Earlier this week, dry bulk shipping entity Star Bulk (SBLK) their Q4 2021 results. SBLK is not just any dry bulk shipping company. It has grown to be the largest publicly listed dry bulk only shipping company with over 125 vessels. With a fleet that large, the vessel categories range from Supramax/Ultramax (medium size) to Newcastlemax (large), and a few vessel types in between. In another thread, I gave the entity a double wow! The double wow! was for
- Vessel charter average (across all vessels) after excluding some expenses, TCE (or Time Charter equivalent) was $37k daily
- Dividend payout. Here’s the quarterly payouts in 2021 -
Q1 - 30c
Q2 - 70c
Q3 - $1.25
Q4 - $2.00
(More on the operational side later)
Ok, so y’all now know that SBLK is a large shipping company. SBLK mgmt were the first group that made me realize how the emissions standards and requirements (that start in 2023) could work in favor of existing ship owners. Sure, a whole number of vessels would fail (as I understand it, a majority of existing vessels would fail) the standard today. But, that’s assuming the vessels are operating at the same speeds as they are sailing currently. A lot of vessels will require some “tweaking”, but a relatively easy “tweak” will be to sail slower. As vessels get older and emissions tighten is where things get tougher (and likely more expensive)
Now, factor in other elements. I have mentioned the huge order/shipyard slot reservation made by the Qataris for LNG tankers. That takes away a lot of the shipyard slots at the 3 main South Korean shipyards - Hyundai, Daewoo and Samsung. Add in the orders for container vessels, and that takes away more slots from the main South Korean yards, and also the top Chinese shipyards. Raw material prices have gone up too. So, there’s both a capacity problem and higher costs (some of this discussed in the SBLK earnings call)
Slide 11 has some helpful METAR tables and charts. Subtle point - with its vessel quantity and variety, SBLK can actively participate in all four primary dry bulk commodities (iron ore, coal, grains and minor bulks)
Slide 9: 94% of SBLK’s fleet fitted with scrubbers. Most owners would only add scrubbers to larger vessels and/or when ordering newer vessels. 94% means more than 119 SBLK vessels have scrubbers installed.
https://www.starbulk.com/media/uploads_file/2022/02/17/p1fs3…
One big take-away from the Earnings call (and I can’t zero-in on it currently) was a comment on China delaying the plans for steel. As I read that, that seems to suggest a positive for the Cape size category (primary vessel type for transporting iron ore). SBLK mgmt did discuss the slowdown of the Chinese steel sector the last few months. But, they expect a pick up from China later in 2022. SBLK mgmt did suggest 2021’s surprise was “Rest of World (RoW)” growth.
Obviously, the other big items were SBLK’s big dividend and SBLK crossing the $3B market cap. There was also a deeper dive into Slide 11
https://seekingalpha.com/article/4488130-star-bulk-carriers-…
Okay, the operational side.
Was the $2 dividend a surprise? Not really, if one had seen SBLK’s investor presentation from mid January 2022.
SBLK have provided a formula (Slide 5 in first URL) and one knows they have a minimum cash threshold, plus occasional items (maintenance + opex-related) that might affect cash flow.
To average $37K TCE across all vessels is still quite impressive. I mean, given the rate spike in Sept - early Oct 2021, the Cape category is not too surprising. Sure, the Cape spot rate did decay rapidly from there. In that light, kudos to SBLK in what they generated from the smaller vessel classes.
So $2/sh in div accrues in early Mar 2022. Now my dilemma is how much to model for the other three quarters in 2022. I do know the payout for Q1 is going to be lower. Anyhow, a good challenge to have in 2022.
HohumYNWA