Star Bulk Carriers Q1 2025 Earnings Report

Star Bulk Carriers EPS Results

• Actual EPS: -$0.07
• Consensus EPS: -$0.28
• Beat/Miss: Beat by +$0.21
• One Year Ago EPS: $0.87

Star Bulk Carriers Revenue Results

• Actual Revenue: $159.28 million
• Expected Revenue: $162.57 million
• Beat/Miss: Missed by -$3.29 million
• YoY Revenue Growth: N/A

Star Bulk Carriers Announcement Details

• Quarter: Q1 2025
• Date: 5/14/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 15, 2025
• Conference Call Time: 11:00AM ET

Star Bulk Carriers (NASDAQ:SBLK), a shipping company, engages in the ocean transportation of dry bulk cargoes worldwide. Its vessels transport a range of bulk commodities, including iron ores, minerals and grains, bauxite, fertilizers, and steel products. As of December 31, 2023, the company owned a fleet of 116 dry bulk vessels with combined carrying capacity of 13.1 million deadweight tonnage (dwt) consisting of Newcastlemax, Capesize, Post Panamax, Kamsarmax, Panamax, Ultramax, and Supramax vessels with carrying capacities between 53,489 dwt and 209,537 dwt. Star Bulk Carriers Corp. was incorporated in 2006 and is based in Marousi, Greece.

Star Bulk Carriers Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1 2025 Star Bulk reported adjusted EBITDA of $49 million but an adjusted net loss of $7.8 million, with a vessel‐day TCE spread of about $6,220.
• Management repurchased 1.3 million shares for $19.6 million and declared a $0.05 per share dividend, maintaining shareholder returns despite formula constraints.
• Pro forma liquidity stands near $500 million with $437 million cash, $1.2 billion debt and a $50 million undrawn revolver, while net debt per vessel has fallen over 50% since 2021.
• Since closing the Eagle Bulk acquisition in April 2024, Star Bulk has realized roughly $40 million in cost synergies (including $18.4 million in Q1) through operational and administrative integration.
• The IMO’s new net-zero fuel intensity rules starting in 2028 introduce annual reporting, trading of surplus units and potential compliance costs up to $380/ton of CO₂ deficits.

Presentation

[Operator]

Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Carriers Conference Call on the First Quarter twenty twenty five Financial Results. We have with us Petros Papas, Chief Executive Officer Mr. Hamish Norton, President Mr. Simo Spiro and Mr. Christos Begleris, Co Chief Executive Officers Mr. Nikos Rescos, Chief Operating Officer and Ms. Charz Plakapanaki, Chief Strategy Officer of the company. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session.

[Operator]

I must advise you that this conference is being recorded today. We'll now pass the floor over to one of your speakers for today, Mr. Spiro. Thank you, sir. Please go ahead.

[Christos Begleris, Co-CFO at Star Bulk Carriers]

Thank you, operator. I'm Christos Begleyris, Co Chief Financial Officer of Starbulk Carriers. I would like to welcome you to our conference call regarding our financial results for the first quarter of twenty twenty five. Before we begin, I kindly ask you to take a moment to read the Safe Harbor statement on Slide number two of our presentation. In today's presentation, we will go through our first quarter highlight results, actions taken to create value for our shareholders, cash evolution during the quarter, an update on the Eagle Bulk transaction, vessel operations, fleet update, the latest on the regulatory front and our views on industry fundamentals before opening up for questions.

[Christos Begleris, Co-CFO at Star Bulk Carriers]

Let us now turn to slide number three of the presentation for a summary of our first quarter twenty twenty five highlights. For the first quarter of this year, the company reported the following. Net income amounted to $500,000 with adjusted net loss of $7,800,000 or $0.07 adjusted loss per share. Adjusted EBITDA was $49,000,000 for the quarter. During Q1, we repurchased 1,300,000.0 shares for a total consideration of 19,600,000.0 For the first quarter, we declared a dividend per share of $05 payable on or on 06/06/2025.

