Star Bulk Carriers Corp. ($SBLK)

Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Carriers Conference Call and First Quarter 2026 Financial Results. We have with us today Mr. Petros Pappas, Chief Executive Officer; Mr. Hamish Doran, President; Mr. Simos Spyrou; and Mr. Crisis Begleris, Co-Chief Financial Officers, Mr. Nicos Rescos, Chief Operating Officer; and Mr. Charles PlakanTulaki, Chief Strategy Officer of the company. [Operator Instructions] I must advise you this conference call is being recorded today. We now pass the floor to our speaker today, Mr. Begleris. Please go ahead, sir.

Thank you, operator. Good morning, ladies and gentlemen, and thank you for joining us today. I'm Christos Begleris, Co-Chief Financial Officer of Star Bulk Carriers, and I would like to welcome you to our conference call regarding our financial results for the first quarter of 2025. Before we begin, I kindly ask you to take a moment to read the safe harbor statement on Slide #2 of our presentation. In today's presentation, we will review our first quarter 2026 company highlights, financial performance, capital allocation initiatives cash evolution during the quarter, operational performance, our continued investments in the fleet, developments on the regulatory front and our perspective on industry fundamentals. We will then open the floor for questions. Turning to Slide 3. The first quarter was characterized by solid capability, disciplined capital allocation and continued balance sheet strength. Net income amounted to EUR 58.5 million, while adjusted net income reached $63 million or $0.52 adjusted earnings per share. Adjusted EBITDA was $114.3 million, demonstrating the strong cash generating capacity of our platform. On the shareholder return front, we continue to actively return capital to our shareholders. Share repurchases during the first quarter until today, we have repurchased approximately 1.9 million shares, totaling $37.9 million on the dividend front, our Board of Directors declared a $0.50 per share dividend for the quarter, payable on June 20 to all shareholders of record as of June 12, 2026. Our balance sheet remains a key strategic advantage. Total cash and cash equivalents are approximately at $432 million, outstanding debt is at approximately $874 million. We also have an undrawn revolver capacity of $110 million. We currently own 29 debt-free vessels with an aggregate market value of around $700 million. Our overall loan leverage as well as this unencumbered asset base provides substantial financial flexibility to fund growth opportunities as well as downside protection. To further enhance shareholder value, we have updated our dividend distribution policy. We distribute 100% of free cash flow, subject to maintaining a minimum cash balance of $2.1 million per vessel. As far as operating performance is concerned, on the top right side of the slide, you can see our per vessel daily performance metrics for the quarter. time charter equivalent was at $18,493per person per day. Combined daily OpEx and net cash G&A was at $6,420 per vessel per day. This results in a daily cash margin of approximately $12,073 per vessel per day before debt service and CapEx. These numbers highlight the operating efficiency of our platform and our ability to generate meaningful cash flow even at mid-cycle rate levels. Slide 4, summarizes our capital allocation track record over the last 6 years. Since 2021, we have executed approximately on $3.1 billion via enhancing actions including dividends, share repurchases and debt repayment. During this period, we have returned approximately $14 per share in dividends, representing approximately 54% of our current share price. We have reduced total net debt by 63%, bringing leverage to a level where net debt is at 56% of the demolition value of our fleet. During the same period, we have expanded the fleet opportunistically through accretive fleet acquisitions, issuing equity at or above net asset value thereby increasing scale while protecting per share value. The result is a larger, more efficient platform with materially lower financial risk and significantly enhanced free cash flow per share potential. Slide 5, state the movements in our cash balance during the first quarter. We began the quarter with $502 million in cash. We generated $112 million in operating cash flow. After vessel sale proceeds, debt drawdowns and repayments, CapEx payments related to new building installments and energy saving devices and ballast water treatment system installations share buybacks and the fourth quarter dividend, we ended the quarter with $409 million in cash. The sequential increase in cash underscores the strong internal cash generation of the company, even after substantial shareholder returns and investment in feed up rates. Slide 6, includes our diversified fleet driving strong earnings contribution across all segments. Starbucks delivered a well-balanced operating performance supported by our diversified fleet of 136 vessels and over 12,000 ownership days. Ultramax Supramaxes remained the largest contributor of revenue at 38%, generating $80.7 million in revenue and $39.7 million in adjusted EBITDA. New Castlemax Kaki vessels contributed 33% of revenue and 36% of adjusted EBITDA, benefiting from strong market positioning and representing 41% of our fixed market value. Post Panamax and Kamsarmax segment continued to provide stable earnings, contributing 29% of revenue and 28% of adjusted EBITDA. Overall, our fleet generated $212.5 million in revenue and $113 million in adjusted EBITDA during the quarter highlighting the resilience of our diversified commercial strategy and efficient fleet deployment. Slide 7 highlights the inherent operating leverage embedded in our business model. With approximately 48,500 fleet available days per year and based on a current net 12-month FFA curve of approximately $20,500 per day on a fleet-wide basis, the company would generate approximately $3.4 per share of free cash flow, representing a 13% implied cash flow yield. The slide illustrates the strength of our platform in a rising market. Every $1,500 fleet-wide increase in TCE equities an EBITDA increase of $71 million. This will translate to $0.64 per share of incremental dividend to our shareholders given our existing approach to distributions. In summary, during first quarter, we delivered solid profitability. We strengthened our liquidity position. We continue to delever. We return meaningful capital to shareholders and we preserve significant optionality for future capital allocation. Our balance sheet resilience, operating efficiency and disciplined capital allocation framework position us well to navigate market volatility while continuing to enhance per share value. With that, I will now pass the floor to our COO, Nicos Rescos, for an update on our operational performance and the continued investments we are making in our fleet.

