Genco (GNK) in 2023

Investment Analysis Clubs Value Hounds
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Back in Nov 2022, I had a thread on Genco Shipping and Trading (GNK)
Watching Genco (GNK) - Investment Analysis Clubs / Value Hounds - Motley Fool Community

Since we are in a new year, I thought I would provide an update. This year (2023) is when stronger environmental standards (CII, EEXI) go into effect. What many ship companies or owners did in the second half of 2022 was to prune their fleet by selling older vessels, ones that would likely need more capex to comply with the upcoming standards.
For Genco, not much has changed. The fleet has remained the same with 44 vessels (17 Cape vessels, 27 Supramax/Ultramax). Will delve into more detail on this shortly.

Genco announced their Q4 2022 results on 2/23/23.

  • Fleet wide TCE (Time Charter Equivalent) of $19,330/day (not bad given the market conditions)
  • Rev of $129M
  • Net income of $28.7M
  • Div of 50c/sh declared
    PowerPoint Presentation (q4cdn.com)

Good numbers in Q4 2022. Debt is being paid down too. That’s good. Then you look at Slide 8. Two items in particular
i. Why are operating expenses supposed to be up in Q1 2023?
ii. Scheduled maintenance is a separate line item. It is a lower run-rate than in Q4 2022. (Possibly fewer vessels undergoing scheduled maintenance)
Are we going to see additional quarters where this dynamic (operating expense variation vs maintenance variation) shows up? With GNK’s low debt ($171M), this is not an immediate concern. But, the Genco fleet is not getting younger, so those maintenance costs are going to continue to increase faster (in general, higher maintenance costs as age of vessel increases)

The dry bulk shipping market has had a weaker second half of 2022 than the same period the year prior. A temporary slowdown? Is the slowdown suggesting an inflationary period? Turnaround in second half of 2023? Some periodic charter coverage is a good hedge against some of the near term concerns.

Clumsy dry bulk shipping investor, who trimmed stakes in various ideas in Jan 2023. In hindsight, even with a falling BDI (Baltic Dry Index), it would have been a good time to add to GNK. Even with a projected weaker Q1, I do think GNK management is doing a good job steering this entity, Just a little surprised at how they seem to be approaching CII/EEXI.

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@HohumYNWA,

Thanks for posting your thoughts on this.

I had a look at the financials 2021 / 2022 and projected 2023. What stands out to me is the category called “Vessel operating expenses” is growing almost exponentially. There are no notes on this specific expense, but would it possibly represent the increased cost of fuel and labor? These seem to be operating expenses directly attributed to operating the vessel.

As fuel costs come down, we may see this expense category level off a bit in the future.

Just a thought.

'38Packard

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Hohun
The price on both GOGL and GNK has trended up nicely the last 3 months too…doc

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@38Packard - Thank for comments.
Seems counterintuitive, but most shipping companies don;t count “fuel” as an operating cost. Scroll down to slide 12, and you will see a line item breakdown. I believe “fuel” is generally considered a voyage cost and notice how it is separated from other line items,

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True, But, GNK has had a steeper rise (say 45-55%) off its recent low, vs about 25-35% for GOGL. I had a family emergency, so I had to ignore my port and holdings for a few weeks. That’s when GNK put in about half its gains.