Genco Shipping & Trading Ltd (GNK) 2025 Q4 法說會逐字稿

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(audio in progress) Compared to peers. As our TCE increased from approximately $12,000 per day in Q1 2025 to $20,000 per day in Q4, our overall profitability and dividend capacity increased as well. As can be seen from the chart, our estimated Q1 TCE also compares favorably to our low breakeven rate on a cash basis.

Turning to slide 9. Through the execution of our value strategy, Genco has paid compelling quarterly dividends to shareholders across cycles. Notably, we have paid 26 consecutive quarterly dividends to shareholders in diverse rate environments, having distributed between $0.15 and $0.50 a quarter over the past three years. In addition to the Q4 dividend being the highest since Q4 2022, it also represents a 233% increase over the Q3 2025 dividend. Supporting our dividend and complementing our low breakeven rate is our balanced approach to fleet composition, which we present on slide 10.

In addition to the 2 Newcastlemax vessels we agreed to acquire, we own a fleet of 17 Capesize vessels as well as 15 Ultramax and 11 Supramax vessels. We continue to balance the high beta and upside potential of the Capesize sector, along with steadier earnings stream of our minor bulk ships. On a vessel ownership basis, our splits are 40% gates and 60% Ultrasuprus. However, when viewed on a net revenue basis over the last two years, we are 50% weighted towards Capesize vessels.

With just 20% of our overall fleet fixed for the year, Genco is uniquely positioned relative to some in the peer group the benefit from a strengthening freight rate environment, providing us with meaningful upside exposure to the current strong spot market. Our high operating leverage is balanced against our low financial leverage which is shown on slide 11.

This provides Genco with significant financial flexibility in various freight market conditions. In strong markets, Genco generates meaningful cash flow with its industry low breakeven rate and scalable fleet. In market downturns, Genco's low financial leverage and undrawn revolver availability, allow the company to take advantage of countercyclical growth opportunities.

Specifically, as demonstrated on slide 12, Genco has taken advantage of our strong liquidity position for opportunistic acquisitions of modern high-specification premium earning vessels at attractive values including six Capesize and Newcastlemax vessels since 2023. I emphasize the positioning of the fleet today is not an artifact of history or chance. It is the result of the steady execution of our plan to optimize the fleet, which began in 2023. At that time, the management team and the Board formed a specific strategy focused on the compelling supply and demand fundamentals of the Capesize sector, which had the lowest order book among the major dry bulk sectors with long-haul ton mile expansion on the horizon.

Since 2023, our strategy has been built upon this thesis. And over this time, Capesize vessels have been the best-performing dry bulk class from an earnings and an asset value appreciation perspective. Notably, our Capesize vessels have increased in value by nearly $40 million despite several years of age depreciation. Furthermore, we have generated an IRR of over 30% on these ships since acquisition. In 2025 alone, we agreed to purchase three 2020 built Capesize and Newcastlemax vessels growing our pro forma fleet by 20% and on an asset value basis and significantly increasing our earnings and dividend capacity in 2026 and beyond while reducing the average age of our fleet.

On slide 13, both Genco's pro forma 45-vessel fleet in Cape fleet, provide significant operating leverage for shareholders. Every $1,000 fleet-wide increase in TCE equates to $16 million of incremental annualized EBITDA or $0.37 per share. Furthermore, our 19 Newcastlemax and Capesize vessels every $5,000 increase equates to $34 million or $0.77 per share of incremental earnings and dividend capacity. Our fleet strategy has been very successful since we implemented it in 2023. And as you see in these figures, has well positioned the company to continue creating shareholder value going forward.

Lastly, turning to slide 14. Genco continues to prioritize strong corporate governance, which is another key differentiator for the company relative to the peer group. Specifically, Genco is the largest US headquartered dry bulk shipping company, and we are also a US public company subject to robust SEC and New York Stock Exchange disclosure regime.