[Christos Begleris, Co-CFO at Star Bulk Carriers]

Despite the fact that no dividend will be due based on our existing dividend formula, our Board of Directors decided to continue prioritizing returns to shareholders given the company's strong position. Our pro form a total cash today stands at $437,000,000 Meanwhile, our pro form a total debt stands at $1,200,000,000 Through an undrawn revolver facility, we have additional liquidity of $50,000,000 resulting to pro form a liquidity of almost 500,000,000.0 Finally, we currently have 13 debt free vessels with an aggregate market value of $270,000,000 On the top right of the page, you will see our daily figures per vessel for the quarter. Our time charter equivalent rate was $12,439 per vessel per day. Our combined daily OpEx and net cash G and A expenses per vessel per day amounted to $6,217 Therefore, our TCE less OpEx, less cash G and A is around $6,220 per day per vessel. Since the Eagle Valve transaction was completed on 04/09/2024 until today, the synergies achieved from integration resulted to almost $40,000,000 Integration process has been completed across all departments.

[Christos Begleris, Co-CFO at Star Bulk Carriers]

Slide four provides an overview of the company's capital allocation policy over the last three years and the various levers we have used to strengthen the company, increase intrinsic value of our shares and return capital to shareholders. In total, since 2021, we have taken actions of $2,600,000,000 in dividends, share buybacks and debt repayments to create value for shareholders. At the same time, Star Bulk has been growing the platform at opportune times through consecutive fleet buyouts by issuing shares at or above net asset value. On the bottom of the page, we show our net debt evolution per vessel. Since 2021, our average net debt per vessel has decreased from $11,600,000 per vessel to $5,400,000 per vessel, which corresponds to a reduction of more than 50%.

[Christos Begleris, Co-CFO at Star Bulk Carriers]

As a result of this deleveraging process, our current net debt is covered by the fleet scrap value. Slide five graphically illustrates the changes in the company's cash balance during the fourth quarter. We started the quarter with $441,000,000 in cash. We generated positive cash flow from operating activities of $49,000,000 After including debt proceeds and repayments, CapEx payments for energy saving devices and ballast water treatment system installments, vessel sales proceeds, share buybacks and the fourth quarter dividend payment, we arrived at a cash balance of $437,000,000 at the end of the quarter.

[Christos Begleris, Co-CFO at Star Bulk Carriers]

I will now pass the floor to our COO, Nikos Rescos for an update on the Eagle Bank integration and our operational performance.

[Nicos Rescos, Chief Operating Officer at Star Bulk Carriers]

Thank you, Christoff. Slide six provides an update on the Eagle integration and synergies. We continue to realize savings this quarter on the operating expenses front, have completed consolidation of ship management practices across the Exegro vessels and offices with the company's headquarters, further reflecting our low job administrative expenses. Importantly, we expect to complete the phase out of third party crew managers by Q3 this year, replacing this critical function with our in house crane platform and hence realizing further cost optimization. On completion of the last remaining crew changes, our dedicated crewing pool will comprise of more than 5,000 seafarers.

[Nicos Rescos, Chief Operating Officer at Star Bulk Carriers]

For Q1, operating expense and G and A savings for the Eagle fleet stand close to $2,140 per vessel per day. In addition, due to our scale in relation with the shipyards and service providers, we have reduced significantly the drydock costs of the former Eagle fleet, a saving of $8,600,000 for the quarter. Interest expense savings have accumulated thanks to the refinancing of the former Eagle debt, which took place during the second quarter of twenty twenty four. Almost $40,000,000 of cumulative cost synergies have been achieved since closing on the Eagle Bulk transaction in April 2024. Our cost synergies for Q1 stand at $18,400,000 Please turn to Slide seven, where we provide an operational update.

[Nicos Rescos, Chief Operating Officer at Star Bulk Carriers]

Operating expense for Q1 twenty twenty five stands at $4,898 per vessel per day. Net cash G and A expenses were $13.19 dollars per vessel per day for the same period. In addition, we continue to rate at the top amongst our listed peers in terms of Rideship Safety Score. Slide eight provides a fleet update and some guidance around our future drydock and the relevant total off hire days. On the bottom of the page, we provide our expected drydock expense schedule, which for the remaining of 2025 is estimated at $47,000,000 for the drydocking of 38 vessels.

