2020 Bulkers Ltd

Thank you, operator. Welcome to the Q4 2024 Conference Call for 2020 Bulkers.

As last time, I'm joined here today with our CFO, Vidar Hasund; and our Chief Commercial Officer, Lars-Christian Svensen, who will be taking over as CEO on April 1. Before we start the presentation, we would like to remind you that we will be discussing matters that are forward-looking.

These forward-looking assumptions are based on the company's current views with regards to future events and subject to risks and assumptions subject to uncertainties. Actual results may differ materially.

And with that, I'll move over to the highlights for the quarter. We reported a profit of $5.1 million and EPS of $0.23.

Trading-wise, we achieved time charter equivalent earnings of approximately $27,100 per day gross, which compares to the Baltic 5 TC average of $18,300. We declared total dividends of $0.34 per share for the months of October through December.

This corresponds to just over a 12% annualized yield based on our current share price. For January, we achieved time charter equivalent earnings of approximately $16,700 per day compared to the Baltic 5 TC average, which was $10,150.

And today, we also declared a dividend of $0.03 per share for the month of January. And with that, I will leave it over to Vidar.

Thank you, Magnus. 2020 Bulkers reports a net profit of $5.1 million for the fourth quarter of 2024.

Operating profit was $7.4 million and EBITDA was $9.7 million for the quarter. Earnings per share was $0.23.

Revenues were $14.8 million for the fourth quarter. The average time charter equivalent rate was approximately $27,100 per day gross.

Vessel operating expenses were $4 million and average operating expenses per ship per day was approximately $7,300 in the fourth quarter. G&A for the fourth quarter was $0.9 million.

2020 Bulkers charged Himalaya shipping approximately $0.4 million in management fee for the fourth quarter, which is recognized as other operating income in the financial statements. Net financial expenses were $2.1 million, which primarily consists of interest expense.

Shareholders equity was $151.9 million at the end of the quarter. Interest-bearing debt was $112.5 million at the end of the fourth quarter and is nonamortizing until maturity in April 2029.

Cash flow from operations was $6.4 million for the fourth quarter. Cash and cash equivalents were $16.1 million at the end of the quarter.

The company declared total dividends and cash distributions to shareholders of $0.34 per share for the months of October, November and December 2024. That completes the financial section.

And now back to you, Magnus.

Thank you, Vidar. Before we go into the market section, I just want to remind you a very competitive cash breakeven.

Our low breakeven is driven by low and attractive debt as well as highly competitive G&A. We currently breakeven at around $11,500 per day, meaningly needs a Capesize market of around $6,800 to achieve that when you include our premium for the lower fuel consumption, higher cargo intake as well as the scrubbers compared to standard Capesize.

This, of course, means that we can sustain trading in the weaker spot market like the one we're witnessing today without being forced to take longer -- long-term contract coverage at what we deem to be an attractive levels. Now as you know, our policy is to pay out monthly dividends equal to our free cash flow.

This chart illustrates the theoretical dividend capacity based on various rate scenarios for standard Capesize vessels. The March through December FFA curve is -- where we could lock in the fleet today if we wanted would imply an annual run rate dividend capacity of around NOK 15 per share or around 12% yield on today's share price.

And with that, I will leave over to Lars-Christian for the market section.

Thank you, Magnus. The overall market activity in 2024 was solid for Capesize and Newcastlemax with a total ton mile increase of 3.2% from the previous year.

Iron ore, especially the volumes from Brazil performed well and set an all-time high record for exports, which explains a 5.2% increase year-over-year. From West Africa, the bauxite exports grew 17% from 2023, also reaching all-time high export levels.

So what happened with the historically strong Q4. To try and illustrate this, we ask you to look at the graph on the left, where we see good Capesize ton-mile growth in the first 3 quarters.

However, the gains quickly evaporated in the fourth quarter. A further look into the sentiment shows that although the bauxite and iron ore performed well, the coal demand on Capesizes in the period slowed down significantly.

We will show you shortly that the coal demand from China was strong in 2024, also in Q4. But as you can see from this slide, the conclusion is not that the coal trade halted, but due to the slow Panamax market the smaller sizes cannibalize the Capesize coal volumes as the Panamax historical grain and soybean season from East Coast South America and the U.S.

Gulf did not materialize and thus left the Panamax segment more competitive than Capesizes on coal. We have mentioned record export volumes of iron ore and bauxite from the Atlantic Basin earlier in this presentation.

This is also well reflected in the Chinese import figures from 2024. We had all-time high Chinese iron ore and coal imports, which yet again indicates that the Chinese appetite for these commodities continue to increase.

Let's have a look at the world steel production. The Chinese steel production is estimated to remain flat for the next 2 years, but it's interesting to observe that the Chinese steel exports increased 25% year-over-year to a total volume of 95 million metric tons.

The rest of the world has improved their crude steel production since doldrums during COVID and forecast for '25 and '26 is an increase of 6% and 5%, respectively. Pre-COVID levels are projected to reach -- to be reached in 2027.

With heavy investments made in onshore logistics in Guinea over the last 5 years, it's not surprising to see steady and solid bauxite exports. In 2024, the Guinean bauxite exports increased with 17%.

So far in 2025, we've seen the growth continue with about 10% year-over-year. 90% of the bauxite trade from Guinea is shipped on Capesize and Newcastlemax vessels.