We are also the only listed dry bulk shipping company with no related party transactions. We have a diverse and independent Board of Directors and observed US public company governance best practices such as having a lead independent director. We provide detailed disclosures on company performance and initiatives while striving to provide a clear and thoughtful strategy to shareholders as we execute our disciplined approach to capital allocation.

We are also consistently ranked in the top quartile on corporate governance among public shipping companies by Webber Research. Our corporate governance is a core part of Genco's identity and reflects our Board's commitment to upholding the highest standards of fiduciary duty and governance excellence.

I will now turn the call over to Peter Allen, our Chief Financial Officer.

Thank you, John. On slide 16 through 18, we highlight our fourth quarter financial results. Genco recorded net income of $15.4 million or $0.35 basic and diluted net earnings per share. Adjusted net income is $17.3 million or $0.40 and $0.39 basic and diluted earnings per share, excluding our operating expense of $1.9 million for shareholder-related expenses. Adjusted EBITDA for Q4 totaled $42 million, an increase of 94% and as compared to Q3 and bringing the full year 2025 total to $85.9 million.

Our cash and debt positions as of December 31, 2025, were $55.5 million and $200 million, respectively. Our undrawn revolver availability at year-end was $400 million. During March of 2026, we expect to take delivery of two 2020 built Newcastlemax vessels, we have approximately $131 million of remaining CapEx for these acquisitions, which we expect to fund primarily through proceeds from our revolver.

As part of our existing $600 million credit facility, we plan to utilize the accordion feature for $80 million and pledge these two vessels as collateral. This would increase our pro forma borrowing capacity to $680 million in total with expected post-acquisition debt outstanding of $330 million and undrawn borrowing capacity of $350 million. Our lenders participating in this revolving credit facility upsizing, include Nordea, DNB, ING, and SEB.

With our full revolving credit facility structure, we will continue to actively manage our cash and debt positions to reduce interest expense while maintaining access to capital to quickly act on growth opportunities as we have demonstrated in recent years.

Moving to slide 19, we highlight the sequential increases in our quarterly EBITDA throughout the year, culminating in a strong fourth quarter performance and an EBITDA increase of 94% from Q3 2025 and also the highest quarterly level since 2022.

As outlined on slide 20, we believe that Genco is in a highly advantageous position with the current fleet of 43 high-quality modern dry bulk vessels, our significant operating leverage, combined with low financial leverage, a sub-$10,000 cash flow breakeven rate and $400 million of undrawn revolver availability collectively provide a compelling risk-reward balance for shareholders. Furthermore, we continue to reward shareholders through our quarterly dividend policy, which targets a distribution based on 100% of operating cash flow less a voluntary reserve as described on slide 21.

For Q4, our Board of Directors declared a $0.50 per share dividend based on operating cash flow of $41 million and a voluntary quarterly reserve of $19.5 million, marking our highest payout in three years.

Looking ahead to Q1 2026, we currently have 80% of owned available days fixed at approximately $18,000 per day as compared to our anticipated cash flow breakeven rate, excluding drydocking related CapEx of approximately $9,715 per vessel per day. Importantly, Q1 2026 TCE is on pace to increase over 50% year over year. On the expense side, we anticipate vessel operating expense to marginally increase in Q1 and compared to Q4 levels due to the timing of crew-related expenses. However, we expect vessel OpEx to revert to levels similar to Q4 moving forward during the year.

I will now turn the call over to Michael Orr, our dry bulk market analyst, to discuss the current industry landscape.

Thank you, Peter. Beginning on slide 23. The dry bulk freight rate environment meaningfully improved in the second half of 2025 and reaching its height in Q4, led by the Capesize sector. The Baltic Capesize Index averaged nearly $29,000 per day in Q4 and approached $45,000 per day in early December, driven by all-time high Brazilian iron ore shipments. Supramax rates were also firm, supported by augmented coal shipments to China as well as firm grain exports.

Turning to slide 24. China reported strong levels of iron ore imports in recent months led by increased seaborne supplies together with the restocking of iron ore inventories. Specifically, the country's iron ore imports in Q4 rose by 7% year over year. And for the second half of the year, China's iron ore imports rose by 12% and as compared to first half levels. On the seaborne supply side, we saw Brazilian iron ore shipments rise by 26% second half over first half.