Thank you, Christos. Turning to Slide 8. covers our operational performance. We continue to operate 1 of the most cost-efficient platforms in the dry bulk sector. Telling OpEx for the first quarter came in at $5,045 per vessel and net cash G&A at $1,375, both among the lowest in our peer group as illustrated. The sustained cost discipline reflects our scale our integrated management platform and the synergies crystallized through vehicle bulk integration and translates directly into superior cash generation through the cycle. Moving to Slide 9, which outlines our fleet-wide investment program. On the new building front, 1 of our latest generation of high specification caps buildings are on track for delivery during 2026, with $195 million of CapEx remaining. Financing is largely in place, where we have secured $130 million of debt against the 5 King do build vessels and expect a further $51.2 million against the 30-bit vessels, middle program fully funded on competitive terms. In our strengthening consoles market, the strong deliveries of these vessels remain highly attractive to our customers, combined with an approximate $40 million mark-to-market gain for our shareholders. pOn vessel upgrades during the first quarter, we'll continue pushing through with energy-saving devices and high-efficiency profiler installations. On rate, we've completed 61 ELT installations across the fleet with a February schedule for 2026. Together with telemetry retrofits, how upgrades and we of silicon pains and deployment of health-cri robots, we measure tangible vessel performance improvements between 7% and 15%, which directly translating to improved commercial performance and attractiveness of our fleet. The top right of the slide illustrates our CapEx schedule presenting both the remaining newbuilding installments and our vessel efficiency upgrade spending alongside the corresponding debt drawdowns. At the bottom, you can see our driver schedule for the remainder of 2026, which totals approximately $42 million and around 1,236 off-hire days. Turning to Slide 10 for our fleet update. We'll continue to actively rejuvenate our fleet through a disciplined combination of selected disposals and newbuilding deliveries, prioritizing the divestment of older non-core to reduce average age fleet and lift overall efficiency. During the -- during the first quarter 2026, we delivered Starsale and Star Mariela to their new owners. In connection with these sales, we collected net proceeds of approximately $46.4 million. Having sold 49 vessels since 2023, we have reinvested the majority of the net sale proceeds to fund accretive share buybacks throughout this period. This quarter also marks the start of our new building delivery cycle with our latest generation constant vessels joining the fleet. We expect to take delivery of the first 2 vessels in May 2026, Stardalina and Starama with the remaining 6 buildings phasing in throughout the balance of the year. We continue to maintain 7 long-term chartering contracts, which provide additional commercial flexibility across market cycles. Star Bulk operates 1 of the largest part of fleets among U.S. and European listed peers with 141 vessels on a fully delivered basis at an average age of approximately 12.2 years, providing scale modernity and operating leverage to compound shareholder value as the market cycle evolves. I will now pass the floor to our Chief Strategy Officer, Charis Plakantonaki for an update on recent global environment regulation development and our ESG performer.

