Operator
Good morning, ladies and gentlemen, and welcome to the Genco Shipping and Trading Limited Fourth Quarter 2025 Earnings Conference Call and Presentation. Before we begin, please note that there will be a slide presentation accompanying today's conference call. That presentation can be obtained from Genco's website at www.gencoshipping.com. To inform everyone, today's conference is being recorded and is now being webcast at the company's website. www.gencoshipping.com. We will conduct a question and answer session after the opening remarks. Instructions will follow at that time. A webcast replay will also be available via the link provided in today's press release, as well as on the company's website. At this time, I will now turn the conference over to the company. Please go ahead.
Good morning. Before we begin our presentation, I note that in this conference call, we've been making certain forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements use words such as anticipate, budget, estimate, expect, project, intend, plan, believe, in other words, in terms of similar meaning in connection with the discussion of potential future events, circumstances, or future operating or financial performance. These forward-looking statements are based on management's current expectations and observations. For a discussion of factors that could cause results to differ, please see the company's press release that was issued yesterday, the materials relating to this call posted on the company's website, and the company's filings with the Securities and Exchange Commission, including, without limitation, the company's annual report on Form 10-K for the year-ended December 31st, 2024, and the company's reports on Form 10-Q and Form 8-K subsequently filed with the SEC. At this time, I would like to introduce John Wobensmith, Chairman and CEO of Genco Shipping and Trading Limited.
Good morning, everyone, and welcome to Genco's fourth quarter 2025 conference call. I will begin today's call by reviewing the progress we've made executing our comprehensive value strategy since its implementation in 2021, and then we'll review our Q4 2025 and year-to-date highlights. We will then provide additional details on our financial results for the quarter, as well as provide an update on the industry's current fundamentals before opening the call up for questions. For additional information, please also refer to our earnings presentation posted on our website. Starting on slide five, 2025 marked the fifth year since our board and management team formulated and began implementing our comprehensive value strategy centered around dividends, financial deleveraging, and opportunistic fleet growth. When we launched the strategy in April of 2021, we set out to accomplish three main objectives. transform Genco into a low-leverage, high-dividend company, maintain significant flexibility to grow the fleet, and pay a sizable quarterly dividend through the cycles based on an established dividend formula. Five years later, we are pleased to have made notable success executing against each of these objectives. Among our accomplishments, we fortified our balance sheet to effectively operate in diverse rate environments, provided shareholders with sizable returns, and invested in our fleet to further expand our earnings power and dividend capacity. Specifically, over this time, we have invested $347 million in high-quality modern vessels, distributed $270 million in dividends to shareholders, and paid down $249 million of debt. Moving to slide six, we continued to advance our value strategy in the fourth quarter, ending the year with strong momentum going into the first quarter. We declared our 26th consecutive dividend, representing an annualized yield of 9% on our current share price, our highest dividend level since Q4 2022, and the longest period of uninterrupted dividends in our dry bulk peer group. Heading into the fourth quarter, we took important steps to maximize fleet-wide utilization in a strong freight rate environment with the completion of 90% of our 2025 dry docking schedule and delivery of a high-quality modern Cape Side vessel early in the quarter. During the fourth quarter, these proactive measures enabled us to generate the highest levels of both EBITDA and TCE for the year at $42 million and $20,064 per day, respectively. Additionally, in November, we agreed to purchase two 2020-built high-quality premium-earning Newcastle Max vessels that we expect to take delivery of in March. Importantly, these well-timed investments further increase our operating leverage and expand our presence in a key sector with compelling supply and demand fundamentals. We also ended the fourth quarter with an industry-low net loan devalue of 12%. As depicted on slide seven, we achieve multi-year highs across key metrics in Q4 and have significant momentum going into Q1, 2026. Building on our success generating TCE and EBITDA levels that were the highest in three years, estimated Q1 TCE of approximately $18,000 per day for 80% of the quarter represents a strong start to the year in what is typically a seasonally slower period. Notably, estimated Q1 2026 TCE is our highest Q1 level since 2024 and over 50% above Q1 2025 levels. Based on our firm fixtures to date and the continued execution of our value strategy, we expect a higher dividend in Q1 on a year-over-year basis. Turning to slide 8, Genco has one of the lowest cash flow breakeven rates in our peer