Genco Shipping & Trading Limited (GNK) Earnings

Management highlights

John Woodsmith discussed executing comprehensive value strategy, Q1 2026 highlights including strong cash flows, $19,300+ TCE, 99.2% fleet utilization, dividend of 35 cents per share, fleet renewal with new vessels and divestment of older ones, low net loan to value, balanced fleet composition with capes and ultra supras, and operating and financial leverage benefits.

Guidance

Management expects Q2 dividend ~70 cents per share, Q3 ~75 cents, Q4 ~70 cents, full-year ~$2.50 per share based on current forward freight rate curve, noting FFA curve subject to change.

Segment performance

No distinct product segments as focused on dry bulk shipping; first quarter TCE over $19,300 per day, fleet utilization 99.2%, etc.

Risks & headwinds

Risk of Diana Shipping's acquisition proposals potentially putting shareholders' investments at risk, such as forcing sale at inadequate price.

Analyst Q&A

• Q: And your first question comes from Omar Nocta from Clarksons. Please go ahead. Thank you. Hi, John. Hi, guys. Thanks for the update. Morning, Omar. Morning. Yeah. And I appreciate the comments on Diana. So that's helpful. And I'll just stick as you ask to industry and the company. And maybe just touching on, and I know you discussed this in the opening comments, but just You know, clearly you've had a nice quarter. It's nice to see dry bulk rates really gaining some momentum here. And I guess just from your perspective, what's really been kind of, you know, driving this strength? There's been a lot of focus on, you say, within the energy sectors on the impact of Hormuz. Is that having an impact on dry bulk? Is that driving things? Or is it more structural in terms of what we're seeing in the iron ore trades?

  A: I think it's more of a structural supply and demand balance. which is obviously very positive. The order book is very low, as Mike pointed out, but we have not had a lot of growth. I think there's only been 11 capes delivered all year, which is down, I don't know, 70%, 75% from the 15-year run rate. So you've got a low supply situation, but then you also have a growing demand side. Iron ore was up 11% in Q1 year over year. Oxite was up 23% in Q1 year over year. So big picture, it's the supply and demand balance in a very favorable position for rising freight rates. And then we clearly have volume growth. So I don't think too much is centered around Hormuz. I think only around 2% of the dry bulk trade actually goes in and out of there. So it's not very much. The other thing that's been happening is that we've seen a real increase in coal exports out of Baltimore and Columbia in particular. And when you start to see those increases in those ports, it really indicates affirming demand picture. And so the added coal um that we've seen you know really come on in in april you know we think is going to uh to continue for a while even um even after the uh removed situation is is solved

• Q: And your next question comes from Chris Robertson from Deutsche Bank. Please go ahead. Good morning, John. Good morning, team. Good morning. John, just taking a look at the, again, the strong rate environment, as everyone's alluded to here, and the lack of substantial deliveries. But on the other side of the equation, just wondering if you could give some commentary around the scrapping or ship retirement environment this year? Has this strong rate environment kind of incentivized people to hold on longer? What are you seeing there, and what's your outlook, you know, given the rate strength around ship retirements for the rest of the year?

  A: Look, at these rates, I would think that the numbers will be on the low side for scrapping. Having said that, it eventually will have to come. I mean, you have almost 12% of the existing fleet that's 20 years or older. So you can only stretch that for so far. But to answer your question directly, I think it's probably going to be on the low side this year.

• Q: And your next question comes from Liam Burke from Re Riley Securities. Please go ahead. Thank you. Good morning, John. Morning, Peter. Morning, Michael. Morning, Liam. John, two years ago, you were moving towards a net positive cash position on your balance sheet. You chose to allocate the capital towards very nice investments, primarily on Cape size. We're looking forward here. Are there opportunities to add to the fleet, or are you just going to go back and look at reducing your debt load?

