Genco Shipping & Trading at Sidoti’s Small-Cap Conference: Navigating Market Dynamics

Genco Shipping & Trading Ltd (NYSE:GNK) presented an optimistic outlook during Sidoti’s Small-Cap Virtual Conference on Wednesday, 11 June 2025. The company, a leader in the U.S. dry bulk shipping sector, highlighted its strategic focus on low financial leverage, high dividend payouts, and strong corporate governance, while acknowledging market concerns related to China.

Key Takeaways

• Genco operates 42 modern ships, making it the largest U.S.-based dry bulk shipping company.
• The company maintains a low net loan to value ratio of 6% and a strong cash position.
• A $50 million share repurchase program was introduced in May.
• Capesize shipping rates have nearly doubled recently, driven by increased demand.
• Genco remains optimistic about future demand, particularly from iron ore and bauxite shipments.

Financial Results

• Cash balance as of March 31: $31 million
• Total debt: $90 million, resulting in a net debt position of approximately $60 million
• Asset base: approximately $1 billion
• Debt repayment since the inception of their value strategy: 80%, or $350 million
• Q1 dividend payout: $0.15 per share, equating to an annualized yield of approximately 4%
• Undrawn revolver availability: $324 million

Operational Updates

• Fleet size: 42 ships, including 16 Capesize vessels and 26 Ultramax and Supramax vessels
• Key commodities shipped include iron ore (44%), coal, grain, and minor bulks
• The company emphasizes high fleet utilization and fuel-efficient vessels
• Geographic focus remains global, with notable routes for iron ore, grain, and bauxite

Future Outlook

• Anticipated growth in iron ore and bauxite volumes from the Atlantic Basin
• New Vale iron ore production set to commence next year
• West Africa iron ore trade expected to reach 120 million tons by mid-2027
• Limited new ship supply until late 2028 or early 2029, seen as a market opportunity
• Management believes the stock is undervalued due to China-related concerns

Q&A Highlights

• Tariffs have minimally impacted the dry bulk business, except for grains
• China’s steel production is largely consumed domestically, with exports mainly to Asia and the Middle East
• Share buyback program complements the dividend policy and is used strategically
• Brazilian iron ore exports are significantly impacting shipping rates

For a deeper understanding, readers are encouraged to refer to the full transcript below.

Full transcript - Sidoti’s Small-Cap Virtual Conference:

Operator: Just type your question in, and management will answer them after the prepared remarks. Fortunately, we are joined today by Genco Shipping and Trading. Let me introduce the team. We have Michael Orr, VP finance, Peter Allen, the CFO, and John Wobensmith, president and CEO. John will be doing the presenting.

John, please go ahead.

John Wobensmith, President and CEO, Genco Shipping and Trading: Great. Thank you very much, and we appreciate you you all having us today. So beginning with just a little basis background on the company. We are the largest US based dry bulk shipping company. We have 42 modern ships on the water today made up of both our large vessel types, which are Capesize vessels, and then our mid sized vessels, our Ultramax and Supramax, and I’ll go into a little more detail in a minute.

We are headquartered in New York, but we also have commercial offices in Singapore as well as Copenhagen. We transfer both major and minor bulks, major being iron ore, coal, and bauxite predominantly, Minor bulks being grains, cement, fertilizers, sugar, salt, gypsum really runs the really runs the gamut, and and all of our trade routes, which we’ll see in a minute, are very global. We have direct exposure to all the dry bulk trades with the mix of our which the mix of our fleet, which we believe is very important to having a a full look at the at the industry and what is happening on a day to day basis. We do provide a full service logistics solution to our customers, so we are getting our customers’ cargo from point a to point b and managing everything in between. We believe we’ve got, from an equity standpoint, the best risk return profile of the peer group with a very low leverage of 6% for net loan to value, but we also have a high dividend payout, And Peter is gonna go through that in more detail in a few minutes.