And with the bauxite inventories in China down about 10% and prices per ton about 25% year-over-year upwards, it's clear that the demand will continue to grow in 2025. For the first time in history, it's currently transported more bauxite than coal on Capesize and Newcastlemaxes.

As many of you are aware, Guinea is not only busy with bauxite. By this year, the country will also commence exports of iron ore from the new Simandou mine.

The latest update indicate 24-month ramp-up period versus the 36 months ramp-up previously communicated. This will provide the market with an additional 120 million tons of iron ore per annum from 2027.

With the additional Vale capacity increase by 2026, we're looking at a total of 170 million tons of iron ore from the Atlantic, which mostly will be exported to China, i.e., grade for ton miles. These volumes will require 158% of the total order book alone, which should be encouraging even for the most conservative onlookers.

It's nice to see new fundamental trades being established for the Capesize and Newcastlemax sector, but it's just as rewarding to look at a record low order book, which stands at 7.2% of the existing Capesize fleet. The active shipyards are still 50% down from the peak of 2008, and it will be challenging to build any meaningful fleet capacity to distort the favorable vessel supply dynamics over the next years.

In addition to the supply story, we are faced with a large increase of dry docks due to mandatory special surveys required on a merchant vessel every fifth year. The vessels delivered in 2010 accounts for 10% of the total Capesize fleet and will have to go in for a 15-year special survey in 2025.

In addition, you will have the 5- and 10-year special surveys as well, which means that 25% of the total Capesize and Newcastlemax fleet will have to fight for a dry dock space this year. We estimate a total of 8.1% and 9.7% additional off-hire on the total fleet due to dry docks alone in 2025 and 2026, not factoring in potential congestion and waiting time.

We have one of the youngest Newcastlemax fleet in the market, but still not immune to the mandatory 5-year special surveys. Four of our vessels will enter dry dock in the first half of 2025 where we take the opportunity to upgrade our assets to increase vessel performance and to exceed emission regulations.

These dry docks are already funded by cash reserves set aside from sister vessel sales in 2024, and our shareholders do not need to worry about the direct dry dock cost hampering our dividend capacity. Thank you.

And with that, I'll pass the word back to operator.

Just kicking off where you left off, really. On the dry dockings, besides the obvious effects of off-hire days and CapEx, are there any other P&L effects we should consider?

I mean are there any cost savings associated with the upgrade? Or is this more of a measure to stay compliant?

It's Lars-Christian. No, this is -- we are upgrading the ships with low frequency paint, which means that the fuel optimization on the vessels will be better than what we currently have today.

So we -- in that budget that we put in, this include all these upgrades, and we expect better performance of all the vessels. The only x that you can think about here is if the amount of days in the dry dock period should be less or more.

Our indications at the moment now is that they're keeping the dock ready for us, and we should be within the projected scope.

Great. And on the market...

And I think just add one thing to that as well. We are doing performance-enhancing measures.

But I don't think you should expect any change in the premium achieved. It's more about keeping 5-year-old vessels up to the speed and consumption standards that they had when they were new.

Yes, that makes sense. And just one on the market as well.

You've talked on sort of the 2 main items here. But on the coal side or coal splitting, is there a level where you expect to see sort of the steam out of that space for the Panamaxes?

Or is this something that you're going to do sort of for eventually old coal volumes?

No. I think we've seen the levels now where the Panamaxes in the Pacific, especially has increased with 30% in a week.

So you're coming to a point now where it makes sense to keep the coal back on the Capesizes and Newcastlemaxes rather than splitting it down on the smaller sizes, but it also depends on where you are loading in discharging and how long the duration of the certain voyages.

I wanted to start with a modeling question. Could you confirm whether the sequential increase in interest expenses is attributable to Q4 not benefiting from the accounting of the monetization of the swaps in early 2024?

Thank you for your question. Regarding our interest rate swaps, they were terminated late in March last year.

We did amortize that gain throughout original maturity of the interest rate swaps, which were in August and September. So as of -- and after that, we have been obviously have a floating interest rate.

I hope that answered your question.

So I think for modeling purposes, you should just look at our 195 basis point spread and SOFR rates, and there are currently no interest rate hedges that are in effect.

Yes, correct.

Perfect. It was simply to confirm whether the increase was attributable to that.

And I have a question more on the macro side. If a ceasefire agreement is reached in Ukraine, could you provide some commentary on your expectations for the rebuilding?

It may have a larger impact on midsized brokers, but do you anticipate any material impact on Capesizes as well?

Yes. This is obviously very difficult to predict at the moment.

And we don't really know how the infrastructure look likes in the region. But I think it's safe to assume that trades out of Ukraine will start before the trades out of Russia.

So if the grain elevators are in decent capacity, I assume we will have some good operating for the Panamaxes there. When it comes to the ton-mile scenario, it actually looks figuratively on the Capesizes, but that will have a bigger boost than the small sizes with the iron ore coming out of Ukraine specifically.

Supramax's Handysizes obviously, if the infrastructure is struggling, I think they will also have an upside to this potential peace agreement, but still the steel exports out of Russia and the fertilizer export out of Russia, which has predominantly been done on the smaller sizes, we think that will lag after trades from Ukraine start first, that make sense.

Okay. Thank you, everyone, for listening in, and thank you for your questions.

As always, if you have a question that you forgot to answer, feel free to reach out afterwards. Thanks again, and we will speak to you on our next conference call.