Golden Ocean has quadrupled its quarterly dividend payment, despite sinking further into the red during the second quarter on the back of a significant derivatives loss.
The John Fredriksen-backed company said it will pay a cash dividend of $0.10 per share for the second quarter, four times more than in the first three months of the year.
Golden Ocean said the increased dividend was based on positive market conditions rather than its financial results.
The Oslo-listed bulker owner recorded a net loss of $33.1m for the period, deeper than the $7.5m loss in the first quarter and reversing an $8.98m profit booked in the same period of last year.
The second-quarter result equated to a loss per share of $0.23, which includes $13.3m in mark to market losses on derivatives.
Derivatives and OPEX
Per Heiberg, the company's chief financial officer, blamed falling interest rates for the derivatives loss, which coincided with a period of increased operating expenditure.
“The weak second quarter results were negatively impacted by losses on our portfolio of derivatives of $13.3m as falling US forward interest rates affected our interest rate hedges and improvement in freight rates late in the quarter partially reversed the unrealised gains on our FFA hedges in previous quarters," Heiberg said in the earnings report.
The derivatives losses coincided with a busy drydocking schedule, which increased operating expenses during the three-month period, he said. Golden Ocean spent $5.2m on installing ballast water treatment systems and $2.8m on scrubber installations during the quarter, according to its report.
"Excluding these effects, we managed to limit the influence of the weak market by delivering an average TCE [time-charter equivalent] rate above the market indexes for all of our vessel classes," Heiberg added.
Golden Ocean said it has exercised four options for scrubbers, which will increase the total number to 23 installations onboard its vessels by the first quarter of 2020.
"We are confident that the investments we are undertaking will provide additional cash flow benefits heading into 2020," the company said in its financial report.
Analyst reaction
Adjusted Ebitda for the second quarter was $21.5m, down 40% compared with $36.0m in the first three months of the year.
Clarksons Platou Securities called the result "better than expected" in a research note on Thursday.
Golden Ocean's EBITDA result beat analysts' consensus estimate of $19m and the cash dividend exceeded Clarksons' expectations of $0.03 per share, the research note said.
Arctic Securities said the EBITDA result was "was marginally on the soft side of estimates".
Outlook
Birgitte Ringstad Vartdal, Golden Ocean's chief executive, said the third quarter has started "on a very strong note".
"Increased iron ore volumes and supply imbalances, combined with fewer vessels in the market due to scrubber installations have led to a dramatic turnaround in the market, which we expect will improve our third-quarter results," she said.
Golden Ocean expects the upcoming IMO 2020 regulations to positively impact the market by making owners of modern, fuel-efficient fleets more competitive.
"There may also be supply chain issues that constrain supply of compliant fuels for some owners," she said.
"We believe the scale of our fleet will again benefit us and that our joint venture with Trafigura and Frontline will further strengthen our ability to source competitively priced bunker fuel of good quality when and where we need it."
New activities
The second quarter saw Golden Ocean put new financing in place and enter into collaborations with other shipping outfits.
Most recently, the company entered into a non-binding term sheet together with Trafigura and Frontline to establish a joint venture for the supply of marine fuels, as TradeWinds has reported.
In April, Golden Ocean announced its investment in Singapore Marine, a dry bulk freight operator sponsored by Peter Weernink, former chief executive of Swiss Marine.
Golden Ocean is contributing $10m in capital and a further $10m via a shareholder loan, through which it has acquired a 15% ownership stake in Singapore Marine.
In May, the shipowner entered into two new credit facilities, one for just under $93.8m and one for nearly $132m, to refinance 14 vessels acquired from Quintana Shipping in 2017.
The second quarter also saw Golden Ocean spend $1.1m in total on repurchasing 225,000 shares of its shares.
The total number of shares acquired under the buyback programme is 795,000 as of Thursday.
