Golden Ocean Sinks Further into Red

Norway based dry bulk shipping company Golden Ocean Group Limited (GOGL) posted a net loss of $33.5 million for the second quarter compared with a loss of $15.3 million for the preceding quarter.

Golden Ocean attributed the fall in earnings primarily to the continued poor market combined with an increase in the size of the fleet following the merger of Knightsbridge and the Former Golden Ocean on March 31, 2015.

As a result, the company’s board has decided not to declare a dividend for the second quarter of 2015.

Operating revenues in the three months ended June 30, 2015 have been reduced by $9.2 million as a result of the amortization of favourable time charter (out) contracts, which were acquired as a result of the said merger and were valued at $127.1 million.

Cash and cash equivalents decreased by $102.1 million in the second quarter. The main cash movements were the payment of $117 million in respect of its newbuilding program, $16.7 million received from the sale of vessels, $40.1 million received from Jinhaiwan as the final repayment for cancelled newbuilding contracts and the payment of $19.9 million for investments.

In addition, GOGL increased its bank borrowings by $13.8 million and repaid debt of $30.2 million.

As of June 30, 2015, GOGL had 23 vessels under construction, of which four have been sold and will be delivered to the new owners on delivery from the yard. The company expects to take delivery of three vessels in 2015, 12 vessels in 2016 and four vessels in 2017. Golden Ocean said it wiould receive net sales proceeds of $92.4 million in 2015 and $92.4 million in 2016 upon delivery of the four vessels which have been sold.

“Following two very weak quarters, the third quarter started with more optimism, in particular, for the Capesize segment. With a spot market close to $20,000 per day it was questionable whether it was a structurally damaged market balance due to oversupply. Then a three step devaluation by the Chinese Central Bank and a very nervous Chinese stock market removed all signs of optimism over a fortnight. With falling commodity prices and growing uncertainty in general, activity among dry bulk charterers is low at present,” the company said in its market outlook commentary.

Golden Ocean believes that in the short term this could be painful for owners of dry bulk assets, but in a longer term perspective the supply side should repair itself faster than previously anticipated.

“The average spot rates so far in the third quarter are higher than the rates in the first half of 2015 and the Company’s revenues are expected to improve compared to the two previous quarters. 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,” GOGL added.