Star Bulk 3Q15 Earnings Call Notes

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Star Bulk Carriers’ (SBLK) CEO Petros Pappas on Q3 2015 Results

Hamish Norton – President

Deferring deliveries

“During the year, we’ve actively been negotiating with our shipyards and we have managed to agree on some measures that benefit the company’s liquidity. In Q3, we agreed to defer the delivery of four new building vessels from the fourth quarter of 2015 to 2016 preserving our liquidity and you know at some point increasing the vessel resale value as its going to be one year younger.”

Lower than industry operating expenses

“Star Bulk has operating expenses as we’ve said of $4,325 per vessel per day which is 17% lower than industry average excluding Star Bulk of $5,245 per day.”

Petros Pappas – CEO and Director

First half of 2016 may be especially challenging

“looking into 2016, we expect that the first half may be especially challenging which should ultimately be seen as a positive factor as it will encourage further scrapping and will largely discourage new building orders. The second half should start improving and we expect that during 2016 as a whole, demand should start picking up in comparison to 2015.”

There has been a slowdown in scrapping as people expected the market to go up

“ell, the first reason why scrapping slowed down, we should remember that the first six months of the year was about 21 million tons. And right now there’s another 7 million tons for their four and half months of the second half. The reason for this slowed down is because people expected that the market go up, but there is no question about that, that’s one reason.”

We definitely have structural problems around Chinese demand in the industry

“I think we definitely have a structural problem in two ways, first of all, there’s no question that there is a slowdown in China and that steel production will be much lower – the growth of the steel production will be much lower if not remaining around the same from where it is. So that’s the one structural issue. And a second structural issue is coal. There is also a trend there for less use of coal, so in that sense we have a structural issue.”

We’re in a new normal in this business with slower demand growth

“in my view, we’re starting in – we’re going to having a new normal in this business. I don’t gap I’m not sure that for a few years we’ll be seeing very high demand. This year demand was – is going to be about zero or thereabouts. We expect demand next year perhaps to be around 2% or 2.5% there’s number of reasons that I can discuss later on if you need about that. ”

We need to see a bit of blood in the streets. We’ll get there

“We need to see a bit of blood in the streets so that people don’t order and people scrap. And we’re not extremely far away from things turning around because in 2017 for example, our calculation is that net supply is going to be about 1.5%. And 2018 is going to be about 1%. So if you ask me I believe that we’ll get to the point that you ask, somewhere in 2017 onwards.”

First semester of next year will be time to buy

“I think that the best point in time to buy is going to be the first semester of next year.”

Christos Begleris – Co-CFO

Debt to net assets covenant at 80%, we are in the 50s or 60s now

“we have a corporate net debt to market value of the assets that is say that 80% and is tested on a quarterly basis. Net debt accounts for debt less cash available for the company. On the basis of evaluations of as of September we are actually in the high 50s or low 60s. So there is obviously significant room there. And market value of asset is defined to include the book value of work in progress at the yards.”