John Fredriksen's Golden Ocean is confident of an improvement in the dry cargo market this year despite a sticky start to 2019.
Chief executive Birgitte Ringstad Vartdal suggested an upturn in rates was on the horizon, possibly supported by increased scrapping before the end of the year.
"The start of 2019 has been marked by uncertainty created by trade tensions and by the tragic dam accident in Brazil,” she said in the company’s 2018 report.
“The company’s low cash breakeven levels and strong balance sheet are vitally important as we navigate through current market volatility.
“Although sentiment is surely negative in the short term, we believe most scenarios have been priced into the forward freight curve, and, if this market continues, we should see adjustments to supply."
Strong fourth quarter
The comments came as Golden Ocean reported a stronger than expected fourth-quarter performance and closed 2018 in the black.
Golden Ocean posted net income of $84.5m for full-year 2018, a significant improvement compared with the net loss of $2.3m it recorded the previous year.
Although orders are still being placed at shipyards, a weaker market should eventually result in downward revisions of fleet growth forecasts, hence provide some support to the market
Golden Ocean
The final three months of the year saw Golden Ocean book a profit of $23.6m, beating the $17.1m consensus.
Analysts at Arctic Securities said the higher than expected rates for the quarter led to the earnings beat.
Arctic Securities analyst Jo Ringheim said a dividend of $0.05 per share was “below market expectations” and a significant reduction on the $0.15 paid in the third quarter of 2018.
Golden Ocean said it expects freight rates will be supported by a short-term uptick in bulker scrapping activity.
Increased demolition will be prompted by the current weak market, the upcoming implementation of ballast water regulations in September followed by the IMO regulations on sulphur in 2020.
“This would help to offset the increased number of new vessels scheduled to be delivered this year,” Golden Ocean said.
“Although orders are still being placed at shipyards, a weaker market should eventually result in downward revisions of fleet growth forecasts, hence provide some support to the market.”
Only 0.6% of the fleet (4.8 million dwt) was scrapped during 2018, said Golden Ocean, citing Simpson Spence Young research.
It said one million dwt was scrapped during the fourth quarter, a 67% increase on the previous three months.
Stock investments
The company has taken advantage of market weakness to buy back shares since December.
Golden Ocean said it has spent $3.4m to date repurchasing 570,000 shares on the Oslo Stock Exchange.
In addition, this morning Vartdal and chief financial officer Per Heiberg have increased their respective shareholdings.
Vartdal has spent NOK 380,451 ($44,010) purchasing 8,700 Golden Ocean shares at an average price of NOK 43.73 each.
Heiberg has purchased an additional 12,000 shares in the company at an average price of NOK 44 per share, or NOK 528,000 in total.
Following the purchase, Vartdal and Heiberg respectively own 30,000 and 15,000 shares in Golden Ocean, plus options to acquire an additional 225,000 and 100,000 shares.
