Cash Flow and Cash

Cash Flow and Cash

The Group’s four main sources of funds are operating cash flows, secured loans, convertible bonds and equity. The major factors influencing future cash balances are operating cash flows, the sale and purchase of vessels, and the drawdown and repayment of borrowings.

As part of the ordinary activities of the Group, the Treasury function actively manages the cash and borrowings of the Group to ensure sufficient funds are available to meet our Group’s commitments and an appropriate level of liquidity is maintained during different stages of the shipping cycle.

Over the long term, we aim to maintain a consolidated net gearing of no greater than 50% – defined as the ratio of net borrowings to net book value of owned vessels – which we believe is appropriate over all stages of the shipping cycle.


During 2018:

  • Our operating cash inflow further improved to US$189.5 million, as compared with US$72.1 million in the first half of 2018 and US$124.7 million in the full year 2017 on the back of better dry bulk market conditions.
  • In June we closed a new US$325.0 million syndicated 7-year reducing revolving credit facility secured against 41 previously mortgaged vessels and 9 unmortgaged vessels at an interest cost of LIBOR plus 1.5%. The facility refinanced 6 existing committed loan facilities and raised an additional US$136.0 million in available funding. Upon closing, the facility was fully drawn.
  • In November we extended an existing term loan by an additional US$40.0 million at an interest cost of LIBOR plus 1.5% secured by the same 19 vessels under the original facility.
  • Including the effects of refinancing, our secured borrowings increased by US$75.7 million in cash after we drew down net US$185.3 million under new committed loan facilities while making net repayments of US$109.6 million.
  • We incurred capital expenditure of US$127.9 million:
    1. we paid US$20.8 million cash for a Supramax newbuilding resale in January;
    2. we purchased a secondhand Handysize for a cash payment of US$12.2 million in April;
    3. we committed in May to purchase one secondhand Supramax, one secondhand Handysize, one Supramax newbuilding resale and one Handysize newbuilding resale for a total consideration of US$88.5 million which was funded by way of i) the issue of new shares to the ship sellers equivalent to US$44.3 million, and ii) a cash payment of US$44.2 million of which US$39.3 million was paid in 2018 and the balance US$4.9 million was paid in early 2019;
    4. we purchased a secondhand Supramax for a cash payment of US$16.4 million in August; and
    5. we paid US$39.2 million for routine dry dockings, including the initial installation of ballast water treatment systems and other costs.

As at 31 December 2018:

  • The Group’s cash and deposits were US$341.8 million reflecting a 34% net gearing ratio.
  • Our unmortgaged vessels comprise eight vessels (including two vessels delivered in early 2019 and one to be delivered by the end of March 2019) with an aggregate estimated market value of approximately US$147 million.
  • Our committed banking facilities were fully drawn.

Sources and Uses of Group Cash in 2018

Cash and Deposits

The split of current and long-term cash, deposits and borrowings is analysed as follows:


US$ Million 2018 2017 Change
Cash and deposits 341.8 244.7 +40%
Current portion of
long-term borrowings (223.7) (104.1)
Long-term borrowings (737.4) (776.9)
Total borrowings (961.1) (881.0) -9%
Net borrowings (619.3) (636.3) +3%
Net borrowings to
shareholders' equity 50% 55%
Net borrowings to net
book value of owned
vessels KPI 34% 35%
Net working capital 140.4 136.8 +3%

Treasury is permitted to invest in a range of cash and investment products subject to limits specified in the Group Treasury Manual. These include overnight and term deposits, money market funds, liquidity funds, certificates of deposit and structured notes.

Treasury enhances Group income by investing in a mix of financial products, based on the perceived balance of risk, return and liquidity. Cash, deposits and investment products are placed with a range of leading banks, mainly in Hong Kong.

The Group’s cash and deposits at 31 December 2018 comprised US$339.2 million in United States Dollars and US$2.6 million in other currencies. They are primarily placed in liquid deposits of three months or less and saving accounts. This maintains liquidity to meet the Group’s vessel purchase commitments and working capital needs.

During the year, Treasury achieved a 2.3% return on the Group’s cash.

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Cash Flow and Cash

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