Dry Bulk Freight Carrier Suffers in Slump

US – WORLDWIDE – Anyone who believes the parlous state of the Baltic Dry Index (dredging the ocean floor at 706 yesterday) is a passing phase may wish to reconsider following the release of financial data from New York headquartered dry bulk freight operator Genco Shipping and Trading Ltd. The effect of falling charter rates has crippled the group’s income in the last quarter with net income falling from $34.8 million in the comparable period last year to just $0.3 million to the end of 2011.

Genco's voyage revenues decreased to $96.3 million for the three months ended 31st December 2011 versus $129.9 million for the three months ended 31st December 2010 mainly due to lower charter rates achieved by the majority of its vessels and partially offset by the increase in the size of the company’s fleet. In 2010 the final quarter rates for average daily time charter equivalent (TCE) was $24,303 against $16,805 per day a year later.

At the same time total operating expenses rose by $2.6 million to $73.2 million the increase being down to the operation of a larger fleet and higher crew related expenses, partially offset by lower expenses related to stores and supplies and lube consumption for the fourth quarter of 2011 versus the same period in 2010. John C. Wobensmith, Chief Financial Officer, commented:

"Genco ended 2011 with a sizeable cash balance of $229.4 million, enhancing the Company's ability to operate in a challenging dry bulk market. Consistent with our objective to strengthen the Company's financial position, we entered into agreements during the fourth quarter to amend our three credit facilities under favourable terms. Specifically, both the maximum leverage ratio covenant and the interest coverage ratio covenant have been waived for each facility through and including the quarter ending March 31, 2013.

“A new covenant has also been introduced for the same period relating to the Company's leverage. In connection with these agreements, we prepaid an aggregate of $62.5 million in principal loan amounts. The continued support of our lending group serves as a core differentiator for our Company and underscores Genco's industry leadership as we remain committed to a strong financial foundation for the benefit of shareholders."

The Genco fleet now extends to 53 dry bulk vessels of varying capacities with an aggregate carrying capacity of approximately 3,810,000 dead weight tonnes. Subsidiary Baltic Trading has 9 more ships of 672,000 dwt. The next few months will be especially tough for the dry bulk freight community and Genco expects to incur further costs due to special surveys and dry dockings. The company anticipates six ships in dry dock in the first quarter of 2012 and eleven to be dry docked to the end of the year. Full results can be reviewed HERE.

The final quarter of 2011 may have looked terrible but it does well to remember that in the period in question the Baltic Dry averaged a clear 1,000 points above today’s total, reaching the comparatively dizzy heights of 2,000+ in December. To put the rates in perspective the position at times three and a half years ago with the Index stretching toward 12,000 now appears positively stratospheric and, with the amount of available new build tonnage coming on stream, such days seem very unlikely to return in the foreseeable future.