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DryShips (NASDAQ:DRYS) has been suffering for quite some time now, and the company not been able to recover after the financial crisis of 2008. The results for the company has been mixed over the past few quarters - despite reporting substantial growth in revenues, the company has not been able to return to profits. The reason behind the poor performance is the weak condition of the sector the company operates in. The offshore drilling segment has been performing well. However, the core business of the company has been losing money, and continues to do so. The company came out with earnings for the most recent quarter, and once again, the core business of the company has reported poor earnings. At the same time, the offshore drilling arm of the company, Ocean Rig (NASDAQ:ORIG), continues to perform well and mask the poor performance of the shipping segment to some extent.

Earnings: Good Growth in Revenues, Poor Earnings

The net loss for quarter was $24.4 million, or $0.06 per share compared with the $129.9 million or $0.34 per share for the same quarter last year. If we look at the figures in isolation, it shows a massive decrease in the net losses for the company over the period of one year. However, it should be kept in mind that DryShips consolidates Ocean Rig's results, and the majority of the growth in revenues and earnings has come from the offshore drilling segment. Nonetheless, the shipping business also recorded top-line growth, but failed to convert it to profits. The drybulk carrier segment recorded revenues of about $53 million, growing by about 31% compared to the same quarter last year. The time charter revenues also recorded growth close to 30% and the Time Charter Equivalent was close to $13,303, up over 26% compared to last year.

Tanker Segment showed massive growth of about 166% and reported revenues of about $33 million. Time Charter Equivalent was up about 84% and total voyage days were 920, up about 43%, indicating that the global voyage days are increasing as economic activity gathers pace. The offshore drilling segment contributed about $345 million in revenues for the quarter, showing a growth rate of about 50% year-over-year. Offshore drilling revenues account for about 80% of the total revenues of the company. From these figures, it is clear that how much DryShips have been relying on the off-shore drilling segment to mask its poor performance. One positive for the company was the decrease of about 4.8% in operating expenses, which also came mainly from the lower drilling expenses. Current cash and cash equivalents for the company stand at $320 million compared with $315 million a year ago - there has been some improvement in cash and cash equivalents, but at the same time the total debt of the company has increased by more than $1.3 billion. Outstanding debt at the end of the same quarter last year was close to $4.2 billion, which has now gone up to over $5.5 billion.

New Builds and Future Outlook

The new builds situation is not good as the shipyards are falling behind on deliveries for the newbuilds. The company did not make any payments to the Rongsheng during the past quarter and it expects to recoup the payments made to the shipyard along with the 8% interest rate guaranteed by the Bank of China.

The outlook for the global economy is good and the recovery is expected to gather pace over the next 12-18 months. As a result, the demand the for drybulk and tanker segment should increase resulting in improved spot rates. At the moment, the balance between the demand and supply of vessels is favorable for the company.

Furthermore, as I mentioned in my previous article, the company will start to benefit from its subsidiary, Ocean Rig, in terms of cash as the driller has announced to pay $25 million in quarterly cash dividends starting from May this year. The dividend rate is expected to remain flat for the year, which should result in cash inflow of over $44 million to DryShips from its subsidiary - certainly a welcome sign for the company.

In addition, the improving conditions of the core business of the company should allow it to continue its recovery over the next 12 months. However, the current year will be another year in transition, and the company may not be able to become profitable during the next twelve months. Nonetheless, the situation is getting better for DryShips and the recovery should continue.


The shipping industry is still suffering from the losses it accumulated over the last decade due to the oversupply of vessels and the financial meltdown of 2008. However, the situation is much better than the last year. The future outlook of the global economy and international trade is also favorable for the shipping industry. DryShips shareholders should be patient and hold on to the stock as I believe the company will make a full recovery over the next two years. The stock has already made substantial recovery over the last twelve months, and the favorable economic environment should support the future rise in the stock price.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.