Eagle Bulk Shipping, Inc. (EGLE)
Q3 2012 Earnings Conference Call
November 09, 2012 08:30 a.m. ET
Executives
Sophocles Zoullas – Chairman & CEO
Adir Katzav – CFO
Analysts
Natasha Boyden – Global Hunter
Alex Hahn – Citi
Mike Webber – Wells Fargo
Presentation
Operator
Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 Eagle Bulk Shipping Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we’ll facilitate a question-and-answer session (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.
I’d now like to turn the call over to Sophocles Zoullas, Chairman and Chief Executive Officer. You may proceed.
Sophocles Zoullas
Thank you, and good morning. I would like to welcome everyone to Eagle Bulk Shipping’s third quarter 2012 earnings call. To supplement our remarks today, I encourage participants to access a slide presentation that is available on our website at www.eagleships.com.
Please note that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and are inherently subject to risk and uncertainties. You should not place undue reliance on these forward-looking statements. We refer all of you to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties that may have a direct bearing on our operating results, our performance and our financial condition.
On slide three, you will note the agenda for today’s call. I will first review our third quarter 2012 results and highlights. We’ll then proceed with an update of our commercial operations and finally present our current views of the market. Adir will then give an overview of our financials before we open the call to questions.
Please turn to slide five for a review of our financial results and highlights. The dry bulk market experienced increased pressure during the third quarter with new building deliveries continuing to hit the water at a robust albeit slower pace. In addition, trade deteriorated on the back of lower global steel production and reduced grain exports out of the US. New building deliveries, which now appear to have peaked during the second quarter, totaled 20 million deadweight tons or over 240 vessels in the third quarter. This represents a decrease of almost 40% sequentially and 25% year-on-year.
On the demand side, global economic weakness has led to lower steel consumption during the third quarter and hence lower demand for iron ore, metallurgical coal and thermal coal. I would like to point out that we have seen a resurgence as of late in iron ore demand post China’s economic stimulus announcement in September. But we view this as more opportunistic purchasing and do not believe it is sustainable in the medium term.
In addition, the drought experienced by the US during the summer months severely impacted grain imports out of the US. The Baltic Dry Index, or BDI, averaged 846 points for the third quarter, representing a decrease of 17% sequentially and 45% year-on-year. Supramax has fared better, posting a decrease of 8% sequentially and 26% year-on-year.
Turning to Eagle Bulk, the company reported a net loss of $29.8 million or $1.77 per share for the third quarter of 2012. Earnings for the period were primarily impacted by the company’s exposure to the depressed spot market. Net revenue for the third quarter was $46.9 million and EBITDA for the quarter amounted to $12.5 million. Fleet utilization, which is calculated as the number of operating days divided by the number of available days, remained at an impressive level of close to 99.4%.
Please turn to slide seven for an update on our commercial operations. Eagle Bulk’s fleet totals 45 vessels comprised of 43 Supramaxes and two Handymaxes, and is considered one of the youngest, largest and most homogeneous fleets in the industry with an average age of just 5.4 years.
As we’ve stated in the past, we deploy an opportunistic and dynamic approach to chartering, utilizing a mixture of long-term time charters, contracts of affreightment or COAs, short-term voyages, and index charters. Given the continued weak period market, we remain short in tenure until there is a further improvement and normalization in charter rates.
As of September 30, our chartering position for the fourth quarter 2012 is as follows; 41% of our fleet is either fixed on-time charter or performing COA business, 11% is indexed to the Baltic Supramax Index or BSI, and 48% is open for charter.
On slide eight, we illustrate Eagle Bulk’s cargoes for the third quarter. Our fleet carried almost 5.2 million tons of cargo during the quarter, up 8% year-on-year. We moved to a record 1.8 million tons of coal during the period, representing 36 voyages and an increase of 13% sequentially. We primarily carried coal from Indonesia, destined for both China and India, but we also moved product from South Africa, Australia and the US Gulf.
Iron ore cargoes were down 14% sequentially to total 396,000 tons. We attribute this to lower global steel production, high Chinese iron ore inventories, but also the ongoing Indian export ban. Indian iron ore exports are projected to total 25 million tons for 2012, down 58% year-on-year. In total, we carried over 20 different cargoes during the quarter. This can be attributed to the Supramax’s known versatility in being able to load and discharge cargo using onboard equipment, for being able to navigate in smaller ports, and for its optimal size and matching cargo stems.
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