Thank you, Nico. Please turn to Slide 10, where we highlight our progress across these priorities. At the latest or marine environment is a -- our consensus was free for the next year framework in when those states remaining divided between those who consider it for purpose and those calling for men. The committee agreed to continue reception work on the framework on the letting consensus ahead of in November 20. Star Bulk remains icily engaged through its participation in industry organization initiatives contributing to efforts aimed at advancing practical, realistic and effective greenhouse gas reduction regulations will consist of global application. Star Bulk has joined the newly established advisory council to the Poseidon Principles association. The country will serve as the following dialogue is in the 36 signatory bonds, and a select group of leading owners and Manta stakeholders from key decorations and implementation of the principles. On the cost of front, during Q1 2026 we engaged extensively all company departments in analyzing the results of our survey and developing an action plan to preserve our strength and improve areas where we can do better air. We continue our efforts to a better system intact to the operations through the expansion of our carton company carport on new off-the-shelf AI tools and the use of AI within R&D. Recognizing the cybersecurity risks associated with our future intelligence. We have completed an external risk assessment and final required controls for the use of AI. We're also developing company on the responsible use of AI, endo included the already deployed AI tools in our upcoming penetration. I will now hand the floor to our Head of Market Constantinos Simantiras for a market update and his closing remarks.

Thank you, Charis. Please turn to Slide 12 for a brief update of supply. During the first 4 months of 2020 date, a total of 4.2 million bad weight was delivered and 1.5 million deadweight 4% cost to demolition for a net fleet growth of 12.7 million deter 3% year-over-year. The new building order book has increased over the past 3 years, but remains relatively low at 13.2% of the line. Total driver contracting remains under control despite the recent pickup in Capesize orders, reflecting limited set availability through late 2028, high seed building costs and ongoing uncertainty around green propulsion technologies. Meanwhile, the fleet continues to age and by the end of 2027, approximately 50% of the existing fleet will be older 15 years old. Moreover, the rising number of vessels undergoing their third special survey is estimated to reduce effective fleet capacity by more than 0.5% per annum during 2026 and 2027. The average steaming speed of the fleet remains slightly elevated through most of Q1 supported by rates but has corrected below 11 knots following the recent serves in bunker prices and middle tensions. Finally, global port congestion has fully normalized and is now following seasonal patterns. Going forward, congestion is expected to have a lease impact on the supply and demand balance. So there could still be some upside from delays related to new mining hubs in West Africa. Let us now turn to Slide 13 for a brief update of demand. According to Clarksons, total dry bulk trade during 2026 is projected to expand by 1.3% in tons and 2.5% in ton miles. We continue to operate against the backdrop of heightened geopolitical uncertainty with the trajectory and duration of the Middle East conflict being difficult to predict while dry bulk freight exposure through the state of hormone remains relatively limited, disruptions to oil and LNG markets could be prolonged, pushing energy prices higher and weighing on the global macroeconomic outlook. Reflecting these risks, the IMS recently revised its 2026 global growth forecast down to 3.1% from 3.3% in January. The U.S. forecast was lower to 2.3% from 2.4% and China to 4.4% from 4.5%. Turning to dry bulk demand. Total volumes rose approximately 3.5% year-on-year during the first quarter, supported by robust iron ore and minor box close alongside record grain and bauxite segments. Ton mile expanded at a faster pace, driven by strong Atlantic exports and longer Pacific trading distances. In China, GDP growth exceeded expectations at 5% in Q1, underpinned by strong industrial production, manufacturing activity and exports. Chinese dry imports rose 8.1% against a low base last year. However, domestic consumption remained relatively weak. On the geopolitical front, President Trump Summit with President Xi in Beijing, delivered a constructive signal for U.S.-China relations and international trade. Dry bulk imports from the rest of the world continue their recovery with or extend consecutive quarter, expanding 3.1% year-on-year on the back of a weaker U.S. dollar and increased restocking activity. The is down by key commodities, iron ore trade is projected to expand by 1.1% in tons and by 1.6% in ton miles during 2020 sales China steel production declined by 4.5% year-on-year during the first quarter due to policy curves on steel supply, the ongoing real estate slowdown and rising protection is. At the same time, domestic iron ore production remained broadly flat, while stockpiles increased to record levels, creating downside risk for the second half of the year. Having said that, the iron ore market remains supply driven and ton miles are expected to receive support from the continued ramp-up of Simandou and stronger Brazil exports. Coal trade is projected to contract by 1.6% in tons and by 0.5% in ton miles during 2026. This forecast is likely to be revised upwards as piper energy supply is expected to strengthen coal demand throughout year-end. World driven disruptions to LNG trade, together with broad-based inflation across energy commodities, have improved the demand outlook for coal, routing several countries to be restriction on its use and production. Chinese payment power generation rose 3.6% in Q1, while domestic coal production has been broadly flat over the past 3 quarters, creating a favorable setup for ingots. Furthermore, developing El Nino is expected to drive polythene year summer, further lifting energy consumption in the short term. Grain trade is projected to expand by 3.7% in comps and by 6.8% in or miles during 2026. Total grain exports increased by 9.1% year-on-year during Q1, supported by strong treatment from all major exporters. Speed over from October's U.S.-China trade through drove seasonally strong U.S. exports and base in place to buy approximately 25 million tons of U.S. soybeans annually through 2028, should continue to support midsized markets or miles. Minor bulk trade is projected to expand by 2.4% in pumps and by 3.1% in ton-miles during 2026. The export volumes increased by 8% year-on-year during Q1 despite lower fertilizer segments from the Middle East. While bauxite exports from Guinea continued their strong performance and expanded 23% year-on-year, generating strong fund marks for the Capesize fleet. As a final comment, we remain optimistic about the driver of market outlook, supported by a favorable supply backdrop, new long-distance Atlantic exports and tightening environmental regulations. In a period of rising geopolitical uncertainty, we remain focused on actively managing our diversified scrubber-fitted fleet to capitalize on market opportunities and deliver value to our shareholders. Without taking any more of your time, I will now pass the floor over to the operator to answer any questions you may have