[Nicos Rescos, Chief Operating Officer at Star Bulk Carriers]

In total, we expect to have approximately twelve ten of hire days for the same period. We have arranged to front load dry docking first half this year in order to take advantage of the dry dock market seasonality during the second half of the year. On the top right of the page, we have our CapEx schedule illustrating our newbuilding CapEx and vessel energy efficiency upgrade expenses. Based on our latest construction schedule, our five Kamsarmax newbuilding vessels constructed at Kingdau Shipyard are expected to be delivered during the first half of twenty twenty six. For these vessels, we have secured $130,000,000 of debt financing against the newbuilding installments.

[Nicos Rescos, Chief Operating Officer at Star Bulk Carriers]

In line with IMO carbon reduction regulations, we will continue investing and upgrading our fleet with the latest operational technologies available, aimed in improving our fuel consumption and reducing our environmental footprint, further enhancing the commercial attractiveness of the Star Bulk fleet. Regarding our Energy Saving Technologies retrofit program, we have so far completed 42 installations with another 21 planned for 2025. Please turn to Slide nine for an update on our fleet. On the vessel sales front, we'll continue disposing non eco vessels opportunistically, reducing our average fleet age and improving overall fleet efficiency. During Q1, we agreed to sell some of our less efficient Supramax vessels, including South Bittering, Star Omicron and Straze Aframco.

[Nicos Rescos, Chief Operating Officer at Star Bulk Carriers]

Furthermore, during the second quarter, we have further agreed to sell Star Puffin, Star Canary and Star Patrol Subramax vessels at attractive levels. We expect to receive an aggregate net sale proceeds of $38,600,000 in the second and third quarter of twenty twenty five. Following the rollover of the Eagle Bulk existing chartering contracts, we now have a total of nine chartering vessels. Considering the aforementioned changes in our fleet mix, we operate one of the largest large fleet amongst U. S.

[Nicos Rescos, Chief Operating Officer at Star Bulk Carriers]

And European listed peers with 150 vessels on a fully delivered basis and with an average age of 11.9. I will now pass the floor to our CSO, Haris Placademerci, for an update on recent global environmental regulation developments.

[Charis Plakantonaki, Chief Strategy Officer at Star Bulk Carriers]

Thank you, Nico. Please turn to Slide 10, where we highlight the major developments on global environmental regulations. The eighty third session of the IMO's Marine and Environment Protection Committee introduced a new net zero framework, marking a major regulatory milestone toward achieving climate neutrality in international shipping by 02/1950. The new regulation introduces a greenhouse gas fuel intensity metric, which is the rate to rate greenhouse gas emissions per unit of energy used on board the ship. This is similar to the fuel legal regulation, which came into force in January 2025.

[Charis Plakantonaki, Chief Strategy Officer at Star Bulk Carriers]

Each ship is required to report its fuel intensity annually to the IMO. Two tiers of requirements are set on the annual fuel intensity for a ship, a base target and a more stringent direct compliance target with each ship is required to meet. A ship which generates compliance surplus can transfer surplus units to ships with a compliance deficit or it can bank the units for later use within two subsequent calendar years. A ship with a compliance deficit can use surplus units from other ships or purchase remedial units from the IMO at $100 or $380 per ton CO2 equivalent deficit, depending on whether the ship's fuel intensity is between the base and direct targets or above the base target. The progress from the new regulation will go into the IMO net zero fund to be set up and managed by the IMO.