Turning to slide 25, we highlight the long-haul iron ore and oxide trade growth expected from Brazil and West Africa in the coming years. Given the scale of the projects, these volumes could absorb potentially over 200 Capesize vessels which is more than the current Capesize new building order book. Supply constraints in Capesize newbuilding activity combined with added long-haul trading distances are two key catalysts for the sector. We expect West African iron ore flows to ramp up in 2026 and after per shipments were made in 2025.

In terms of the grain tray, as detailed on slide 26, China has reported fulfilled their 12 million-ton quota from the US as part of the October agreement. However, further reports highlight additional purchase of up to 8 million tonnes of US soybeans in the coming months. With the onset of -- American brain season at the end of Q1, the tension is likely to shift to Brazilian soybean volumes.

Regarding the supply side outlined on slide 27. Net fee growth in 2025 was 3%, slip between 1.5% net growth for Capesizes and 4% to 5% net fleet growth for Panamaxes down to Handysize. Importantly, 2025 marked the fourth straight year of sub-3% net fleet growth for Capes, which is the first time on record at this lower level as it materialized for this line.

Additionally, as scrapping has remained low in recent years, the age of the global fleet has risen to nearly 13 years old, the highest average age of the global dry bulk fleet since 2010. This has increased the pool of potential scrap and candidates that 11% of the on-the-water fleet is 20 years or older, which is nearly identical to the global dry bulk order book as a percentage of the fleet of 12%. This implies net replacement of tonnage over time as opposed to any material net fleet growth.

While we expect volatility in the freight market to persist, the foundation of a low supply growth picture provides a solid basis for our positive view of the dry bulk market going forward.

I'll now turn the call back over to John to conclude the call.

Thank you, Michael. Turning to slide 29. We have made outstanding progress, executing our comprehensive value strategy, providing shareholders with sizable returns and investing in our fleet to further expand Genco's earnings power. With our high quality and modern fleet, leading commercial operating platform, strong balance sheet and significant operating leverage, we remain well positioned to create meaningful value for shareholders in 2026 and beyond.

As we progress through the year, our unrelenting focus will be on continued capital return for shareholders, further growing our high-specification premium earning fleet as well as maintaining our industry-leading leverage profile and strong corporate governance standards.

Before we turn the call over to Q&A, I'd like to briefly address our announcements from last month regarding a non-mining indicative proposal we received to acquire all outstanding shares of Genco. As detailed in our previous press releases, our Board thoroughly reviewed the proposal with the assistance of external advisers and determined the proposal significantly undervalued Genco.

As part of its review, our Board did determine that a differently structured transaction, one organized as an acquisition by Genco would create value for all shareholders. We sought to engage privately on an alternative structure, but our offer to engage was turned down. Our management and Board are focused solely on delivering maximum value for shareholders.

With that said, the purpose of today's call is to discuss our fourth quarter and full year 2025 results and the opportunities ahead for Genco the company is performing very well today, and we are very excited and confident in the future. We ask that you please keep your questions focused on results, performance and industry trends. Thank you for that in advance.

This concludes our presentation, and we would now be happy to take your questions.

(Operator Instructions) Omar Nokta, Clarksons.

Yes, the dry bulk market ended '25 on a pretty strong note and as shown in our results, obviously. And so far this year, things are progressing quite nicely you've upsized your facility by the $80 million and you're going to take delivery of those two Newcastlemax next month. Obviously, you have plenty of flexibility. Asset values look like they're on the rise and -- or at least have risen a good amount here over the past few months. Where does that leave Genco kind of strategically?

I know you touched on this a bit at the end of your comments, John, but how are you thinking about Jinko strategically capital allocation as we look ahead here for the rest of '26?

