Management’s future plans for acquisitions or buybacks and capital deployment are significant drivers of a company’s future prospects. In this article, we’ll analyze the future plans for companies in the dry bulk shipping space in the face of a current weak market scenario.
The SPDR S&P 500 ETF Trust (SPY) covers the broader industry index.
DryShips sells tankers
To weather the current downturn in the dry bulk space, DryShips (DRYS) sold its ten tankers to founder and CEO (chief executive officer) George Economou. DRYS originally planned to take its tanker fleet public but ultimately opted for a sale to pay off a bridge loan.
Interestingly, the sale happened at a time when the tanker market is doing very well. In its latest earnings call, DRYS management said the company has very limited capex (capital expenditure) requirements with no newbuilds on order.
Diana buying vessels every couple of months
While DRYS has taken a reactive approach, Diana Shipping (DSX) has taken a very proactive approach by buying new vessels and investing $15–$20 million every two months or so. This is to take advantage of the current low valuations of vessels.
DSX’s management mentioned that the company can easily spend another $150 million from its equity, which means more than $300 million in new purchases. In addition, it has a $72 million capacity remaining out of a total $100 million authorized by its board for a share repurchase program.
Efforts to weather the current downturn
Safe Bulkers (SB) has pushed back the delivery of six newbuilds out of a total of ten. Its current delivery schedule for vessels is two in 2015, three in 2016, four in 2017, and one in 2018. As we’ll discuss in detail later, SB has also reduced dividends to weather the current industry downturn.
Navios Maritime Partners (NMM) recently acquired one more containership and is constantly trying to be a container-focused MLP. The company’s management, however, didn’t give any clear indication about future acquisition plans.
Navios Maritime Holdings (NM) through the Navios joint venture, including NM, NMM, and Navios Maritime Acquisition (NNA), announced the acquisition from HSH Nordbank AG on April 23 of 14 distressed vessels, or seven vessels each of dry bulk and containers.