[Operator Instructions] Our first question today is coming from Omar Nokta from Clarksons Securities.

I wanted to ask about the capital allocation policy of now paying out 100% of of operating cash flow less the CapEx and debt service. You've obviously got plenty of cash to give you that flexibility. Leverage is a bit low now, unencumbered ships but wanted to ask the stock, while it has done well, it's still at a discount to NAV. And in the past, you've leaned on asset sales to try to crystallize that difference between the equity and the NAV. How do you kind of think about that today? Are sales still something under consideration from here? Or is it not a time to really maximize your exposure to the market?

I think Omar, this is Norton. We're still planning on selling smaller, older and less fuel-efficient ships. Frankly, the market is pretty hot. And if you need to sell these ships at some point, this is as good a time as any to sell them. And the capital that we generate from selling ships could be used for repurchases of shares. It could be used for we might keep some of it for use later when there are better opportunities. We think there will be some very good opportunities, and I think with our operating cash flow, we intend to keep paying that out on a current basis.

Okay. And if I could, I know this is sensitive. But just regarding the agreement you have with Diana to acquire the 16 ships if they succeed in acquiring Genco, just in terms of the price, the 470 that you've agreed on -- my question is, is that fixed? And then...

That is fixed at the moment. Yes, that's the agreement is for a specific price.

Okay. And are you able to give sort of -- is that based off of whatever Diana ends up paying if it succeeds? Or is it based off of that -- the current.

No, price. It's fixed.

Our next question today is coming from Chris Robertson from Deutsche Bank.

Yes, very strong start of the year. We had a lighter than usual seasonal pullback during the first quarter, very strong indicators here at the Capesize FFA over 40,000 in May, over 30,000 for the remainder of the year. But at the same time, we're seeing a little bit of decelerating economic activity in China in April with regards to industrial production. Patrice, you mentioned some of the El Nino concerns and other things. So I mean, kind of putting all this together, what is your expectation for the second half of the year, which is usually seasonally stronger. Do you think that comes this year? Do you think that has been pulling forward of demand in the first half of this year that could kind of smooth out demand for the rest of the year and rates for the rest of the year. Do you see any policy support in China that could help boost demand for dry bulk commodities while they potentially focus on doing economic strength. Kind of what's the outlook there?

Chris, we're actually pretty bullish for the balance of this year, and we are bullish for next year as well. I think the situation in the Persian Gulf is actually helping for now for as long as things stand as they are. Oil prices are up, and that makes vessels go slower, which is good for supply. We have about 2% of the fleet in the Persian Gulf, which reduces supply again. Red Sea remains then more ton miles. The increased oil prices actually incentivizes use of coal. So you see that the reduction in the coal trade is actually minimal right now and might even turn around and there's all kinds of inefficiencies. But this is not the only thing. You saw that during the first 5 months, demand increased by 5.1% in ton miles, and this is only the first half, as you said. We continue to believe that the second half is going to be strong. And there is tons of positive reasons why the market should continue to be strong this year. China has been doing pretty well up now, and we don't expect to see any slowdown in the very near future. If there is going to be a problem going forward that maybe the order book, I would say, or in case the person got opens up, I think for a while, it's going to be positive because it will -- psychology will be assisted and oil prices will go down, which will help trade, et cetera. But all the positive I mentioned over a period of 8 to 12 months may start slowing down. Now -- so therefore, for now, we are very positive and we're actually positive for the next 18 months.

