Genco Shipping & Trading has fallen further into the red and cut its dividend amid millions of dollars in impairment charges and coronavirus uncertainty.
On Wednesday, the John Wobensmith-led owner of 53 dry bulk ships posted a net loss of $120m for the first quarter versus a $7.8m deficit recorded during the same period last year.
The New York-listed company's adjusted loss, which excluded $113m in non-cash impairment costs, came in at $7.1m, up from $7.8m from a year earlier.
That translated into earnings per share (EPS) of $0.17, beating analyst consensus by $0.07 and above the year-ago EPS of $0.19.
Genco incurred $85.8m in impairment costs on 10 handymaxes put up for sale and another $27m impairment charge on four 55,000-dwt supramaxes as a result of the Covid-19 downturn.
Revenue came in at $98.3m for the quarter, up from $93.5m a year ago thanks to higher rates that were offset by Covid-19-related disruptions in China then the US and Europe.
"The duration and impact of Covid-19 and actions to contain the coronavirus or treat its impact are uncertain, as are their effects on rates and market volatility," Genco said.
Therefore, Genco, which has implemented measures to protect its crew members from the virus, has taken out $25m in credit to maintain $150m in liquidity after issuing a quarterly dividend of $0.02 per share.
"During this time of global economic uncertainty, we remain focused on maintaining the strength of our industry-leading balance sheet and conserving our sizeable liquidity position," chief executive Wobensmith said.
In November, Genco began a regular dividend programme set to offer $0.175 per quarter to shareholders.
"Given the disruption to and volatility of the dry bulk market in 2020 to date, management and our board of directors decided to reduce our regular quarterly dividend for the first quarter of 2020 to $0.02 per share from $0.175 per share following its quarterly review," the company said.
Best of the bunch
Fearnley Securities said Genco's second-quarter bookings would leave a flat Ebitda and a cash balance of about $100m.
Its $25m bank financing would result in a total cash balance of $135m, it added.
The company "would, thus, [be] able to sustain around six quarters at these unprecedented rates, which is best in the industry".
Ultramaxes, supramaxes and handysizes are currently weak due to a sharp reduction in activity, Fearnley added.
"In short, the containment measures around the globe is impacting shipments of construction material whilst coal is also suffering from lower energy consumption and competition from cheaper oil and gas," it said.
"Many of the larger loading/discharge ports in the US, South Africa and India are also closed, affecting the day-to-day operations for many owners."
The analyst is continuing to "stay on the sidelines" in terms of bulker shares for the time being.
"We do believe that the balance sheets for the industry are stronger now than back in 2016, both in terms of leverage headroom and liquidity," it said.
"Also, none of the owners has large newbuildings commitments ahead, which was a key driver of equity injections back then as lowered asset values made the banks holding back on financing."
'Prudence is a virtue'
Evercore ISI analyst said "prudence is a virtue" in looking at Genco's decision to cut the dividend.
"Genco still retains the strongest balance sheet in the dry bulk industry and had the liquidity to continue to pay its recently initiated dividend; however, given the ongoing weakness in the dry bulk market as well as the maximum global economic uncertainty at present, we believe that retention of cash for a potential stormy period is the right call," he wrote in a client note Thursday.