We’re very proud that for the last three years, we’ve been ranked number one from an ESG standpoint in terms of global shipping companies that are publicly traded. I believe there are 64 in that, in that group. We are a US filer, so high transparency. And we’re the only listed, dry bulk shipping company with zero related party transactions. And, again, that really goes, as a testament to how we view the company as well as our high very high corporate governance scores.

And we’re traded under GNK on the New York Stock Exchange. So if we look at the commodities that we primarily ship, iron ore is the the biggest at 44%. You can see over on the left or the middle part of the slide, iron ore is used in steel production. We also ship metallurgical and thermal coal for steel production and power generation. Grain, which can be used for human consumption, but it’s actually more on the livestock side in terms of coal, soybeans.

We also ship wheat, which is obviously on the human consumption side. And then minor bulks, again, really runs the gamut, and you you can see over on the right fertilizers, cements, pig iron. There’s a big, you know, 10% miscellaneous, which, again, is could be sugar, salt, gypsum. And if you look at global seaborne trade in total, dry actually makes up 46% of that total world trade. These are the key trade routes for iron ore, coal, grain, and the minor bulks.

The I think the routes that are that are very interesting to pay attention to are the iron ore and the and the bauxite as well as the grain routes, particularly coming out of South America going into China. There’s also iron ore that goes out of Australia, but those iron ore routes are the longest shipping routes in terms of dry bulk, which means they have a tremendous amount of operating leverage. They’re taking ships out of the market for a much longer period of time than some of the, some of the shorter haul routes. So we focus a lot on those iron ore, grain, and bauxite routes, bauxite coming out of West Africa. We have what we like to refer to as a barbell approach to our fleet makeup.

We have 16 Capesize vessels, which, again, are are trading iron ore, coal, and bauxite predominantly, and then 26 minor bulks the Ultramax and Supramax. One of the one of the differences is the Ultrasupramax can self load and self discharge as they have cranes onboard, whereas the Capes are going to more of a terminal type structure. The Capesize definitely has a higher beta versus the more stable earnings in in the minor bulks, and we think, again, it’s important to have that stability for that the minor bulks bring to us and the ability to create arbitrage opportunities and additional cash flows in beta, but also have the direct exposure to the iron ore markets giving giving high operating leverage and upside to the equity. If you look at our approach to capital allocation, three pillars, dividends, deleveraging, and growth. You can see we’ve paid 23 consecutive quarterly dividends since February.

Again, the longest in the peer group, aggregate dividends of $6.76, which represents about 50% of our current share price paid over time. We have paid down debt in a meaningful way over the last few years. 80% of, of the original debt since the end of twenty twenty has been paid down, so we’re at that 6% net loan to value today. And then we can we do continue to grow, particularly in fleet renewal. So we’ve been divesting our older, less fuel efficient assets, redeploying in more modern, more fuel efficient shipping assets.

And then just finishing up, before I turn it over to to Peter, this is a a really interesting graph. It it shows the volatility that exists in shipping, particularly in in the larger vessels. And what we’re what we’re getting across here is that we have set the company now up from a risk reward standpoint where we can always play offense. So as freight rates rise, there’s clearly significant significant operating leverage built into the fleet, particularly the larger Capesize vessels. But when things are softer, it presents opportunities from a countercyclical standpoint because of the strong balance sheet.

And I would also tell you just to finish up on dividends. Again, we’ve had those consecutive dividends, but dividends are very important to to shareholders. We believe heavily in in returning capital, and that plan will continue going forward. So with that, I will turn it over to Peter Allen, our CFO.

Peter Allen, CFO, Genco Shipping and Trading: Great. Thanks, John. So I’ll touch a little bit more on our comprehensive value strategy, which is essentially Genco’s approach to capital allocation. As John alluded to, we have a low financial leverage model, but we take advantage of the high operating leverage inherent in the drybulk business. In terms of our balance sheet, we have a cash balance of $31,000,000 as of March 31 and debt of only $90,000,000 resulting in a net debt position of about $60,000,000 on an asset base of approximately a billion.

