Star Bulk Carriers Corp. (SBLK)

Q1 2010 Earnings Call Transcript

May 20, 2010 9:30 a.m. ET

Executives

Akis Tsirigakis - Chairman and CEO

George Syllantavos - CFO

Analysts

Natasha Boyden - Cantor Fitzgerald

George Pickral - Stephens Inc.

Doug Garber - FBR Capital Markets

Presentation

Operator

Welcome to the Star Bulk conference call on the first quarter 2010 financial results. We have with us Mr. Akis Tsirigakis, Chairman and Chief Executive Officer; and Mr. George Syllantavos, Chief Financial Officer of the company. (Operator instructions)

We'll now pass the floor to one of your speakers today, Mr. Akis Tsirigakis.

Akis Tsirigakis

Good morning, ladies and gentlemen, and welcome to the Star Bulk conference call. I am Akis Tsirigakis, the Chief Executive Officer of Star Bulk. And with me today is George Syllantavos, our Chief Financial Officer.

Before we begin with our slide presentation, I kindly ask you to take a few moments and read the Safe Harbor statement on slide number two. It will take a minute to do it.

I would like to take this time now and use this introduction to make a few brief points. We continue to believe that we are one of the most undervalued companies in the dry bulk sector, especially since our company remains financially strong with modest leverage, substantial charter coverage, ample liquidity and positive cash flows.

We have had quite a busy and fulfilling first quarter of 2010 with several key developments. Our reduction of operating cost campaign continued to show great success for the third quarter in a row. This was achieved while the quality of our operation was enhanced rather than compromised.

Delivering on past guidance, we judged the timing was appropriate to implement fleet growth and renewal plans. As such, we agreed to acquire three Capesize vessels, two newbuildings and one second-hand, representing a whopping 57% of our current deadweight or 27% in terms of number of vessels.

The newbuilding prices achieved were the lowest in the recent years, and both second-hand and newbuilding values have increased significantly following our acquisitions, showing the correct timing of the acquisitions.

On slide number three, we have an update of our company since our last conference call. Very recently, we declared the $0.05 dividend related to the first quarter of 2010. As of yesterday's market close, these reflect a 7.1% annualized yield.

We extended our time charter for the Star Theta with Cargill at the rate of $19,000 per day, 68% higher gross daily rate than the previous charter for a year-and-a-half duration.

We entered into a package deal with Augustea for the Star Ypsilon. Augustea timechartered the Star Ypsilon for 10 to 12 months at a gross daily rate of $22,350 and undertook to perform the next four quarterly cargoes under the VALE Contract of Affreightment. This effectively improved the TCE rate, while also alleviating fuel and other exposures usually associated with COAs.

We contracted two Capesize newbuildings with high-quality shipbuilder, Hanjin, for $53.5 million and $53.25 million, respectively, with delivery expected in September and November 2011. These prices are the lowest for new Capesize contracts in the recent years.

We also entered into a 10-year time charter agreement with STX Panocean for the first newbuild only at a gross daily of $24,750.

In March, we entered into a time charter agreement with Rio Tinto for the Star Aurora, a vessel we recently purchased for $42.5 million and expect to have delivered in the fourth quarter of 2010. We'll finance the acquisition with a mix of our own cash and bank debt.

We have gained certification for ISO 14000 Environmental Management. This certification ensures that all shore-side as well as shipboard operations and processes conform to strict standards aimed at protecting the environment and are documented, verifiable and constantly improving.

We actively participate along with a handful of major shipping companies in the European Union's energy efficiency research program entitled Targeted Advanced Research for Global Efficiency of Transportation Shipping or you might have heard it as TARGETS.

These two developments show our continued commitment towards enhancing our corporate responsibility and the quality of our operations, while still of course keeping focus on reducing our operating costs.

On the next slide four, we illustrate Star Bulk's growth overview. Within 2010, we have already contracted growth equal to 57% of our current fleet deadweight or 27% in number of vessels.

As you can see on the two graphs, Star Bulk has managed to grow its original fleet of eight vessels and just under 700,000 deadweight tons to 13 vessel of over 1.4 million tons within four years. This means that based on our current contract, our fleet will grow by 111% in deadweight and 62.5% in vessel terms by the end of 2011.

It is worth noting that in the process of growing our fleet, we have also been renewing it. During this period, we have sold three of our oldest ships and bought seven younger vessels, while we have also ordered two newbuilding Capesize vessels.

On slide five, we depict the results of our operating cost reduction campaign. This was achieved while enhancing our quality, as measured by objective metrics such as exceptional Port state control records and quality certifications.

As you can see in the two graphs, our operating expenses, or OpEx as we call it, has steadily decreased, both overall, but more importantly on a per vessel per day basis. Actually, our efforts towards operating cost reductions have played an important role in our improved financial performance. We are confident that our in-house technical management will continue to be instrumental in our quality objectives, while further optimizing our vessel operating costs.

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