group. This key differentiator is directly related to our industry loan net loan-to-value, as well as not having mandatory debt amortization, which further reduces our cash flow breakeven rate compared to peers. As our TCE increased from approximately $12,000 per day in Q1 2025 to $20,000 per day in Q4, our overall profitability and dividend capacity increased as well. As can be seen from the chart, our estimated Q1 TCE also compares favorably to our low break-even rate on a cash basis. Turning to slide nine, through the execution of our value strategy, Genco has paid compelling quarterly dividends to shareholders across cycles. Notably, we have paid 26 consecutive quarterly dividends to shareholders in diverse rate environments, having distributed between $0.15 and $0.50 a quarter over the past three years. In addition to the Q4 dividend being the highest since Q4 2022, it also represents a 233% increase over the Q3 2025 dividend. Supporting our dividend and complementing our low break-even rate is our balanced approach to fleet composition, which we present on slide 10. In addition to the two Newcastle Max vessels we agreed to acquire, we own a fleet of 17 Cape-sized vessels, as well as 15 Ultramax and 11 Supermax vessels. We continue to balance the high beta and upside potential of the Cape-sized sector, along with steadier earnings stream of our minor bulk ships. On a vessel ownership basis, our splits are 40% Capes and 60% Ultra-Supras. However, when viewed on a net revenue basis over the last two years, we are 50% weighted towards capesized vessels. With just 20% of our overall fleet fixed for the year, Genco is uniquely positioned relative to some in the peer group to benefit from a strengthening freight rate environment, providing us with meaningful upside exposure to the current strong spot market. Our high operating leverage is balanced against our low financial leverage, which is shown on slide 11. This provides Genco with significant financial flexibility in various freight market conditions. In strong markets, Genco generates meaningful cash flow with its industry low break-even rate and scalable fleet. In market downturns, Genco's low financial leverage and undrawn revolver availability allow the company to take advantage of counter-cyclical growth opportunities. Specifically, as demonstrated on slide 12, Genco has taken advantage of our strong liquidity position for opportunistic acquisitions of modern high-specification premium earning vessels at attractive values, including six Cape Sides and Newcastle Max vessels since 2023. I emphasize the positioning of the fleet today is not an artifact of history or chance. It is the result of the steady execution of our plan to optimize the fleet, which began in 2023. At that time, the management team and the board formed a specific strategy focused on the compelling supply and demand fundamentals of the Cape Side sector, which had the lowest order book among the major dry bulk sectors with long-haul ton-mile expansion on the horizon. Since 2023, our strategy has been built upon this thesis, and over this time, capesized vessels have been the best-performing dry bulk class from an earnings and an asset value appreciation perspective. Notably, our capesized vessels have increased in value by nearly $40 million, despite several years of age depreciation. Furthermore, we have generated an IRR of over 30% on these ships since acquisition. In 2025 alone, we agreed to purchase three 2020-built Cape Sides and Newcastle Max vessels, growing our pro forma fleet by 20% on an asset value basis and significantly increasing our earnings and dividend capacity in 2026 and beyond while reducing the average age of our fleet. On slide 13, both Genco's Proforma 45-vessel fleet and CAPE fleet provide significant operating leverage for shareholders. Every $1,000 fleet-wide increase in TCE equates to $16 million of incremental annualized dividend or $0.37 per share. Furthermore, our 19 Newcastle Max and Cape Size vessels, every $5,000 increase equates to $34 million or $0.77 per share of incremental earnings and dividend capacity. Our fleet strategy has been very successful since we implemented it in 2023, and as you see in these figures, has well positioned the company to continue creating shareholder value going forward. Lastly, turning to slide 14, Genco continues to prioritize strong corporate governance, which is another key differentiator for the company relative to the peer group. Specifically, Genco is the largest U.S. headquarter dry bulk shipping company, and we are also a U.S. public company subject to robust SEC and New York Stock Exchange disclosure regimes. We are also the only listed dry bulk shipping company with no related party transactions. We have a diverse and independent board of directors and observe U.S. public company governance best practices, such as having a lead independent director. We provide detailed disclosures on company performance and initiatives while striving to provide a clear and thoughtful strategy to shareholders as we execute our disciplined approach to capital allocation. We are also consistently ranked in the top quartile on corporate governance among public shipping companies by Weber Research. Our corporate governance is a core part of Genco's identity and reflects our board's commitment to upholding the highest standards of fiduciary duty and governance excellence. I will now turn the call over to Peter Allen, our Chief Financial Officer.
