A Solid Performance All Round for Pacific Basin
It is fulfilling to report that Pacific Basin delivered a strong performance in 2018. Having pursued several positive initiatives in recent years to position ourselves for the dry bulk market recovery, the Company generated significantly larger operating cash flows and our strongest earnings since 2010.
Usual seasonal weakness at the start of 2019 has been further undermined by the US-China trade dispute and Chinese coal import restrictions, casting uncertainty over the strength of dry bulk demand. On the positive side, the fundamentals for our minor bulk segment look encouraging, but we are bracing ourselves for increased freight market volatility in 2019. As we have shown before, Pacific Basin has what it takes to navigate such turbulence adeptly.
2018 Final Dividend
In view of our return to a meaningful level of profitability, the Board recommends a final dividend of HK3.7 cents per share (2017: nil). Combined with the HK2.5 cents interim dividend distributed in August, this represents 50% of our net profit for the full year (excluding disposal gains), consistent with our dividend policy
Effective Platform for a Sustainable Business
Exceptional Fleet and Robust Business Mode
We added several modern secondhand vessels to our world-leading fleet of minor bulk ships in 2018 and sold one older, smaller ship. Planning for the future, we aim to gradually grow and renew our Handysize and Supramax fleets further, including by trading up our smaller, older ships to larger, newer vessels with longer life at attractive prices
The scale of our fleet and uniform design of our interchangeable ships enable our experienced colleagues in 12 offices to provide the most reliable freight service to our cargo customers around the world, while combining our ships and cargoes to achieve high laden utilisation and TCE earnings that outperform the market indices. Our fleet scale and versatility, global coverage, ship operating and cargo expertise and customer focus sit at the heart of our business model.
Competitive Funding, Healthy Balance Sheet and Competitive Cost Structure
Four of the ships we acquired in 2018 were in aggregate 50% funded by issuing shares in a transaction that is accretive to our earnings per share. Other fundraising initiatives included closing competitive revolving credit and term loan facilities amounting to US$365 million.
These initiatives all contribute to our competitive P&L breakeven levels and further enhance our funding flexibility, operating cash flow, EBITDA and balance sheet strength. Our cash position increased to US$342 million at 31 December 2018 with net gearing of 34% (net debt to net book value of our owned fleet).
We continue to maintain good control of our daily vessel operating expenses and G&A overheads with efficiencies across our business, reinforcing our platform for success in the years ahead.
World-class Industry Reputation, Excellent Team, Sensible Values
We again received several awards in 2018, including Lloyd’s List’s Dry Bulk Operator of the Year award and the International Bulk Journal’s Customer Care Award. These recognise our commitment to quality operations, fleet growth, a superior customer experience and a truly customer-focused infrastructure and business model.
Underpinning this reputation is an exceptional team of executives, staff and ships’ crews whose experience and passion for delivering excellent service help drive us towards our vision of being the first choice partner for customers and other stakeholders.
We take a thoughtful approach to how we run our business and care for our customers and employees. Our business is people-driven, so success hinges on strong relationships with customers, suppliers and other business partners.
We continued to invest intelligently in staff training and development, which resulted in excellent safety performance at sea, enhanced productivity ashore, and leadership development that is the backbone of our strong succession planning.
Experienced Board and Strong Governance
Our Chief Financial Officer Peter Schulz joined our Board as an Executive Director in July 2018, and the Board now comprises three Executive Directors and six Independent Non-executive Directors with a broad range of commercial, strategic, operational, legal, financial and accounting experience and strong shipping and commodities expertise.Our commitment to strong corporate governance – sound internal controls, transparency and accountability to all stakeholders – continues to underpin all components of our business and seeks to enhance stakeholder confidence in Pacific Basin as a partner and a place to invest
Robust Strategy and Well-Positioned for the Future
We remain committed to our Handysize and Supramax focus, our effective strategy and to always refining and improving our fleet and how we do business. Staying true to our corporate mission and values – such as through customer attention and solutions focus, responsiveness and reliability, safety and care, and integrity and accountability – is key to the longer term sustainability of our business, irrespective of market conditions.
We embrace and have prepared well for the recent raft of environmental regulations to impact shipping including the Ballast Water Management Convention, IMO 2020 sulphur cap and IMO’s ambitious strategy to significantly reduce total greenhouse gas emissions from shipping. We have an excellent team to lead and roll out our preparations, and are well-equipped to adapt and cope both practically and financially with compliance and new technology.
We remain well positioned to capitalise on opportunities in the minor bulk segment, more of which could emerge from the volatility that is expected this year.The Company is in good financial health, has a proven business model and a large competitive fleet with a low cost base. It has the excellent people, governance structure, strategies, systems and reputation that are key to enhancing our already competitive market position.On behalf of the Board, I thank our loyal customers, suppliers, staff and other stakeholders for their valued support of Pacific Basin.