So that results in a net loan to value of about 6%. On top of that, we have significant undrawn revolver availability of $324,000,000 that we can utilize for accretive growth opportunities as markets develop, and it gives us a lot of financial flexibility, within our balance sheet and capital structure. In terms of debt repayments since inception of our value strategy, we’ve paid down about 80% of our debt, as John alluded to. That’s about $350,000,000 that has been used in this current cycle to delever the balance sheet and really transform the balance sheet over that period of time. But we’ve also opportunistically utilized our debt and credit facility to purchase vessels as we see various opportunities as we did in Q4 of twenty twenty three and once again in Q4 of twenty twenty four, investing in high quality modern assets.

So we’ve been able to delever the balance sheet, grow the fleet, and we’ve also paid a significant amount of dividends over that time. And turning to our dividend policy, it’s a variable quarterly dividend. It’s based on 100% of operating cash flow, less a voluntary reserve. It does vary from quarter to quarter, and the beauty of it is that the operating leverage baked into the drybulk business flows through the financial statements and also flows through the the dividend policy. So the paying 100% of operating quarterly cash flow, and then we also have that voluntary reserve, which is within management and the Board’s discretion and can be flexed up or down in given quarter.

And in the first quarter in particular, which is highlighted on this page, our voluntary reserve is usually $19,500,000 With the softer Q1, we reduced that to $1,100,000 paying out a $0.15 dividend, which is about a 4% annualized yield. On top of our dividend policy, in May of this year, we also implemented a $50,000,000 share repurchase program that the board approved, and that is used that will be used opportunistically going forward. With that, I’ll turn it over to Michael Orr to discuss the drybulk market dynamics. Thanks, Pete.

Michael Orr, VP Finance, Genco Shipping and Trading: Beginning on slide 15, this chart really highlights the volatility and operating leverage of the Capesize segment. This is the year to date CapE rates as well as Supramax rates. And the CapE rates have nearly doubled in the last four weeks and are currently at year to date highs of approximately $26,000 per day with Supramax rates at approximately 9 to $10,000 per day. The uptick in rates has been large part thanks to strong volumes coming out of Brazil with that in May, saw the strongest iron ore exports since October of last year. Over the last two years, China has imported significant amount of iron ore.

And over that time, stockpiles have increased significantly. What is encouraging is that stockpiles have been coming down in China with stockpiles currently 7% lower than they were last year, and they’re currently at their lowest level since February of last year. So China has been drawing down those stockpiles. And with that, steel production is actually positive year to date with a significant amount of that steel being exported. In the near term, we expect significant volumes to come online in both iron ore and bauxite from the Atlantic Basin from Brazil as well as West Africa and Guinea.

What’s important is that for every one cargo coming out of the Atlantic Basin that has three times the ton mile impact of one cargo coming from Australia. So that’s really where you see the fleet gets stretched out, where you can see a pop in rates as supply of vessels becomes thinned out. Wanna touch briefly on the bauxite trade, which has really turned into a significant cape trade on the Capesize segment. We have seen 10% annualized growth over the past decade with majority of these volumes coming from the West Africa. And as I mentioned on the prior slide, this is long haul tons, both predominantly shipped on Capesize segments that has that ton mile impact from the Atlantic Basin.

In terms of the grain trade, we are currently in South American grain season with strong volumes coming from both Brazil as well as Argentina. China has been aggressive in purchasing large volumes from South America as there is uncertainty in terms of their supply come the fall when we turn more towards North American trade season. And finally, in terms of the supply side, the order book is currently approximately 10%, which is roughly in line with 10% of the fleet that is currently twenty years or older. So we view this order book largely as replacement tonnage. As the fleet gets older and older, these ships will be removed from the market and re replaced with this order book tonnage.