Thank you, John. On slides 16 through 18, we highlight our fourth quarter financial results. Genco recorded net income of $15.4 million, or $0.35, basic and diluted net earnings per share. Adjusted net income is $17.3 million, or $0.40, and $0.39, basic and diluted earnings per share, excluding other operating expense of $1.9 million for shareholder-related expenses. Adjusted EBITDA for Q4 told $42 million, an increase of 94% as compared to Q3, and bringing the full year 2025 total to $85.9 million. Our cash and debt positions as of December 31st, 2025 were $55.5 million and $200 million respectively. Our undrawn revolver availability at year end was $400 million. During March of 2026, we expect to take delivery of two 2020-built Newcastle Max vessels. We have approximately $131 million of remaining CAPEX for these acquisitions, which we expect to fund primarily through proceeds from our revolver. As part of our existing $600 million credit facility, we plan to utilize the accordion feature for $80 million and pledge these two vessels as collateral. This would increase our pro forma borrowing capacity to $680 million in total with expected post-acquisition debt outstanding of $330 million and undrawn borrowing capacity of $350 million. Our lenders participating in this revolving credit facility upsizing include Nordea, D&B, ING, and SEB. With our full revolving credit facility structure, we will continue to actively manage our cash and debt positions to reduce interest expense while maintaining access to capitals to quickly act on growth opportunities as we have demonstrated in recent years. Moving to slide 19, we highlight the sequential increases in our quarterly EBITDA throughout the year, culminating in a strong fourth quarter performance and an EBITDA increase of 94% from Q3 2025 and also the highest quarterly levels since 2022. As outlined on slide 20, we believe that Genco is in a highly advantageous position. With the current fleet of 43 high-quality modern dry bulk vessels, our significant operating leverage combined with low financial leverage, a sub-$10,000 cash flow break-even rate, and $400 million of undrawn revolver availability collectively provide a compelling risk-reward balance for shareholders. Furthermore, we continue to reward shareholders through a quarterly dividend policy which targets a distribution based on 100 percent of operating cash flow less a voluntary reserve as described on slide 21. for q4 our board of directors declared a 50 cent per share dividend based on operating cash flow of 41 million dollars and a voluntary quarterly reserve of 19.5 million dollars marking our highest payout in three years looking ahead to q1 2026 we currently have 80 percent of owned available days fixed at approximately $18,000 per day as compared to our anticipated cash flow break even rate, excluding dry dock and related capex, of approximately $9,715 per vessel per day. Importantly, Q1 2026 TCE is on pace to increase over 50% year over year. On the expense side, we anticipate vessel operating expense to marginally increase in Q1 compared to Q4 levels due to the timing of crew-related expenses. However, we expect vessel opex to revert to levels similar to Q4 moving forward during the year. I will now turn the call over to Michael Orr, our dry bulk market analyst, to discuss the current industry landscape.