[Charis Plakantonaki, Chief Strategy Officer at Star Bulk Carriers]

Part of the revenues are intended to be circulated directly back to the industry as a reward for using near zero fuels or energy sources which are near zero. This new framework is set for adoption in October 2025, subject to final approval with the first reporting period starting on first January twenty twenty eight. Star Bulk remains focused on researching and adopting optimal strategies to ensure timely and efficient compliance with the new global regulations. I will now pass the floor to our CEO, Pedro Svapas, for a market update and his closing remarks.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

Thank you, Harris. Please turn to Slide 11 for a brief update of supply. During the first four months of 2025, a total of 12,200,000 deadweight was delivered and 1,100,000 deadweight was sent to demolition for a net fleet growth of 11,100,000 deadweight or 2.9% year on year. The new building order book stands at a modest 10.3% of the existing fleet with new contracts during Q1 falling to an eight year low of 2,800,000 deadweight, limited shipyard capacity availability up to second half twenty twenty seven, high seabuilding costs and uncertainty over future grain propulsion have kept new orders under control. At the same time, the fleet is aging and by the end of twenty twenty seven, approximately 50% of the fleet will be 15 years old.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

Moreover, the increasing number of vessels undergoing the third special survey is estimated to reduce effective capacity by approximately 05% per annum between 2025 and 2027. The average steaming speed of the fleet corrected to a new record low of 10.8 knots in February, driven by soft freight rates, inflated bunker costs and environmental regulations. Although speeds have rebounded slightly on the back of improved earnings and lower oil prices, they remain below last year's levels. In the medium term, new regulations on carbon emissions introduced by the IMO can be expected to continue to incentivize slow steaming and moderate effective supply. Finally, global port congestion fully normalized in the second half of twenty twenty four after a two year decline that inflated effective supply by about 6%.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

In Q1 twenty twenty five, loading port congestion sales due to weather disruptions while congestion in Chinese discharge ports fell to historic lows, driven by a sharp drop in import volumes. For the remainder of 2025 and 2026, we expect congestion to have a neutral or slightly positive impact on the supply demand balance and to follow seasonal trends. Let us now turn to Slide 12 for a brief update of demand. According to Clarksons, after two years of strong demand expansion, total drybulk trade is projected to contract during 2025 by 1.2% in tons and 0.4% in ton miles. President Trump's aggressive tariff negotiations and policy shifts since taking office have raised uncertainty in traditional forecasting models.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

Following Liberation Day, international agencies lowered their projections for global GPT growth and trade. The IMF revised its 2025 global economic growth forecast to 2.8%, down from 3.3% in January, with The U. S. Forecast reduced to 1.8% from 2.7% and China to 4% from 4.6%. However, upward revisions could now be expected after the initial trade agreement between The U.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

S. And China took place last weekend in Geneva. During the first quarter of twenty twenty five, total drybulk volumes were up year on year, supported by strong bauxite and minor bulk shipments, while iron ore, coal and grains volumes combined declined by 3.5% year on year. Suez Canal crossings remained at 50% of pre Houthi attacks levels and Red Sea passengers will probably be slow to restart. China's GDP exceeded expectations during Q1 and grew 5.4% fueled by more aggressive stimulus measures as of September 2024 and an increase in retail sales, industrial production and exports.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

Chinese drybulk imports contracted by 8.3% year on year during the first quarter driven by elevated inventories and rising domestic production of iron ore, coal and grains throughout 2024.

[Nicos Rescos, Chief Operating Officer at Star Bulk Carriers]

Can you hear us? Operator?

[Operator]

Yes, we can hear you.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

On the other hand, drybulk imports from the rest of the world expanded by 4.5% year on year as lower commodity prices, easing monetary policy and preemptive stockpiling in anticipation of U. S. Tariffs helped stimulate demand for raw materials. Growth has been driven mainly by developing Southeast Asian nations and The Middle East, while European imports have steadily increased since mid-twenty twenty four. Iron ore trade is projected to contract by 1.3% in tons and by 0.6% in ton miles during 2025.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

During Q1, China's steel production increased by 1.1 year on year supported by strong exports and lower input costs. During the rest of the year, government efforts to reduce steel overcapacity and growing protectionist measures by major steel importers may curb steel output. However, iron ore imports are expected to gain support as Chinese port stockpiles have declined in recent months and domestic iron ore production fell by 11.7% in Q1 twenty twenty five. Iron ore ton miles are projected to receive further support by late twenty twenty five as new high grade Atlantic iron ore mines begin operations, progressively replacing lower quality Chinese domestic production and imports. Coal trade is projected to contract by 3.2% in tons and by 3.6% in ton miles during 2025.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

