase steel capacity to 130 Mt by 2014/15 from 70 Mt currently(3)Total seaborne iron ore and coal trade are estimated to grow by 6% and 5% YOY in 2013, respectively(4)China’s fixed-asset investment rose 20.9% in Q1 2013 YOY(5)― China’s urbanization rate is expected to grow to 60% by 2020 as compared to 51% today and 80% for most developednations(6)NDRC announced that 42 new transport hubs will be built by the end of 2015(1)China remains focused on revitalizing the northeast as the NDRC said more funding will be provided to aging cities(1)1) Source: Commodore Research2) Source: World Steel Association5) Source: National Bureau of Statistics6) Source: J.P. Morgan, Hands-On China Report01020304050607080China EU27 (External Trade)Japan South KoreaIron Ore Imports by Country(4)(million tons)Chinese Iron Ore Imports vs. Steel Production(2)(4)(million tons)01020304050607080Steel Production Iron Ore Imports3) Source: Reuters4) Source: Clarkson Research Services Limited 2013
    • 17 BALTIC TRADING LIMITEDIncreasing Iron Ore and Coal Production are Major Factors1) Source: Public statements by subject companies2) Source: Australia’s Bureau of Resources and Energy Economics3) Source: Clarkson Research Services Limited 20134) Source: ICAP Shipping5) Source: ReutersKey iron ore expansion plans equal increased capacity of 400 Mt by2017(1)― 400 Mt represents 36.0% of total 2012 seaborne iron oretrade― 115 Mt represents 10.4% of total 2012 seaborne iron oretrade planned for 2013Australian iron ore and coal exports are forecast to increase by 14%and 10% in 2013, respectively(2)More of China’s imports could be sourced from Australia in 2013(3)― Fortescue and Rio Tinto expect robust iron ore output growth― Grades of Chinese domestic iron ore are declining― Indian export availability is limited― Brazilian export growth is expected to be marginal in 2013Additional supply of iron ore could lead to a further decrease in ironore prices and a potential displacement of Chinese domestic oreICAP Shipping forecasts Indian thermal coal imports to grow byapproximately 11% per year through 2015(4)India’s coal demand is projected to rise by approximately 370 Mt bythe end of the fiscal year 2016/17(5)― India’s coal demand was approximately 730 Mt in the fiscalyear 2011/12 with about 100 Mt supplied through imports― Forecasts are for demand to rise to 1,100 Mt by 2016/17― Not all of this potential added demand will be met by domesticproduction leaving a possible gap for importsKey Expansion Plans(1)0204060801001201402013 2014 2015 2016 2017BHP Fortescue Rio Tinto* Vale MMX(million tons)* Rio Tinto’s expansion to a capacity of 290 Mt/a is fully approvedand scheduled for 2H-13. Iron ore production is forecast to increaseto 265 Mt in 2013. Rio Tinto’s port and rail expansion has beenapproved for 2014 and 2015, however, additional mine approvals arestill pending.
    • 18 BALTIC TRADING LIMITEDSupply Side FundamentalsSlippage of newbuilding vessel deliveries as financing concerns continue15% of the fleet is 20 years old or greater while 11% of the fleet is 25 years old or greater(1)― Represents approximately 1,450 vessels that could get scrapped going forward33.7 mdwt scrapped in 2012 and 9.0 mdwt scrapping in 2013 YTD(1)Average monthly net additions in Q1 2013 were 42 vessels compared to 67 in Q1 2012(1)16 of the 23 Capesize vessels scrapped YTD were built in the 1990s(1)― Capesize vessels built in 1995 or earlier total 14% of the Capesize fleetCapesize orderbook currently stands at 48.9 mdwt while Capesize vessels greater than 20 years old total 23.5 mdwt(1)1) Source: Clarkson Research Services Limited 2013051015202530352004 2005 2006 2007 2008 2009 2010 2011 2012 2013YTDHandysize & Handymax Panamax CapesizeDrybulk Vessel Scrapping by Type(1)(million dwt)0204060801001202013 Total* 2014 2015+Capesize Panamax Handymax Handysize6%2%Drybulk Vessel Orderbook by Type(1)(million dwt)Remains to beseen what willbe delivered14%* Total includes actual 2013 deliveries to date as well asscheduled deliveries for the remainder of the year.
    • 19 BALTIC TRADING LIMITEDQ&A