Star Bulk Carriers Corp. (SBLK)

Q2 2010 Earnings Call Transcript

August 11, 2010 8:30 am ET

Executives

Akis Tsirigakis - Chairman and CEO

George Syllantavos - CFO

Analysts

George Pickral - Stephens Inc.

Natasha Boyden - Cantor Fitzgerald

Robert MacKenzie - FBR Capital Markets

Otto Roethenmund - Internation Capital

Presentation

Operator

Welcome to the Star Bulk conference call on the second 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 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 moment to read the Safe Harbor statement on Slide 2. I would like now to take the time and use this introduction to make a few brief points before I commence with the proper presentation.

We continue to believe that we are one of the most undervalued companies in the dry bulk sector. It is a very volatile dry bulk market. Star Bulk remains financially strong with modest leverage, substantial charter coverage, ample liquidity and positive cash flows. We also continue to maintain and excellent relationship with our lenders.

Our reduction of operating cost campaign continues to show tangible results in both G&A and operating expenses quarter-after-quarter. This was achieved while the quality of our operations was enhanced and our utilization rate substantially increased.

Our company has emerged from the challenging times of the past 18 months stronger and leaner with significant achievements, which include the sale of its costliest tonnage, the acquisition of three modern Capesize vessels without diluting the shareholder base, having repaid organically a major portion of its debt, being in full compliance with its original loan covenants and its in-house vessel management producing stellar results.

Our commitment towards enhancing our operations on all fronts is on course. And we are keeping focus on reducing our operating costs further. We are also pleased to be able to declare our fifth consecutive quarterly dividend for the second quarter of 2010 of $0.05 per share.

Turning to Slide 3 of the presentation, we will discuss our second quarter and first half ended June 30, 2010, financial highlights. For the second quarter of 2010, gross revenues amounted to $30 million and net income amounted to $6 million. Excluding non-cash items, our net income for the second quarter 2010 as adjusted amounted to $7.2 million.

Adjusted EBITDA for the second quarter 2010 was $20 million, while average daily operating expenses were $5,269 per day per vessel. The Time Charter Equivalent for the second quarter of 2010 was $28,640 per day. The adjusted net income of $7.2 million represents $0.12 earnings per share basic and diluted, which is above Bloomberg consensus of $0.06 per share.

For the first six months ended June 30, 2010, gross revenues amounted to $59.3 million, and net loss amounted to $27 million which includes a non-cash impairment charge of $33 million due to the sale of the Star Beta. Excluding non-cash items, our net income for the first half of 2010 as adjusted amounted to $8 million.

Adjusted EBITDA for the first half of 2010 was $33.8 million, while the average daily operating expenses were $5,473 per day per vessel. The Time Charter Equivalent for the first half of 2010 was $27,291 per day. The adjusted net income of $8 million represents $0.13 earnings per share basic and diluted.

Now turning to Slide 4, we would like to provide an update of our company's recent developments. For the quarter ended June 30, 2010, we declared our fifth consecutive dividend of $0.05 as of yesterday's market close. This reflects a 7% annualized yield.

We are also pleased to announce that we have secured a $26 million loan for the Star Aurora at favorable financing cost and terms. I would like to remind our investors that we acquired the Star Aurora in February 2010 for approximately $42.5 million from a third party and chartered the vessel to Rio Tinto for about three years at a gross daily rate of $37,500.

We are especially satisfied to see our senior debt lenders demonstrate their continued support of our acquisition plans and their confidence in Star Bulk as we continue our growth strategy.

Also in early 2010, we delivered the previously Capesize vessel, Star Beta to her new owners. Last but not least, we have received $2 million as part of our claim for the vessel Star Epsilon.

Our next slide, we illustrate Star Bulk's growth overview. As you can see, in the two graphs of Slide 5, Star Bulk has managed to organically grow its original fleet of eight vessels and just under 700,000 deadweight to 13 vessels of over 1.4 million tons within four years. This means that including our current contract, our fleet growth is 111% in terms of deadweight and 63% in terms of vessels.

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 older ships and bought seven younger vessels, while we have also contracted two newbuild in Capesize vessels.

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