Following record high imports in 2024, Chinese and Indian coal imports sharply contracted in early twenty twenty five, driven by robust domestic coal production and year on year contraction of thermal electricity generation. Rising renewable energy production in China and elevated coal inventories heightened downside risks for imports, while falling coal prices over the past six months have further compressed profit margins for international coal miners. Nevertheless, strong demand from Southeast Asian economies is expected to provide some support on coal trade over the next year. Grain trade is projected to contract by 2.1% in tons, but expand by 0.6% in ton miles during 2025. During Q1, total grain exports declined by 5.6% year on year, driven by nearly 50% drop in Chinese imports.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

The Brazilian soybean season was delayed affecting long haul shipments early in the year, but exports surged over the past two months, driven by increased Chinese buying to build inventories ahead of The U. S. Export decision. And it's not that the recent U. S.-China trade agreement may boost U.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

S. Exports to China during Q4, mirroring the trade deal during President Trump's first term. But the 2025 grain trade outlook will also depend on the strength of China's harvest. Minor bulk rate is projected to expand by 0.4% in tons and by 0.8% in ton miles during 2025. Minor bulk trade may encounter challenges from heightened trade tensions due to its close ties to global GDP.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

But recent progress in U. S.-China trade relations could drive upward revisions to full year projections. Bauxite exports from West Africa continued the strong performance and expanded by 31% during Q1, generating strong ton miles for the Capesize fleet. As a final comment, we expect a volatile market in 2025 as the U. S.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

Administration clearly states a risk to reset the trade landscape. We nevertheless remain cautiously optimistic about the medium term outlook for the drybulk market, given the favorable supply picture, stricter IMO environmental regulations and accumulation of stimulus measures by the Chinese government and positive signals from The U. S.-China tariffs negotiation. In a period of increased geopolitical uncertainty, we remain focused on actively managing our diverse scrubber fitted fleet to take advantage of emerging market opportunities and create value for 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]

Thank you. The floor is now open for questions. Session. first question is coming from Omar Nokta of Jefferies.

[Omar Nokta, Managing Director at Jefferies LLC]

Yes. You were mentioning just at the end of your comments expecting a bit of a volatile year just given everything that's going on. It does feel, when we look at dry bulk, that it seems to be in somewhat of a holding pattern in terms of where rates are. Rates aren't terrible. They're also not exciting.

[Omar Nokta, Managing Director at Jefferies LLC]

We're just sort of in this interesting period. We've also seen asset values hold up seemingly quite well, especially as confirmed by your latest sales. I just want to get a sense from you. What do you think is ahead here for this market? I know it's probably a big picture question.

[Omar Nokta, Managing Director at Jefferies LLC]

But just in general, when we think of where asset values are and then where the underlying rates are, something has to give at some point. Any kind of any feeling you have for how this market starts to progress here in the coming quarters?

[Petros Pappas, CEO & Director at Star Bulk Carriers]

Thank you, Omar. Let me quote somebody first. Niels Bohr, the guy, the father of the atomic energy said that prediction is very difficult, especially about the future. And that tells you that it's difficult to foresee. Anyway, we have views over here, so I'll talk for a few minutes about that.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

There are pros and cons in this market. The pros are mostly geopolitical and macro. The cons are more micro, I would say. Let me start. On the pros, we have the bauxite from West Africa and the iron ore from West Africa and Brazil that are coming in the future, especially due to the environmental regulations, China and others will need higher content iron in the iron ore.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

And that will actually incentivize importing iron ore from longer distances. So that is going to be a positive, especially when the new ore iron ore cement do comes for example in starting to export their first tons towards the end of the year. So that's one thing. The environmental regulations are going to help in general and that is a very important thing and it will start to bite as time as years go by. Then we have the potential of if the war in Ukraine stops, we have potential reconstruction over there, which will also lead to congestion.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

