This is the third paper I've written covering the Dry Bulk Industry results from Q4 2015 and the companies that make up the Industry:
- The Dry Bulk Industry: Q4 2015 Comparison of Revenues
- The Dry Bulk Industry: Q4 2015 Comparison of Expenses
In the shipping industry, companies spend hundreds of millions of dollars to build fleets in the hopes of returning a profit from the revenues generated. In order to build the fleets, the companies will finance the acquisitions through long term debt or issuing equity. While the size of the fleets may fluctuate, the comparison on a per ship and per DWT basis should help to compare the companies. Over the past year the Dry Bulk Index has tanked, reducing revenue needed to pay off loans.
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).
Cash on Hand
Cash on hand helps to provide a buffer during lean times for expenses. There may be times when ships may operate at a loss due to market and industry imbalances. Of the companies in the group, DSX, NM, SB and SBLK have the highest levels of cash on hand in both absolute terms and compared to the assets they own. SB and DSX have right around $5M per ship while NM and SBLK have just under $3M per ship. On the opposite end of the spectrum are DRYS, GNK, and NMM with under $1M per ship.
Over the long term, the companies have sold shares to help build their cash positions. While these levels have fluctuated over the past few years, the levels at DRYS and NMM are the most alarming. DRYS recently sold three of its Capesize ships to its owner along with its stake in Ocean Rig (NASDAQ:ORIG), which helped to reduce the amount of debt it owed and helped to strengthen the cash levels by $49.9M. For NMM, payments on dividends on the preferred stocks were suspended after the recent conference call.
Among the companies, the assets have an average value range per ship of $20-50M with NM and GOGL having the highest asset values per ship at $50M and $48M. On a per DWT basis, NM, NMM, SB, and GOGL are all within the $380-500 range.
On the liabilities side, NM, SBLK, and GOGL all have over $1B they owe. By breaking these numbers down on a per ship basis, SBLK has a lower average level of debt. NM however, has the highest amongst the group with over $31M in liabilities per ship, followed by GOGL with $22M, and NMM with $20M.
Long Term Debt makes up the majority of Liabilities, and the difference between Liabilities and Long Term Debt is small. The rankings for Long Term Debt and Liabilities are basically the same. The one exception is DRYS. The $341M they owe was prior to the recent deal with Mr. Economou, and the Q1 2016 results will show debt at $213M.
After Assets and Liabilities are reconciled, Shareholder Equity is left. On a per ship and per DWT basis, DSX, GOGL, and NMM have the highest averages. On the low end is DRYS with just over $5M per ship and $57 per DWT. When the equity is compared to outstanding shares, GNK and DSX come out on top, followed by NM.
While there are some companies in the industry that are better off than others, most of the companies are OK for the immediate term. The one exception is DRYS. While it did raise some cash from the recent sell of the ships and cashing in the ORIG shares, it is far from out of trouble, and recent statements by the CEO about transforming the company leave some uncertainty. There is also a lot of consternation about NM and NMM. Both have massive amounts of debt at a time when rates are at all time lows.
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.
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