And this one for one swap is quite encouraging in terms of the supply side fundamentals. And with that, I will turn it back over to John.

John Wobensmith, President and CEO, Genco Shipping and Trading: Great. Thanks, Michael. So just to finish up a quick recap, and I think the the most important most important thing is that we we have a very balanced risk reward strategy. In fact, I would I would argue that we are the best best risk reward model in the peer group because of our low leverage and high dividend payout and our ability, again, to play offense in any type of a volatile market. We have an industry low cash flow breakeven rate, which Peter Allen went through, very strong balance sheet, high liquidity through our revolving credit facility, which allows us to manage interest rates interest rate risk, very well.

We have a fleet renewal growth strategy that is that is active. Very strong corporate governance, as I as I mentioned before, number one ranked for over the last three years from an ESG standpoint. And then in terms of revenue generation, you know, Michael Michael presented a fairly strong picture in the years to come, particularly because of the low supply and the low order book. And ordering today, you really can’t expect to get an a new ship until late two thousand twenty eight, early two thousand twenty nine. So you can put a lot of faith in what that supply situation looks like, which, as Michael pointed out, it’s effectively fleet replacement when you look at ships twenty years in order versus what’s, what’s on what’s on order today.

So with that, we will open it up for questions.

Operator: Well, terrific. And we got a few questions come in. So Right. Let me read them off. The no surprise, would come to the impact of tariffs, on your business, how you’ve managed through that, how it’s affected your planning, as well as execution and results.

John Wobensmith, President and CEO, Genco Shipping and Trading: So it has, it has not affected our business directly, from a dry bulk standpoint. Keeping in mind that with the exception of grains, there’s very little dry bulk cargo going in and out of, of The US. On the grain front, there’s there’s a 10% tariff that will be in place, and we will see what actually happens as we get into North American grain season, which really won’t come until September, October time frame. In terms of our largest commodities, so iron ore, coal, bauxite, you know, the the that’s all international trade. So it is not subject to, to any tariffs, whether it’s The US or or China.

So directly, not affected. Indirectly, and I think we’ve seen this over the last few months, it it has affected China’s economy. In a positive view, that probably means they’re gonna continue their stimulus efforts, which is good for infrastructure building, which is good for steel production, which is good for iron ore consumption. But, you know, I I still take a cautious outlook, from from the tariffs, that that were put in place a few months ago. Clearly, today, there seems to be a deal on the table, but I also think, I think it’s a little bit of a waiting game, until things are signed off by, officially by both countries.

Operator: Terrific. Just kinda sticking with China there because they’re such an important factor. You had a slide that showed, that effectively the iron ore imports turn into steel exports, and I’m wondering if you’re seeing any vulnerability there, any slowdown in So

John Wobensmith, President and CEO, Genco Shipping and Trading: iron ore goes into steel production as as you pointed out. I would say most of that steel production is consumed domestically. However, they they they have been exporting. There is there’s not a lot of exporting to The US on the steel front. I know there’s a lot of noise around steel tariffs, but the reality is there just isn’t a lot coming in, and there hasn’t been for a long time.

Most of that steel that is being exported is being exported to other Asian countries as well as as well as The Middle East.

Operator: Okay. Great. Just looking to the q one results that you announced probably a month or so ago, you also announced a share buyback program. Could you talk a little bit about that decision from a capital allocation standpoint and if there’s any things you want to share about it?

Peter Allen, CFO, Genco Shipping and Trading: Sure. Yes. I’ll start on that one. So yes, we had we had a net loss in Q1. Q1 is typically the seasonally worst quarter, and that came to fruition very much so in Q1 of this year.

Have poor weather in Brazil and Australia, new building delivery timing being front loaded and then the Chinese New Year, the confluence, aggregate of that really impacting the overall dry bulk market. So we’re essentially looking through that. We are a little bit more positive as we get on through the balance of this year, particularly into next year. Having said that from a capital allocation perspective, we saw that there was a lot of, noise, particularly in the macro, and that was disconnecting, many equities, not just ours, but many equities and valuations to the specific supply and demand fundamentals of our business. So we thought it was an opportunistic, tool within our tool belt to, to utilize that capital allocation, methodology and and add that buyback program on top of our favorable dividend policy.