And that could also happen in Gaza and Syria, if that war stops. And if there is an agreement in Iran, that would also incentivize trade. So these are potentialities that I think will come in the next months or very few years and it will be very positive. Then we have China boosting their economy because of what's happening and the way that The U. S.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

President has treated them. And that's going to be a positive as well because on the con, is actually going to be reducing imports the way we see it. Now oil prices, if oil prices go down, this is a good macro effect in the sense that it will help GDPs of various countries. And if the dollar goes down as is being forecasted, that is also a positive for trade because it reduces the cost of raw materials. It reduces the cost of freight in local currencies and it also reduces the vessel prices in local currencies.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

So they would be willing potentially to pay more dollars for them. So these are generally the positives. The negatives, one big negative is China itself. On coal, they will be importing less coal going forward, but this is going to be a story in general about coal. I think coal will be traded less every year.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

However, I think that the environmental regulations effect will counter the coal negative future. Also China is trying to increase their own grain production and they're engaging in GM crops. So that could be a negative as well. And if it is true that they will cut their crude production, then iron ore will reduce as well. So China is a potential negative.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

Then Red Sea opening is going to be a negative. Fortunately, bulk carriers have been less affected than other types of vessels, but that's going to be a negative anyway. Then we see that there's not a lot of scrapping and the order book is usually about 3%, three point five % per annum and scrapping is 0.5. So we actually need 3% we have 3% increase in vessels. Need 3% increase in demand to negate that.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

And as a final major point, if oil prices go down, as I said, it's a positive in the sense that it's good for the economies in the world. But on the microfab would be that vessel would speed up. So having said pros and cons, my view is that we're probably going to be seeing a similar market with not too many ups and downs following seasonal patterns, meaning that second half should be stronger than the first half, but without amazing results. But if anything like Ukraine reconstruction or Iran opening and more say that happens, then I think that this is going to be an extra bonus for the market. So summing up, I think we will be seeing a moderate year with potential upward potential in case the world starts stops.

[Omar Nokta, Managing Director at Jefferies LLC]

Thanks, Dutchess. Well, very obviously incredibly detailed. And I had a couple of follow ups that you answered in those in your response. I appreciate that. I'll pass it over. That's it for me. Thank you.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

Thank you.

[Operator]

The next question is coming from Chris Robertson of Deutsche Bank.

[Christopher Robertson, Equity Research Analyst - Vice President at Deutsche Bank]

Hey, good morning, guys. Thank you for taking my questions. Just wanted to dial in here on the recent asset sales on how to think about timing for delivery and incoming cash over the next couple of quarters. And should we be thinking about those aggregate sales proceeds as basically being kind of fifty-fifty? Or are some of the older assets kind of more weighted in the near term?

[Christopher Robertson, Equity Research Analyst - Vice President at Deutsche Bank]

And if you could talk about kind of the cadence of incoming cash.

[Christos Begleris, Co-CFO at Star Bulk Carriers]

Chris, all vessels that we have announced the three vessels that we have announced that have been committed to be sold are basically being delivered to their buyers in the second and early third quarter of this year. Therefore, the total proceeds that we have announced of $38,500,000 basically fully received the delivery of each vessel during this quarter and the beginning of next.

[Christopher Robertson, Equity Research Analyst - Vice President at Deutsche Bank]

Got it. Okay. Thank you. And could you just as a follow-up to that, how are you guys thinking about the use of those sales proceeds here? Are you reserving that cash on the balance sheet for potential reinvestment opportunities?

[Christopher Robertson, Equity Research Analyst - Vice President at Deutsche Bank]

Or are you looking at kind of further share repurchases here as shares continue to trade at a meaningful discount to NAV?

[Christos Begleris, Co-CFO at Star Bulk Carriers]

Chris, as long as our shares trade at a meaningful discount to NAV, today's levels essentially, the opportunity to buy back shares at a significant discount to net asset value by using proceeds from vessels sold at net asset value essentially locks a very nice arbitrage for us. Therefore, we think that first priority is essentially on buybacks.