Just following up, just to get a sense of scenarios here. With regards to potentially strong El Nino, using examples in the past, let's say, in regions that are prone to whether it's drought conditions or on the other side of that flooding conditions which market should we be on the lookout for weather-related disruptions that could potentially impact trade flows.

Well, short term, we are -- we think that the in euro will be positive because it will create higher temperatures in the northern hemisphere. And therefore, there will be more need for air conditioning as fast as, therefore, more energy. Now for the winter, this might -- we may have a warmer winter, which will repair things. As far as droughts are concerned, this is a potential. This is a potential risk, especially for grain corps crops. I was talking about it to our analysts. He said that perhaps people are foreseeing what may happen in arrives, and they may be stocking up right now. This is possible. On the other hand, we may have positive view positive developments on the Panama canal, maybe the water levels will fall and there will be less vessels coming in. So there is positives and negatives.

[Operator Instructions] Our next question is coming from Stephanie Moore from Jefferies.

I know that when we have talked in the past and certainly, we all spoke publicly together on your first call, there was -- and it continues today, but there's a lot of optimism about the underlying dry bulk market for 2026. But even since that print, a lot has changed from a geopolitical standpoint and certainly kind of enhanced complete geolocalcontict around the globe. So maybe if you could just talk a little bit about how anything might have changed in terms of your general optimism about the dry bulk market for the rest of this year and especially navigating what is obviously a heightened geopolitical environment. So I love your thoughts there to start.

Stephanie, is that a geopolitical question, mostly.

Yes, yes. And maybe how that supports your view on the dry bulk market for 2026. And if anything has changed since you kind of discussed can you yes.

Right. I did talk about the Persian Gulf. I think that is positive for the short term or even for longer, depending on how that goes. The main -- I think that the Ukrainian war is not affecting that much the market anymore. It did help to at the beginning because, for example, Russian coal had to travel longer distances to be exported and that was positively or negative because there was less grain trade coming out from the Black Sea, especially. But we don't think that is as important anymore because it's being overshadowed by the President Golf. What I see very potentially positive is in case any of these worst stops or both, we may see very strong construction. So it has a lot to -- of course, that would start later on in time. So my view is that this year is going to be very strong but next year is going to be strong as well. And if there is the end of any of the words, it's going to help the sharing because it will create a lot of demand. So it will all come in stages and depending on how things happen going forward. We're not fortunate tell us to know how things will end up, of course.

Understood. And then I think 1 question that we're getting a lot of is if maybe more on the negative side that if some of these conflicts persist, does that create, particularly in emerging markets that stress on the overall economy. So would love to get your views on that as well and if that could ultimately impact demand.

Sorry, can you please Stephanie, you said that this creates what market?

Yes. I'm sorry. I guess -- sorry if you can't hear me, but if the other side of maybe the coin here from a demand standpoint would be an emerging market are negatively impacted by persistingly higher energy costs but that ultimately causes any kind of economic weakness in those markets and if that would be the negative side. So what are your thoughts on potentially that scenario, too?

Yes. Well, that risk actually remains. And if oil prices go further up, -- and even in the 150 or even more than that, I -- we are very afraid here that, that would damage the world economy and not just emerging economies. And it will also discount state because trade depends on how on -- or how you can construct something cheaper than the other country. And then that creates great trade -- if prices go very far up, then then that will impede a development of economies. And I think it's going to be negative. Commodities on more expensive, there will be less demand of commodities.

Understood. I appreciate the high level. And then I guess 1 last thing for me. Maybe just talk a little bit about your appetite for additional newbuild orders just given there are higher shipyard costs at this point, but also given some of the we just discuss kind of general market dynamics. So anything there

Yes. Well, newbuilding prices have gone up a lot. And we were doing some calculations lately that unit really very high income levels for very long periods to be able to achieve a relatively low IRR. So the idea here is not to continue any further with new buildings until prices start falling. I don't know when that is going to be, but we are patient. The ones we ordered the comes MAXes we did because our Camso fleet was getting older compared to the rest of the fleet. And it needed some -- we needed to get the average age of our fleet to get lower. At the same time, of course, we are judiciously selling all their vessels and inefficient ones, as Hemish said earlier. So no, for as long as prices keep on climbing, we see has a better opportunity to sell rather than buy or order.

Thank you. We reach out of our question-and-answer session. I would like to turn the floor back over for any further or closing comments.

No further comments, operator. Thank you very much.

Thank you, everyone. That does conclude today's teleconference and webcast to disconnect your line at this time, and have a wonderful day. We thank you for your participation today.