Look, in terms of the capital allocation, dividends and the value strategy is top of the list. We will endeavor to continue to cycle out some of the older vessels and redeploy those funds on more modern fuel-efficient ships such as we've done such as we did last year. So I don't think much has changed. But you're correct, values continue to move up. We're actually in a situation where they're moving up almost weekly at this point, which is obviously very positive basis the the timing of the acquisitions that we did last year.

But look, it makes newer tonnes more expensive, but it also makes our older tonnage more firm in what we can get. So dividends and value strategy is the first -- and as part of that value strategy, we have a fleet replacement and growth element.

And maybe just as a follow-up, then you -- as we referenced, asset values having risen, I wanted to ask you how are you thinking about the term charter markets? Or what are you seeing there as we kind of think about it from, say, the crude tank is just as what we've seen there, VLCC values have risen and there's been a lot of charter interest. Are you seeing something similar in the cape market -- and how do you feel about deploying ships on term charter today?

I think -- well, there has not been as much liquidity in the dry ball TC market, as you just mentioned in the tanker sector. I think a lot of that has to do with the optimism as we look at the supply side and demand growth for the rest of 2026, but then certainly going into as West African iron ore really starts to ramp up. So I think it's more of a function of, I believe, owners not wanting to lock in currently because of the optimism, again, low supply demand growth coming.

Having said that, there have definitely been some one -- three-year deals done. I think there was a three-year deal, done, on a new -- at least one, maybe two Newcastlemax from an iron ore major excess $30,000 a day. Those are firm rates. And clearly, the market is indicating bullish staffs and positive sentiment. You know that we, from time to time, have taken exposure off the table, particularly in the Capesize sector.

We really do look at it as a portfolio approach. But we spend a lot of time and analysis looking at whether we want to lock in and there could easily come a time this year where maybe we take some exposure off the table. But for the time being, we're we're going to continue to trade spot. And I think it's one of the unique things about Genco. We really only have 20% of this year's fixed.

So with a rising market, we are fully exposed 80% exposed to that positive market and sentiment.

Liam Burke, B. Riley Securities

John, in the past discussions on asset acquisitions, you always like the flexibility of the Capes versus the Newcastlemax. Has there anything changed in trading patterns that makes you favor more of the Ultramaxes vis-a-vis a Cape?

Sorry, the Ultramaxes or the Newcastlemaxes?

Newcastlemax, excuse me.

Yes. No, okay. Yes. No, I wouldn't say anything has drastically changed, though certainly, on the Brazilian trade, those Newcastlemax have always been filled up to their capacity. Over the last several years that may have not been true with Australia loadings, but that's really changed.

And we certainly have seen the bauxite trade develop as well as out of West Africa. So that bauxite can go on Newcastlemax. So we like the news we bought. We like our Capesize fleet. The Newcastlemax that we bought are no doubt premium earning assets with very high specifications and low fuel consumption.

I think Bulkers 2020 did a fantastic job ordering and kitting out those ships. So we're very happy to be taking delivery of those. But we're going to continue to look at Capes and Newcastlemax. And that's where I think you'll see growth for us, and we'll stay steady with our Ultra Supramax fleet probably do a little bit of fleet renewal on the supers.

Okay. Just as a follow-on, you just mentioned the supers. Is there any opportunity? Or is there any interest in adding to that part of the fleet when you're discussing renewal? Or is it just sell the older vessels on elevated asset values?

It certainly would be selling older vessels. Again, we're focused on the larger shifts in terms of redeploying capital to -- I'm not going to rule out that we wouldn't buy an Ultramax. I mean that market is doing pretty well. As you know, these are all correlated. It's just the Cape has certainly more upside potential based on higher beta and volatility.

And if you look at, again, the supply side on the Capes is the most favorable in the dry bulk sector and demand growth that is coming is Newcastlemax and Capesize oriented.

Chris Robertson, Deutsche Bank Securities Inc.

John, just on the back of Omar and Liam's questions around the S&P market. I just wanted to touch on -- last year, it was reported that a large number of Chinese buyers of dry bulk vessels were active in the market. I was wondering if you could comment, is that trend still continuing? And where do you see kind of the activity being driven in the S&P market for potential asset sales?

