The Dry Bulk Industry: Q4 2015 Comparison Of Expenses

by: MTF Investing


Comparing expenses from chartering strategies on a per Ship and per DWT basis helps to identify strengths and weaknesses.

DRYS, NM, and GOGL had the highest expenses on a per Ship basis.

SB, NMM, and GNK had the lowest expenses on a per Ship basis.

This is the second in a series of articles looking at the companies that operate in the Dry Bulk industry and their recent quarterly earnings. The first article looked strictly at Revenue while this article will focus on Expenses. A third will follow comparing balance sheets.

When earnings are released, the numbers can seem arbitrary unless there is a way to compare them to other companies. I have found that breaking the numbers down on a per ship and per DWT basis helps to put those numbers in perspective, but they must be taken with a grain of salt, understanding the strategy the company is using in chartering their ships and what types of ships they are using.

The companies looked at are DryShips, Inc. (NASDAQ:DRYS), Diana Shipping Inc. (NYSE:DSX), Genco Shipping and Trading Limited (NYSE:GNK), Golden Ocean Group Limited (GOLG), Navios Maritime Holdings Inc. (NYSE:NM), Navios Maritime Partners L.P. (NYSE:NMM), Safe Bulkers (NYSE:SB), and Star Bulk Carriers (NASDAQ:SBLK).

Operating Expenses

The tightening of the belt is a good measure of efficiencies companies have been able to achieve. While there can be multiple expenses that are registered each quarter the main expenses investors can expect to see are:

Voyage expenses

Vessel Operating expenses


General and Administrative expenses

Dry docking

In order to focus on the operating expenses that are directly tied to the actual daily operations of the fleet, this article will focus on Voyage expenses, Vessel Operating Expenses, and General, Administrative, and Technical Management Fees. While depreciation is recorded as an expense, it is typically used to reduce the tax burden of the company and no cash is expended. Dry docking is required in the industry, and each ship will go through it, but the timing will change from quarter to quarter.

The data used to compile the charts comes from the most recent Quarter, and only looks at that quarter. While some of the expenses will fluctuate from quarter to quarter, all shippers will be subject to bunker fuel rates, weather delays, and repairs needed that will affect expenses. A look at yearly expenses is also helpful, as is multi-year comparisons.

The fees the companies will log are also tied to how the fleet is managed. The two means most companies use are either Voyage Charter or Time Charter.

Voyage Charter: In a Voyage Charter a company hires a shipper to move its product from one location to another. The charterer pays the shipper on a per-ton basis and the shipper pays the port costs, fuel costs and crew costs. Most of the voyages are typically one way with a shipper moving a load but having to return empty on their dime.

Time Charter: In a time charter the ship is chartered for a specific period of time and the charterer will decide the ports and routes. The charterer will pay for all fuel, port charges, commissions, and a daily hire to the owner of the vessel.

Voyage expenses: Voyage expenses are all expenses unique to a particular voyage, including bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions. When a company operates their ships in the voyage charter spot market, the company is responsible for all voyage expenses as opposed to spot market-related time charters in which a company is not responsible for voyage expenses.

Vessel operating expenses: Vessel operating expenses includes crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs and management fees. Under both types of charters the company will be responsible for these costs.

General and Administrative Expenses: General and administrative expenses include onshore vessel administration related expenses such as legal and professional expenses and administrative and other expenses including payroll, office rent and expenses, directors' fees, and directors and officers insurance. General and administrative expenses also include non-cash compensation expenses.


When comparing the expenses on a per unit basis, there are a few things that pop out. First is that NM had expenses that were above average in all categories while GOGL also had higher than average expenses in all categories except General and Admin Expenses. This is likely indicative of the companies attempts to use a voyage charter strategy. DRYS was also on the high end of expenses, but on the low end of Voyage Expenses, signaling the use of a Time Charter strategy. Overall, the three companies posted expenses that averaged over $1.1M per ship.

On the lower end of the spectrum were GNK, NMM, and SB. Each had expenses under $700K, with SB posting $550K worth of expenses per ship for the quarter.


When comparing expenses, it helps to keep in mind the strategy used and the revenues generated. In the current market, with rates at all time lows, the safety of a time charter would have been the most profitable for the companies. While revenue and expenses help gauge performance over a quarter, the balance sheet helps to gauge the health of the company.

Disclosure: I/we 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.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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