Thank you, Peter. Beginning on slide 23, the dry bulk freight rate environment meaningfully improved in the second half of 2025, reaching its height in Q4, led by the Cape Size sector. The Baltic Cape Size Index averaged nearly $29,000 per day in Q4 and approached $45,000 per day in early December, driven by all-time high Brazilian iron ore shipments. Supermax rates were also firm, supported by augmented coal shipments to China, as well as firm grain exports. Turning to slide 24, China reported strong levels of iron ore imports in recent months, led by increased seaborne supplies, together with the restocking of iron ore inventories. Specifically, the country's iron ore imports in Q4 rose by 7 percent year-over-year, and for the second half of the year, China's iron ore imports rose by 12 percent as compared to first half levels on the seaborne supply side we saw brazilian iron ore shipments rise by 26 second half over first half during the slide 25 we highlight the long haul iron ore and oxide trade growth expected from brazil and west africa in the coming years given the scale of the projects these volumes could absorb potentially over 200 capeside vessels which is more than the current capeside new building order book supply constraints and capeside new building activity combined with added long-haul trading distances are two key catalysts for the sector. We expect West African iron ore flows to ramp up in 2026 after first shipments were made in 2025. In terms of the grain trade, as detailed on slide 26, China has reportedly fulfilled their 12 million ton quota from the U.S. as part of the October agreement. However, further reports highlight additional purchases of up to 8 million tons of U.S. soybeans in the coming months. With the onset of South American grain season at the end of Q1, attention is likely to shift to Brazilian soybean volumes. Regarding the supply side outline on slide 27, net flea growth in 2025 was 3 percent, split between 1.5 percent net flea growth for capes sizes and 4 to 5 percent net flea growth for Panamaxes down to handy sizes. Importantly, 2025 marked the fourth straight year of sub-3 percent net flea growth for capes, which is the first time on record this lowly level has it materialized for this long. Additionally, as scrapping has remained low in recent years, the age of the global fleet has risen to nearly 13 years old, the highest average age of the global dry bulk fleet since 2010. This has increased the pool of potential scrapping candidates as 11 percent of the on-the-water fleet is 20 years or older, which is nearly identical to the global dry bulk order book as a percentage of the fleet of 12 percent. This implies net replacement of tonnage over time as opposed to any material net fleet While we expect volatility in the freight market to persist, the foundation of a low supply growth picture provides a solid basis for our positive view of the dry bulk market going forward. I'll now turn the call back over to John to conclude the call.
Thank you, Michael. Turning to slide 29, we have made outstanding progress executing our comprehensive value strategy, providing shareholders with sizable returns and investing in our fleet to further expand Genco's earnings power. With our high-quality and modern fleet, leading commercial operating platform, strong balance sheet, and significant operating leverage, we remain well-positioned to create meaningful value for shareholders in 2026 and beyond. As we progress through the year, our unrelenting focus will be on continued capital return for shareholders, further growing our high-specification premium earning fleet, as well as maintaining our industry-leading leverage profile and strong corporate governance standards. Before we turn the call over to Q&A, I'd like to briefly address our announcements from last month regarding a non-mining indicative proposal we received to acquire all outstanding shares of Genco. As detailed in our previous press releases, our board thoroughly reviewed the proposal with the assistance of external advisors and determined the proposal significantly undervalued Genco. As part of its review, our board did determine that a differently structured transaction, one organized as an acquisition by Genco, would create value for all shareholders. We sought to engage privately on an alternative structure, but our offer to engage was turned down. Our management and board are focused solely on delivering maximum value for shareholders. With that said, the purpose of today's call is to discuss our fourth quarter and full year 2025 results and the opportunities ahead for Genco. The company is performing very well today, and we are very excited and confident in the future. We ask that you please keep your questions focused on results, performance, and industry trends. Thank you for that in advance. This concludes our presentation and we would now be happy to take your questions.
Operator
Thank you. Ladies and gentlemen, we'll now conduct the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Omar Nocta with Clarkson's. Your line is open. Please go ahead.
Thank you. Hi, guys. Good morning. Solid quarter, obviously. Hey, John. Yeah, you know, the dry book market ended 25 on a pretty strong note. and as shown in your results obviously and you know so far this year things are progressing quite nicely uh you've upsized your facility by the 80 million and you're going to take delivery of those two newcastle maxes next month um obviously have plenty of flexibility asset values look like they're on the rise and um or at least have risen a good amount here over the past few months where does that leave jenco kind of strategically i know you touched on this a bit at the end of your your comments john but how are you thinking about uh jenco strategically you know capital allocation as we look ahead here for the rest of 26?
Look, in terms of the capital allocation, dividends and the value strategy is top of the list. We will endeavor to continue to cycle out some of the older vessels and redeploy those funds on more modern fuel-efficient ships such as we did last year. So I don't think much has changed, but you're correct. values continue to move up. We're actually in a situation where they're moving up almost weekly at this point, which is obviously very positive basis, the timing of the acquisitions that we did last year. But, you know, look, it makes newer tonnage more expensive, but it also makes our older tonnage, you know, more firm in what we can get. So, you know, dividends and value strategy is the first. And as part of that value strategy, we have a fleet replacement and growth element.