Yes. I think the Chinese continue to be very active. I would put them as the number one buyer right now, particularly of older assets, not on the -- not necessarily on the modern eco side, but the older assets, they are very active on. China is the largest importer of dry bulk commodities, right? So seeing the Chinese go long tonnage, I think that's a positive yes, a vote of confidence in the market going forward.

You've -- and you've seen it across the board. I mean they certainly have been active in older tapes, but they've also been buying some of the older Supramaxes as well. And I'm sure they see the same thing that we see again, the low supply growth on the cases, the age of the fleet. And I think most importantly, there are additional cargo volumes that are going to be coming both on the bauxite side, but more importantly, on the iron ore front out of West Africa.

Got it. Makes sense. My second question is just related to kind of reevaluating the geopolitical environment and the disruptions that we've seen across various shipping segments over the last few years. Where do things stand in terms of the disruption levels related to dry bulk -- and let's say, if there was a reversal, whether it's the Red Sea or Russia, Ukraine, et cetera, where do you see kind of puts and takes around some of those themes?

Well, I mean, let's take the Russian Ukraine situation. If there is a conclusion of that and the Black Sea reopens fully, clearly, that's potential for more grains and to a smaller degree, iron ore. So that would be a net positive for dry bulk shipping. In terms of the Red Sea, we're well aware that there are some container companies that have started operating through Suez and the Red Sea we're still cautious and we're still not putting our ships through that area. But having said that, it's maybe 1% to 2% max in terms of number of ships that would actually go through the Red Sea.

So deviating around Africa is it's not a big factor in dry bulk. It certainly isn't containers, but it's not for dry bulk.

Sherif Elmaghrabi, BTIG.

A couple of questions on operating costs here. It looks like the cost of charter higher in Q4 roughly doubled sequentially. So I'm wondering, does the current strength in spot rates change, how you think about augmenting your fleet with outside tonnage?

Well, -- in terms of -- again, in terms of growth, we're definitely focused on the larger ships. And hopefully, this is going to be answering your question. If it's not, please feel free to clarify. But when you look at where rates have really moved up, it is in the larger ships, which, again, that's been our strategy of growing that fleet since 2023. And -- and you can definitely see that in the revenue side.

It's driven quite a bit of the upside in revenues. Did that answer your question?

I was asking about the chartered in fleet.

Yes. Sure, in terms of the chartering fleet, that is a very opportunistic part of the business. A lot of the times, the guys will take forward cargoes. And if it makes more sense in the moment to to charter in a vessel to create an arbitrage, they'll do that. And that's something that the guys are -- have been really good over the years of assessing whether they can make whether it's 100,000 plus on a particular cargo.

A lot of the times in the first quarter, you'll see that because we'll look forward cargoes, the market will come off relative to Q4, and we'll be able to get that arm. But it's a very opportunistic play. Some quarters, you'll see higher than others. But certainly, in a strengthening market being on the longer side and having the spot focus that we have is certainly where you want to be right now?

What you're not going to see us do is speculative long-term time charter-ins. It will either be short term, backed up by a piece of cargo as Pete said, but we're not going to adjust go make it on chartering a Capesize or an Ultramax for that matter long term into the company. That's not part of the strategy.

Okay. Yes, that's very clear. And then just looking back at the presentation, slide 8, highlights your remarkably stable cash breakeven which has remained below 10,000 days for a few years now. So is there anything you're doing, obviously, decide to keep leverage low to manage breakeven costs while some other owners have seen operating cost inflation.

We've seen operating cost inflation. There's no doubt, particularly on the crew side and when you look at spares and stores just from an inflationary standpoint. We certainly manage to a budget that we set every year, though I want to emphasize, particularly with the larger ships, the bar keeps getting raised calling Australia. So we need to make sure that we are keeping our ships well maintained so that we do not have any issues trading anywhere in the world. So there is a little bit of inflation.

We certainly manage and pay very close attention to OpEx -- but we're not going to be penny-wise town foolish.

As there are no further questions at this time, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.