Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pacific Basin Shipping Ltd (PCFBF, Financial) reported a net profit of USD58 million for the first half of 2024, with an EBITDA of USD158 million.
- The company declared an interim dividend of HKD4.1 per share, amounting to USD28 million, representing 50% of net profit for the period.
- Pacific Basin Shipping Ltd (PCFBF) has a strong financial position with USD537 million in committed liquidity and net borrowings of just USD32 million.
- The company has launched a share buyback program of up to USD40 million, with approximately 42.7 million shares repurchased and canceled for USD14.6 million.
- The company outperformed the Baltic Exchange Handysize Index and Supramax Index by $840 and $410 per day, respectively, in the first half of 2024.
Negative Points
- Despite the rise in daily TCE earnings, both underlying profit and EBITDA have declined due to increased chartered vessel costs and higher expenses related to bunkers and port disbursements.
- The company's Supramax outperformance was negatively impacted by increased costs associated with chartering short-term core vessels in the Pacific.
- Handysize and Supramax daily TCE earnings decreased by 9% and remained flat compared to the first half of 2023.
- The company anticipates limited upside potential if market freight rates continue to strengthen due to Supramax/Ultramax scrubber limitations.
- Higher depreciation costs were reported due to increased dry docking costs and investments in fuel-efficiency technology.
Q & A Highlights
Q: Could you share which specific commodity types are expected to see a sequential pickup in demand in the second half of 2024?
A: We anticipate increased activity in grain loadings from the Northern Hemisphere, particularly from the US, Europe, and Ukraine, starting in October. Other commodities are expected to maintain stable volumes.
Q: Why do you expect scrapping to pick up from 2030 to 2037 and not earlier, given stringent environmental regulations?
A: Scrapping is expected to increase as ships approach 30 years of age, making it difficult to operate them due to environmental regulations. As long as the market remains strong, owners will keep older ships running. However, environmental rules will eventually necessitate scrapping.
Q: With the recent weakness in share price, will you accelerate the share buyback program, and is there a possibility to increase it beyond $40 million?
A: We plan to complete the $40 million buyback program by the end of the year without acceleration, considering liquidity constraints. We will evaluate the program's effectiveness with the Board and shareholders before deciding on future buybacks.
Q: Can you explain the elevated short-term charter costs and whether they will continue into the second half?
A: The elevated costs were due to an unusual market situation where Pacific rates were higher than Atlantic rates, driven by vessel shortages in the Pacific. This situation has normalized, and we expect more balanced rates going forward.
Q: Is there still room for a special dividend in the second half, given the $40 million buyback?
A: The decision on special dividends is up to the Board. We are generating strong cash flow with minimal debt, and if we don't find attractive investment opportunities, we will consider further distributions in line with our policy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