John Wobensmith, President and CEO, Genco Shipping and Trading: Right. Yeah. Just to just to put a a fine point on it, it is incremental to our dividend policy so that there’s no fungibility between the two. They are two very separate things. And as Pete pointed out, we put that in place from an opportunistic standpoint.

So if we do see, you know, large volatility to the downside like we saw a couple months ago, then we have it, at our disposal to use.

Operator: Great. Maybe if we could come back to some of the demand drivers in your business. You mentioned that there had been an upsurge in demand for shipping from Brazilian ports. Could you describe how you’re taking advantage of that?

John Wobensmith, President and CEO, Genco Shipping and Trading: Mike, you wanna

Michael Orr, VP Finance, Genco Shipping and Trading: Yeah. So Brazilian iron ore exports have increased month over month for the past three. Typically, q one is the seasonally weakest point for Brazilian exports largely because of rainy conditions that hinder hinder movement of of iron ore. Once those once Brazilian iron ore exports ramp up, what’s great is that it’s a, you know, it’s a ninety day voyage from Brazil to China. So every time a ship loads in Brazil, it takes it out of the market for basically a whole quarter as compared to what what it calls an Australian port, it takes it out of the market for thirty to forty days.

So when Brazilian exports really ramp up, you really see it stretching up the fleet, and that’s where freight rates really rise because there’s a artificial supply reduction of capes on the market.

Operator: So kind of plunging into the details there of how you manage the fleet, what is your approach for ensuring, just the highest asset utilization you can? Is there anything you’d like to share there?

John Wobensmith, President and CEO, Genco Shipping and Trading: Yeah. Sure. So, we we certainly have very high utilization. We we always have, and it’s the nature of the industry. It certainly comes down more to to rates, you know, with that utilization.

And we depending on the time of year, we’ll deploy more in the Brazilian trade, less in the Australian trade, and then vice versa. We also have we also have a few ships that are on index type charters, which are pegged to the Baltic Capesize Index plus a plus a nice premium because they’re they’re relatively new fuel efficient vessels. So we also we I would call we have a more of a portfolio approach to how we generate revenues in the Capesize sector simply because of of the very large volatility that exists there both to the upside and and, you know, in at times down. But right now, I would say we’re fairly evenly deployed between Brazil and and Australia. And as as Mike pointed out, that Brazilian trade being ninety days, there’s a tremendous amount of operating leverage for the fleet on that trade.

And then Australia being shorter, if, you know, if we believe the market is going up, we we’ll we’ll tend to wait a little more towards Australia because it’s shorter trade, and and you wanna make sure you don’t miss any uptick in the market.

Operator: Great. Turning to how you manage the business, you had a slide that showed very low leverage levels, and that’s unusual for the shipping industry. Could you describe why you chose to do that, what it means to you strategically?

John Wobensmith, President and CEO, Genco Shipping and Trading: Yeah. So, again, I I I it’s a couple things. One, always wanting to play offense. Right? Companies that that have overleveraged themselves tend to wind up not being able to take take advantage of opportunities that present that are presented when the market does have downward volatility.

We wanna be able to take advantage of that situation, but we also wanna, you know, use when rates are up, we want to to pay out higher dividends. We obviously have a variable dividend policy. That dividend is very important. The and and we believe the way to keep a dividend going and not having to turn it off is having low leverage so that no matter what the market throws at you, you you can react, and you can react in a positive way and continue to pay dividends.

Operator: Right. There was also an interesting slide that, in effect, all of the new builds that are contracted for would be swallowed up by growth and demand for bauxite, other minerals being switched, shipped to to Asia. When do you you feel that will really start to pinch and start driving rates up?

