Knightsbridge Reports 2013 Results

Posted by Michelle Howard February 5, 2014

Highlights:

Knightsbridge reports net income of $3.0 million and earnings per share of $0.10 for the fourth quarter of 2013. Excluding the results from discontinued operations, the company reports net income of $3.5 million and earnings per share of $0.123 for the fourth quarter.
Knightsbridge reports EBITDA from continuing operations of $7.0 million and EBITDA from continuing operations per share of $0.24 for the fourth quarter of 2013.
Knightsbridge announces a cash distribution of $0.175 per share for the fourth quarter of 2013.
Knightsbridge reports a net loss of $3.9 million and a loss per share of $0.15 for the year ended December 31, 2013. Excluding the results from discontinued operations, the company reports net income of $3.5 million and earnings per share of $0.14 for the year ended December 31, 2013.

Fourth Quarter 2013 and Full Year Results
The company reports net income from continuing operations (i.e. the Capesize vessels) of $3.5 million and earnings per share from continuing operations of $0.12 for the fourth quarter compared with net income from continuing operations of $1.1 million and earnings per share from continuing operations of $0.04 for the preceding quarter. The Company received $0.8 million in December from Sanko with respect to unpaid charter hire and claims of the Battersea and recorded this as time charter revenue. The average daily time charter equivalent ("TCE") earned by the Capesize vessels in the fourth quarter was $28,600 compared with $21,000 in the preceding quarter. In February 2014, the Company has an average cash breakeven rate for its Capesize vessels of $10,800 per vessel per day for the remaining period of Q1 2014.

The results of the VLCCs have been recorded as discontinued operations in accordance with U.S. generally accepted accounting principles. The company reports a net loss from discontinued operations of $0.5 million and a loss per share from discontinued operations of $0.02 for the fourth quarter compared with a net loss from discontinued operations of $0.1 million and a loss per share from discontinued operations of $0.004 for the preceding quarter.

Cash and cash equivalents increased by $40.9 million in the fourth quarter. The company generated cash from operating activities of $6.2 million, raised $51.1 million (net) from the issuance of shares, paid newbuilding installments of $11.1 million and paid $5.3 million to shareholders.

For the year ended December 31, 2013, the company reports net income from continuing operations of $3.5 million and earnings per share from continuing operations of $0.14 compared with net income from continuing operations of $5.9 million and net income per share from continuing operations of $0.24 in the year ended December 31, 2012. The average daily TCE earned by the Capesize vessels in the year ended December 31, 2013 is $21,100 compared with $22,500 in the year ended December 31, 2012.

The Dry Bulk Market
Over the last three years, the focus has been on the supply side of the dry bulk industry. Overcapacity has caused great concerns with an official order book representing approximately 50 percent of the total fleet at the beginning of 2011. The order book has gradually been reduced and by the end of 2013, it is estimated to be approximately 17 percent of the existing fleet albeit a much bigger fleet than three years ago.

In 2013, approximately 60 million dwt was delivered and approximately 22 million dwt of the dry bulk fleet was removed. Consequently, net fleet growth ended at seven percent which was considerably lower than in the three previous years.

For many years, except 2009, the dry bulk market has not had a demand problem. In 2013, total demand growth was approximately 6 percent in volume but taking into account other factors such as sailing distances and congestion, the demand growth measured in tone miles was approximately 8 percent. The difference between the first part of last year and the second half was significant and for the first time since 2007, utilization of the dry bulk fleet turned in favor of owners towards the end of 2013.

Spot earnings for Capesize vessels in particular experienced strong volatility last year. The low point was in April when a Cape earned approximately $4,200 per day, while the same vessel earned $42,200 per day at the end of September. Average earnings in 2013 were $14,700 while the average earnings for the fourth quarter of 2013 were $27,500 per day.

The "China story" remained intact in 2013 and China accounted for 83 percent of the global demand growth of 200 million tons. Last year, China imported a total of 1,500 million tons of dry bulk commodities, compared to 750 million tons in 2008. This represents approximately 35 percent of global dry bulk trade measured in volume and more than 40 percent in ton miles

In 2013, there was strong growth in both iron ore and coal imports to China. Iron ore increased by 10 percent to reach 820 million tons while coal increased by 17 percent to 275 million tons. It is also worth mentioning that bauxite and nickel ore increased by 60 percent and 22 percent respectively, but obviously at smaller volumes.

India's newly commissioned coal fired power plants and improved port infrastructure are resulting in higher coal imports to the country. In 2013, India imported 164 million tons of coal which is almost 10 percent growth year on year.

Expectations for a higher utilization of the dry bulk fleet are high among many analysts and owners. Consequently, ordering of new capacity was quite brisk in the second half of 2013, leading to higher new building prices. From a low in the first quarter of last year, prices rose by approximately 15 percent on average. Asset prices for second hand vessels, in particular Capes, witnessed even stronger gains. The value of a second hand Cape increased by more than 25 percent last year.

The Fleet
The company's sailing fleet consists of four Capesize bulk carriers. The Battersea is employed in the spot market. Golden Zhejiang and Golden Future are employed on index related time charter contracts. The Belgravia is on a time charter contract with estimated expiry in the third quarter this year.

The company's newbuilding program consists of four Capesize bulk carriers with estimated delivery in 2015.

Corporate
30,472,061 ordinary shares were outstanding as of December 31, 2013, and the weighted average number of shares outstanding for the quarter was 29,037,278.

The Board has decided to declare a cash distribution of $0.175 per share. The record date is February 19, 2014, the ex cash distribution date is February 14, 2014 and the cash distribution will be paid on or around March 6, 2014.

Outlook
Knightsbridge remains well positioned in the market place with its modern bulk fleet and financial flexibility. The board believes that the company will benefit from its current Capesize play. The Capesize vessels are mainly carrying coal and iron ore and the demand for freight is expected to increase for these commodities. The recent spike in freight rates is a sign of an improved balance in the dry bulk market and the company expects that supply/demand balance will improve further going forward.