  A: I think we'll keep our fleet renewal plan intact. You'll continue to see us execute on selling some of the older minor bulk vessels and focus on the larger and then in a more fuel efficient capacity in the Cape size Newcastle mechs. If you look at what we've done over the last, I think two and a half years, we've invested somewhere around $400 million We've created a 30% IRR on those investments. So while we'll continue to pay down debt and we're going to continue to have a reserve on a quarterly basis, we will still be focused on the fleet renewal side. We do want to grow. I think it's difficult to do large-scale transactions with just because of where vessel values have gone. I mean, you've seen our NAV has creeped up quite a bit just this year alone. So that's indicative in what's going on in asset pricing. But we also, you know, at some point there may be an opportunity to use our equity as a currency as well. But again, that's got to be done on a solely an accretive basis to not just cash flows, but NAV.

• Q: And your next question comes from the line of Sheriff El-Moghrabi from BTIG. Please go ahead. Thank you, and good morning. Just one for me today, kind of sticking with what Liam was asking about fleet growth, thinking about tools in your tool belt. You highlighted, Peter highlighted the Pace Genco is on for a healthy Q2 dividend. And I'm wondering, how do you think about the voluntary reserve? Any thoughts to a temporary increase, which would keep more dry powder for opportunistic growth? You know, you talked about tough to do large scale transactions and had the added benefit of padding the NAB with some stable value.

  A: Yeah, so the advantage of having that low cash flow break even and a low net loan to value allows us to pay high dividends as well as grow. And we've got a large revolver in place that's non-amortizing if we find the right opportunity. In terms of the reserve, look, we think the reserve is important. It's, you know, it's a depreciating asset class or asset base. So you need to be able to renew the fleet. But I don't see us changing our dividend policy this year. So the reserve will stay as is for the remainder of the year.

• Q: And your next question comes from Poe Frat from Alliance Global Partners. Please go ahead. Is it the fuel cost issue? And then also, maybe you could talk about insurance. Can you just highlight any potential bottom line impact on cost escalation in those two areas?

  A: Sure, Poe. So on the fuel side, you know, almost everything we're doing is on a spot basis. So when we're pricing cargo, we're pricing the current fuel price. We do a little bit of hedging because we've seen fuel so volatile. So if we lock something in, then we may hedge the fuel. Um, but there's no additional cost on the fuel side for us that, uh, that we've experienced. And I don't expect that, um, to occur again, everything, when we price a spot cargo, we price the current fuel price, um, into the, into the quote. Um, in terms of insurance, you know, we're, we're not. You know we're not going into the Red Sea. We've made that very prominent in our strategy for the time being and foreseeable future. We're not in the Persian Gulf, so we really haven't had to deal with any increased insurance costs.

• Q: And then, John, can you just talk, you know, you talked to, well, actually, Peter, for you, can you just highlight what the potential You know, costs might be from, you know, shareholder, shareholder perspective, annual meeting perspective. I think you said 3.8 million that was broken out in the second, first quarter. Can you give a ballpark number for the second quarter?

  A: Hi, Paul. Thanks for the question. Yeah, so historically with these types of situations, you know, our costs have run anywhere between $2 and $4 million. as you've seen in Q4 and Q1 here, as well as in 2024. We didn't specifically provide Q2 guidance, but I think looking at history, that's a fair assumption in the 2 to 4 million range.

• Q: And then, John, on corporate governance, you know, I'm not sure where I can ask this question, you know, before the annual meeting in a public forum, but can you just answer one question for me on the poison pill? Why did you put the poison pill vote into the annual meeting instead of waiting until it expired in September? And then why also did you increase that 10% threshold for the poison pill to 15%?

  A: Right. So in terms of the shareholder vote, we just think that is proper governance. We think that's the right move to allow shareholders to have a vote on it. and putting it in place for a medium-term period. So that's the answer to that. And your other question on moving the 10 to 15, it's simply a matter of, you know, we talk to shareholders a lot, and the board and the management team look at data and how things are done from a governance standpoint, and we elected to move the 10 to 15 basis, all of that. Was there any consultation with the proxy consultants or proxy recommendations at all? We have a full host of advisors, obviously, so everybody gets to weigh in. But again, you know, the way we make decisions is very definitive. It's based on data, and it's based on very high governance standards.