Dry bulk shipping company Golden Ocean Group has reported a deep 1Q15 loss on weak freight rates and a USD140.9 million impairment charge, but the company has repeated its pledge to consolidate the sector in the future.
Group net loss amounted to USD75.3 million in 1Q15, while a year earlier Golden Ocean had reported a profit of USD10.7 million. Revenues decreased to USD18 million from USD20.1 million.
“The company has recorded a vessel impairment loss of USD141 million in the three months ended 31 March 2015. This impairment loss relates to five vessels: KSL China; Battersea; Belgravia; Golden Future; and Golden Zhejiang, which the company in April 2015 has agreed to sell to, and lease back, from Ship Finance. The impairment loss represents the amount by which the carrying value of the vessels exceeded the sales price,” Golden Ocean said in a statement.
The dry bulk market has remained weak so far also in 2Q15; consequently the revenues of Golden Ocean are expected to remain low in the second quarter. “Future earnings will continue to correlate with the spot market as long as the majority of our fleet is employed in the spot market and on index linked time charter contracts,” the company said.
The lengthy arbitration process against Jinhaiwan over newbuilding contracts came to an end during April and the board is pleased with the fact that the company has received full refund for all of the nine contracts, including interest in the amount of USD40.5 million.
The dry bulk market, which went from bad to worse during the first four months of the year, finally appears to have some much needed structural changes in the sector. Scrapping has outpaced newbuilding deliveries so far in 2015 both for Capesizes and for vessels smaller than 40,000 dwt.
“Conversions of dry bulk newbuildings to tankers or containers have been achieved wherever possible and negligible numbers of new orders have been placed. In spite of this, it will be challenging for the sector in the coming months, which should lead to opportunities for those companies with stamina and a decent balance sheet. Golden Ocean intends to be at the forefront of a much needed consolidation of the sector,” the company said.
Commenting on the figures, Erik Nikolai Stavseth and Kurt Waldeland, shipping analysts at Arctic in Oslo, said that the company had stated it’s satisfaction with the restructuring of its newbuild programme as well as the other Sale-Leaseback transaction and sale of vessels. “While the Sale-Leaseback is clearly not cheap, ‘cash is king’ has never been more true for dry bulk. In addition, GOGL has finally concluded the Jinhai dispute – being able to recoup the full amount for all nine vessels that were cancelled,” they said in a market report emailed to IHS Maritime.
Lastly, Golden Ocean, part of the John Fredriksen business empire, stated that the company intends to be at the forefront of ‘much needed consolidation in the sector’ – and sees opportunities for companies with stamina and a decent balance sheet. “Golden Ocean has just been to the gym for a workout and although we do not rule out additional workouts, we find Golden Ocean to be a preferred pick in the dry bulk space,” they concluded.