Thanks, John. And maybe just as a follow-up then, as we referenced asset values having risen, I wanted to ask you a question. So how are you thinking about the term charter markets or what are you seeing there you know as you kind of think about it from say the the crude tank is just as what we've seen there the lcc values have risen and there's been a lot of charter interest are you seeing something similar in the cape market and how do you feel about deploying ships on term charter uh today um i think uh well there has not been as much liquidity in the dryball TC market, as you just mentioned, in the tanker sector.
I think a lot of that has to do with the optimism as we look at the supply side and demand growth for the rest of 2026, but then certainly going into 2027 as West African iron ore really starts to ramp up. So I think it's more of a function of, I believe, owners not wanting to lock in currently because of the optimism, again, low supply demand growth coming. Having said that, there have definitely been some one three-year deals done. I think there was a three-year deal done on a on a new at least one maybe two new castle maxes from an iron ore major you know excess thirty thousand dollars a day those are those are firm rates and um clearly the market is is indicating a bullish stance and and positive sentiment you know that that we from time to time have taken exposure off the table particularly in capeside sector. We really do look at it as a portfolio approach, but we spend a lot of time and analysis looking at whether we want to lock in. And there could easily come a time this year where maybe we take some exposure off the table. But for the time being, we're going to continue to trade spot. And I think it's one of the unique things about Genco. We really only have 20% of this year fixed. So with a rising market, we are fully exposed, well, 80% exposed to that positive market and sentiment.
Yeah. Yeah. Well, very good. Thank you, John. I'll turn it back. Thanks, Omar.
Operator
Your next question comes from the line of Liam Burke with B. Reilly Securities. Your line is now open. Please go ahead.
Thank you. Good morning, John. Good morning, Peter. Good morning, Liam. John, in the past discussions on – you always liked the flexibility of the CAPES, the Newcastle Maxes. Has there anything changed in trading patterns that makes you favor more of the Ultramaxes vis-a-vis a cape?
I'm sorry, the Ultramaxes or the Newcastle Maxes? Newcastle Maxes, excuse me. Yeah, no, okay, yeah. No, I wouldn't say anything has drastically changed, though certainly on the Brazilian trade, those Newcastle Maxes have always been filled up to their capacity. Over the last several years, that may have not been true with Australia loadings, but that's really changed. And we certainly have seen the bauxite trade develop as well as out of West Africa. So that bauxite can go on Newcastle Maxes. So we like the nukes we bought. We like our capesized sleet. The Newcastle Maxes that we bought are no doubt premium earning assets with very high specifications and low fuel consumption. I think Balkers 2020 did a fantastic job ordering and kitting out those ships. So we're very happy to be taking delivery of those. But, you know, we're going to continue to look at CAPES and Newcastle Maxes. And, you know, that's where I think you'll see growth for us. And we'll stay steady with our Ultra Supermax fleet, probably do a little bit of fleet renewal on the Supras. Okay.
Just as a follow-on, you just mentioned the Supras. Is there any opportunity or is there any interest in adding to that part of the fleet when you're discussing renewal, or is it just selling older vessels on elevated?
It certainly would be selling older vessels. Again, we're focused on the larger ships in terms of redeploying capital, though I'm not going to rule out that we wouldn't buy an Ultramax. I mean, that market's doing pretty well. As you know, these are all correlated. It's just the capes have certainly more upside potential based on higher beta and volatility. And if you look at again, the supply side on the capes is the most favorable in the dry bulk sector and demand growth that is coming is Newcastle Max and capesize oriented.
Thanks, William. your next question comes from the line of chris robertson with deutsch bank securities inc your line is now open please go ahead hi good morning john and peter thanks for taking my questions um john just on the back of omar and liam's questions around the smp market i just wanted to touch on um last year it was reported that a large number of chinese buyers of dry book vessels were active in the market. I was wondering if you could comment, is that trend still continuing? And where do you see kind of the activity being driven in the S&P market for potential asset sales?
