This week will be a gauge of how much shipping has benefited from the commodity boom, as some of the world's biggest public bulker owners reveal their earnings for the second quarter.
Mining companies — major charterers of bulk carriers — are already reporting blockbuster profits on the back of strong iron ore prices, which soared last quarter, and are paying out billions in dividends to shareholders.
Some of this strength looks set to be reflected in bulker companies' bottom lines and distributions to investors for the second quarter.
Analysts expect seven major US-listed bulker companies to clock up combined revenue of $954m for the three-month period, which could translate to total net profit of $423m, according to consensus estimates.
The companies are Diana Shipping, Genco Shipping & Trading, Eagle Bulk Shipping, Star Bulk Carriers, Golden Ocean Group, Navios Maritime Partners and SFL Corp.
These companies could together pay out close to $115m in dividends for the quarter, if analysts' expectations are met.
"Clearly all of them can pay large dividends, the question is: will they pay large dividends now, or wait for more visibility and even stronger balance sheets in subsequent quarters?" commented Randy Giveans, senior vice-president of equity research at investment bank Jefferies.
Already, there are positive early signs of what lies ahead this earnings season.
Diana Shipping has just reported its first profitable quarter in almost two years, although it did not declare a dividend.
TUESDAY
Diana Shipping - read report.
WEDNESDAY
Genco Shipping & Trading
THURSDAY
Eagle Bulk Shipping
Star Bulk Carriers
Oslo-quoted owner GoodBulk, the public arm of pooling giant C Transport Maritime, last week reported its strongest-ever quarterly profit and declared a dividend of $1 per share, three times more than its previous payout.
Hong Kong-based Pacific Basin Shipping last week announced its best first-half profit in 13 years, which allowed it to resume its dividend and pay out HKD 0.14 ($0.018) per share for the six months.
An analyst's take
Giveans expects stronger results from bulker companies for the second quarter, but said the "real meaningful jump" will be in the third quarter.
"As a result, although Q2 will be important, I believe the Q3 [to date] rate guidance will be even more important as it will show if owners are/are not capturing the strong rates that brokers are reporting," he told TradeWinds.
Giveans expects to see higher payouts to shareholders from companies with floating dividends based on earnings or cash flow.
"However, for those without dividends or those with fixed dividends, I do not expect increases (yet) as many owners remain focused on debt repayment, asset acquisitions and building cash balances, especially with the ongoing 'market uncertainty' (which is always the case, but even more so in these Covid times)," he explained.
"That said, I do expect those with big dividend payments, or large share repurchases (which I am a big fan of), to outperform those companies who remain focused on hoarding cash or buying ships (especially newbuildings that won’t be delivered for two to four years)."
Eagle Bulk, like Diana, is among the few US-listed bulker owners that analysts do not expect will declare a dividend for the second quarter.
Gold rush for miners
Star Bulk Carriers looks set to declare the biggest dividend, with analysts expecting a $0.43 per share payout, according to the consensus estimates. This would mean the Greek owner paying out close to $44m to investors.
Eagle Bulk looks to be the big winner in terms of earnings per share (EPS) for the second quarter — analysts expect the company to book EPS of $3.09.
Booming commodities markets this year have resulted in a bumper earnings season for miners — particularly producers of iron ore, for which Chinese demand has been insatiable and supply has been constrained.
Rio Tinto, the world’s biggest iron ore producer, last week announced its highest-ever interim profit and said it will pay $9.1bn in dividends.
The average realised free-onboard price for iron ore almost doubled year on year to $168.40 per tonne during the first half of 2021, according to Rio Tinto.
This helped boost its underlying earnings to $12.17bn for the first half, up from $4.75bn a year earlier.
Vale, which is jostling for position as the world's top iron ore miner, last week reported second-quarter net profit of $7.59bn, up by 600% from a year ago.
