Future Plans for Dry Bulk Companies: Driver for Future Prospects?
Investing in Dry Bulk Shipping Industry: A Comparative Analysis
Future plans
Management’s future plans for acquisitions or buybacks and capital deployment are significant drivers of a company’s future prospects. In this article, we’ll analyze the future plans for companies in the dry bulk shipping space in the face of a current weak market scenario.
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No major capex
To weather the current downturn in the dry bulk space, DryShips (DRYS) sold its ten tankers to founder and CEO (chief executive officer) George Economou during 2Q15. Its management reiterated during the 2Q15 earnings call that the company has no new buildings on order and therefore zero capital expenditure going forward for the dry bulk segment.
Diana’s proactive approach
Diana Shipping (DSX), on the other hand, is proactively buying vessels to take advantage of the current lower vessel values. It announced the purchase of a newbuild Capesize vessel to be delivered by October 2015. In addition, it has two newbuild Newcastlemax dry bulk vessels and one newbuild Kamsarmax dry bulk vessel expected to be delivered in 2016.
On being asked a question regarding alternatives for deployment of capital, management commented that it’s not the company’s immediate plan to look for share buybacks but that it will stick to vessel purchases by investing another $20–$50 million. Management also stated that with the company’s cash position, it can afford to invest for a year and a half around $20 million every two months or so.
Navigating the downturn
Safe Bulkers (SB) has once again pushed back the delivery of seven newbuilds out of a total of ten. Its current delivery schedule for vessels is three in 2016, three in 2017, one in 2018, and one in 2019.
Navios Maritime Partners (NMM) announced the acquisition of one containership in 1Q15, which got delivered in 2Q15. In addition, it had an option to acquire an additional containership at similar terms to the one already acquired. However, it let that option expire without exercising it. Management believed the current credit environment was not right for the acquisition. The company’s management, however, didn’t give any clear indication about future acquisition plans.
Navios Maritime Holdings (NM) through the Navios joint venture, including NM, NMM, and Navios Maritime Acquisition (NNA), announced the acquisition from HSH Nordbank AG on April 23 of 14 distressed vessels, or seven vessels each of dry bulk and containers.
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