John Wobensmith, President and CEO, Genco Shipping and Trading: So I’m if you look at the projects that are coming online Pete, do you have that slide? Yep. Alright. The IRR. There we go.

So if you if you look at the West the West Africa bauxite is alive and well and is and is you know, continues to grow today, and it and it’s actually a pretty significant trade now. And that’s really only happened over the last two to three years. The Vale iron ore production, that’s coming on starting next year. But then the big one is the West Africa iron ore at a 120,000,000 tons. And that will most I they they say that they’re gonna make their shipments at the end of this year.

I’m a little skeptical in terms of seeing that really ramp up until we get into the middle of next year. That’s that’s when I think you really start that West African iron ore trade, growing. And I think it to get to that 120,000,000 tons is somewhere around mid two thousand twenty seven. Is that right, Peter?

Peter Allen, CFO, Genco Shipping and Trading: Yeah. Starts Yeah. So

John Wobensmith, President and CEO, Genco Shipping and Trading: that’s that’s the time frame on on all this. And and as you pointed out, it it is it is very positive demand growth when you balance it again versus what’s actually gonna be delivering over the next few years in terms of new builds.

Operator: And, here’s a question, pointed sort of directly at, the stock price. What do you feel, investors are missing are missing? What is the market missing? Why should people be looking seriously at GNK today?

John Wobensmith, President and CEO, Genco Shipping and Trading: Look. We are, there’s no doubt we’re trading at a at a at a discount to, to net asset value. That’s very clear. I think when you look at, again, our leverage profile, our risk reward model, and our very high corporate governance, which is, gets lost in this industry quite a bit, unfortunately. You know, this is this company is is set up to be very shareholder friendly in, you know, in those multifaceted ways.

And I think I think it I my my view is, again and and it’s an opinion. I think anything to do with China right now has been sold off. And because when we go back and look at share prices, you know, versus where rates are today, that there’s a very very much a mismatch that’s going on. And I’m sure there are other I’m sure there are other things that are that are going into why, you know, these small cap shipping stocks are are trading at discounts. We’re obviously not the only one.

But I but I do believe it’s sort of this China off trade right now, and that that presents opportunity. I mean, it’s clearly a value stock at this point.

Operator: Interesting. Looks like we have time for one more question. Could you just talk about your competitive advantages, versus your peers?

John Wobensmith, President and CEO, Genco Shipping and Trading: Yeah. Again, as I said, you know, best risk reward model set up to play offense no matter what the market, come you know, brings our way. The the the dividend and then the very strong culture of, of high corporate governance. I I think that is very important to this industry, and and I’ll say it again. We’re the only only peer that has no related party transactions.

Everything we do, our ship management, our commercial management, it is all in house contained within the public entity.

Operator: You mentioned the absence of related party transactions, and, you know far more than I would about the industry, but it does seem pervasive. Why again have you chosen to be, different? What’s the strategy there?

John Wobensmith, President and CEO, Genco Shipping and Trading: So we’ve had we we’ve we’ve always been we’ve always had the mindset that we that we don’t want related party transactions. We think they create conflicts. There are certainly cases in a lot of these related parties where there are higher fees that are being charged to the company in order to manage vessels. So in order to keep our operating expenses, our g and a, anything to do with the ships at the lowest we can, we like to have it in house. We we don’t believe in in having the those related parties.

And, again, the big the thing is creating conflicts. And and decision making from this management team is solely made based on Genco, which I think is a a big positive.

Operator: Well, excellent presentation. Thank you, gentlemen, very much. We really appreciate that. If we didn’t get to all of the questions and there were quite a few, please contact your Sidoti representative. We’ll help you run down answers.

Thanks everybody for joining. Hope to see you next time. And thanks.

John Wobensmith, President and CEO, Genco Shipping and Trading: Thank you. Thank you again. Bye, Ben. Bye bye.

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