Golden Ocean Group reports “weak” second quarter results

Birgitte Ringstad Vartdal, CEO of Golden Ocean Management AS, commented: “Following a weak first half of the year, the third quarter has started off on a very strong note. Increased iron ore volumes and supply imbalances, combined with fewer vessels in the market due to scrubber installations have led to a dramatic turnaround in the market, which we expect will improve our third quarter results. The upcoming IMO2020 regulations are widely expected to positively impact the market and create a further competitive advantage for owners with modern, fuel-efficient fleets. There may also be supply chain issues that constrain supply of compliant fuels for some owners. We believe the scale of our fleet will again benefit us and that our joint venture with Trafigura and Frontline will further strengthen our ability to source competitively priced bunker fuel of good quality when and where we need it.”

Per Heiberg, Chief Financial Officer of Golden Ocean Management AS, commented: “The weak second quarter results were negatively impacted by losses on our portfolio of derivatives of US$13.3 million as falling US forward interest rates affected our interest rate hedges and improvement in freight rates late in the quarter partially reversed the unrealised gains on our FFA hedges in previous quarters. These losses coincided with a heavy drydocking schedule during the second quarter, which increased operating expenses. Excluding these effects, we managed to limit the influence of the weak market by delivering an average TCE rate above the market indexes for all of our vessel classes.”

Second quarter results

The company reported a net loss of US$33.1 million and a loss per share of US$0.23 for the second quarter of 2019, compared with a net loss of US$7.5 million and a loss per share of US$0.05 for the first quarter of 2019. Adjusted EBITDA was US$21.5 million for the second quarter of 2019, a decrease of US$14.5 million from US$36.0 million for the first quarter of 2019. Operating revenues amounted to US$115.8 million in the second quarter of 2019, a decrease of US$10.2 million, from US$126.0 million in the first quarter of 2019. The decrease in revenues was driven by weak market conditions in the first quarter and at the start of the second quarter, when the majority of the voyages conducted in the second quarter were contracted. Voyage expenses decreased by US$1.3 million in the second quarter of 2019 compared with the first quarter of 2019 primarily due to a decrease in the number of vessels days on voyage charter compared to time charter contracts.

The average TCE rate for the fleet was US$11 629/d in the second quarter of 2019 compared with US$13 131/d in the first quarter of 2019. Ship operating expenses amounted to US$48.7 million in the second quarter of 2019 compared with US$42.1 million during the first quarter of 2018. As a result of the adoption of the new lease standard on 1 January 2019, the service element of vessels chartered in on time charter are presented as ship operating expenses. In the second quarter of 2019, ship operating expenses comprised US$37.3 million in running expenses (US$37.7 million in the first quarter), US$6.7 million on dry docking expenses related to eight vessels (US$1.4 million related to three vessels in the first quarter) and US$4.7 million related to estimated ship operating expenses on time charter in contracts (US$3.0 million in the first quarter). Charterhire expenses were US$15.8 million in the second quarter of 2019 and in the first quarter of 2019, respectively.

Administrative expenses were US$3.3 million in the second quarter of 2019, compared with US$3.5 million in the first quarter of 2019. Depreciation was US$24.0 million in the second quarter of 2019 compared with US$22.9 million in the first quarter of 2019. Net interest expense was US$14.2 million in the second quarter of 2019, compared with US$15.3 million in the first quarter of 2019. The decrease in net interest expense was primarily a result of the repayment of the company's convertible bond in January 2019. In the second quarter of 2019, the company recorded a US$13.3 million net loss on derivatives. This loss was primarily driven by a US$7.5 million loss on the company's US$ interest rate swaps due to falling forward US$ interest rates and a loss of US$6.0 million on forward freight derivatives and bunker hedges. The loss was slightly offset by a US$0.2 million gain on foreign currency swaps.

Read the article online at: https://www.drybulkmagazine.com/shipping/16082019/golden-ocean-group-reports-weak-second-quarter-results/