Yeah, I think the Chinese continue to be very active. I would put them as the number one buyer right now, particularly of older assets, not necessarily on the modern an eco side, but the older assets, they are very active on. China is the largest importer of dry bulk commodities, right? So seeing the Chinese go long tonnage, I think that's a positive or a vote of confidence in the market going forward. And you've seen it across the board. I mean, they certainly have been active in older capes, but they've also been mine some of the older supermaxes as well. And I'm sure they see the same thing that we see. Again, the low supply growth on the capes, the age of the fleet, and I think most importantly, there are additional cargo volumes that are going to be coming both on the bauxite side, but more importantly, on the iron ore front out of West Africa.
Got it. Makes sense. My second question is just related to kind of reevaluating the geopolitical environment and the disruptions that we've seen across various shipping segments over the last few years. Where do things stand in terms of the disruption levels related to dry bulk? And let's say if there was a reversal, whether it's the Red Sea or Russia, Ukraine, et cetera, where do you see kind of puts and takes around some of those themes?
Well, I mean, let's take the Russian-Ukraine situation. If there is a conclusion to that and the Black Sea reopens fully, clearly that's potential for more grains and to a smaller degree iron ore. So that would be a net positive for dry bolt shipping. In terms of the Red Sea, we're well aware that there are some container companies that have started operating through Suez and the Red Sea. We're still cautious, and we're still not putting our ships through that area. But having said that, it's maybe 1% to 2% max in terms of number of ships that would actually go through the Red Sea. So deviating around Africa, it's not a big factor in dry bulk. It certainly is in containers, but it's not for dry bulk.
All right, great. That's clear. Thank you, John. I'll turn it over.
Operator
Thank you. Your next question comes from the line of Sharif Almagrabi with BTIG. Your line is now open. Please go ahead.
Hey, good morning. A couple questions on operating costs here. It looks like the cost of charter hire in Q4 roughly doubled sequentially. So I'm wondering, does the current strength and spot rates change how you think about augmenting your fleet with outside tonnage?
Well, in terms of, again, in terms of growth, we're definitely focused on the larger ships. And hopefully this is going to be answering your question. If it's not, please feel free to clarify. But when you look at where rates have really moved up, it is in the larger ships, which, again, that's been our strategy of growing that fleet since 2023. Um, and you can, you can definitely see that in, in the revenue side. It's driven, uh, quite a bit of the upside in, in revenues. Did that, um, did that answer your question?
Uh, I was asking about the chartered in-fleet. Uh, okay.
Yeah. Hey, Sharif. Yeah. In terms of the chartered in-fleet, you know, that is a very opportunistic, uh, part of the business. Um, you know, a lot of the times the guys will take forward cargoes, and if it makes more sense in the moment to charter in a vessel to create an arbitrage, you know, they'll do that, and that's something that the guys have been really good over the years of assessing, whether they can make, you know, whether it's 100K plus on a particular cargo. A lot of the times in the first quarter, you'll see that because we'll book forward cargoes, the market will come off relative to Q4, and we'll be able to get that ARB. But, you know, it's a very opportunistic play. You know, some quarters you'll see higher than others. But certainly, you know, in a strengthening market, you know, being on the longer side and having the spot focus that we have is certainly where you want to be right now.
What you're not going to see us do is speculative long-term time charter ends. It'll either be short-term backed up by a piece of cargo, as Pete said, but we're not going to just, you know, go naked on chartering a Cape size or an Ultramax, for that matter, long-term into the company. That's not part of the strategy.
Okay. Yes, that's very clear. And then just looking back at the presentation, slide eight highlights your remarkably stable cash breakeven, which has remained below 10 grand a day for a few years now. So is there anything you're doing, obviously, besides keeping leverage low to manage breakeven costs while some other owners have seen operating cost inflation?
We've seen operating cost inflation. There's no doubt, particularly on the crew side and when you look at spares and stores just from an inflationary standpoint. We certainly manage to a budget that we set every year, though I want to emphasize, you know, particularly with the larger ships, the bar keeps getting raised calling Australia. So we, you know, we need to make sure that we are keeping our ships well maintained so that we do not have any issues trading anywhere in the world. So there is a little bit of inflation. We certainly manage and pay very close attention to OPEX, but we're not going to be Pennywise town foolish.
All right. Thanks for taking my questions. Thank you.
Operator
As there are no further questions at this time, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