[Christopher Robertson, Equity Research Analyst - Vice President at Deutsche Bank]

The

[Operator]

next question is coming from

[Douglas Smith, Chairman at Everest Group]

As you show in your slides, the order book over the last five years has been relatively controlled, but this demolition has been negligible. And as you mentioned, about 05% a year. So as a result, the net fleet growth over the last five years has significantly exceeded the underlying growth in ton miles. What is your view of what demolition is likely to do over the next few years? And what if what can you attribute as the causality of the low demolition rate over the last five years?

[Petros Pappas, CEO & Director at Star Bulk Carriers]

Yes. Well, to be able to cover that gap of 3%, I think that the environmental regulations will play a big role. I think that the exports from West Africa and the increased exports from Brazil in the future of high quality iron will also be able to increase ton miles. You know increasing ton miles is much more important than increasing tons. I think these things will definitely cover part of that 3%.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

Then if we have any reconstruction in the places that I mentioned earlier, that will create congestion and that's going to be important as well. Now, you will see that in the last quarter, order book was just 2,900,000 tons deadweight. And I think this could be a result of not being able to foresee what is going to happen. Lately, the geopolitical regulations have been affecting us a lot. We do not know where this is going.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

So people actually do not order, plus the vessels are pretty expensive. So if that trend continues and then it is possible that the order book will actually drop. I think it has dropped already to a certain degree. And I believe that this will continue. And if the market remains medium, I think people will just not order.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

And plus, let's not forget that we do not know which will be the engines of the future, which is going to be the fuel of the future. So all that creates a very hazy future that discourages ordering and that is actually going to be good for the market.

[Douglas Smith, Chairman at Everest Group]

Yes. As you sell a number of your older ships, can you provide any color on how the buyer is going to use them? These ships do not seem to be leaving the fleet. As ships age and get over twenty years, what's their use? Why are they not being retired?

[Douglas Smith, Chairman at Everest Group]

Does your customers have any are they willing to pay a premium or a more efficient or modern ship? Or is there no premium that you can recognize in the market?

[Petros Pappas, CEO & Director at Star Bulk Carriers]

Well, first of all, for as long as the vessels are not making a loss, people do not scrap. That's one thing. Secondly, the buyers are Chinese. Now, I'm not sure what they're seeing. What we are seeing is that the return on investment on these vessels is not good enough for us.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

And we have very low operating expenses and we have scrubbers. We actually have probably among the lowest operating expenses. And still the return is not good enough. And therefore, we get rid of them. Now what they are thinking and what kind of IRR they can survive with, it's I suppose their own matter unless if they know something about China that we don't.

[Douglas Smith, Chairman at Everest Group]

Do you see the environmental regulations as being a catalyst that's going to actually cause ships to be scrapped? Or is that unlikely to happen for the foreseeable future?

[Petros Pappas, CEO & Director at Star Bulk Carriers]

It will definitely slow down speed. It will take longer time to install ESDs in shipyards and to keep the vessels in better condition so that they consume less and to clean their hull more often so that they don't burn more fuel, which will be a punishment for high consumers. Now I think there may be a few, a number of older heavier consumer consuming Chinese vessels that may not be as competitive as others. And the result for those will be that they won't be making any profit. So I think that there will be a percentage that is capped because of these reasons and perhaps we won't get to vessels that we won't get to keep vessels over twenty years of age at some point.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

But I think the immediate effect is going to be on speed and delays in drydocks and then scrubbing will follow.

[Douglas Smith, Chairman at Everest Group]

Thank you.

[Petros Pappas, CEO & Director at Star Bulk Carriers]

Thank you, Doug.

[Operator]

Thank you. At this time, I'd like to turn the floor back over to management for any additional or closing comments.

Participants

Executives

• Christos Begleris, Co-CFO
• Nicos Rescos, Chief Operating Officer
• Charis Plakantonaki, Chief Strategy Officer
• Petros Pappas, CEO & Director

Analysts

• Omar Nokta, Managing Director at Jefferies LLC
• Christopher Robertson, Equity Research Analyst - Vice President at Deutsche Bank
• Douglas Smith, Chairman at Everest Group