Welcome to the 2020 Bulkers Q2 conference call. For the first part of this call, all participants are in a listen-only mode. Afterwards, there'll be a question and answer session. To ask a question, please press five star on your telephone keypad. I'll now hand it over to the Chairman, Magnus Halvorsen. Please begin.
Thank you, operator. Welcome everyone, to the second quarter 2023 earnings conference call for 2020 Bulkers. As usual, I'm also joined here today by our CFO, Vidar Hasund. Before we start the presentation, we would like to remind you that we will be discussing matters that are forward-looking in nature. These forward-looking assumptions are based on the company's current views with regards to future events, and therefore subject to risk and assumptions subject to uncertainties. Actual results may differ materially. With that, I'll move over to the highlights for the quarter. 2020 Bulkers generated a net profit of $4.8 million in the second quarter, continuing our unbroken track record of profitability since we took delivery of our first vessel.
We again outperformed the Capesize Index and achieved average time charter equivalent earnings of $23,800 per day, compared to the Baltic Capesize Index, which averaged out at approximately $15,600. For the months of April through June, we made total cash distributions of $0.19 per share. This represents an annualized yield of around 8% based on the current stock price. Last week, we also announced a cash distribution of $0.04 per share for the month of July. Far in the quarter, we started off July with average time charter equivalent earnings of $21,200 per day gross. During August, we also amended and extended our time charter with Koch for Bulk Sandefjord. With that, I will leave it over to Vidar for the financial highlights.
Thank you, Magnus. 2020 Bulkers reports a net profit of $4.8 million for the second quarter of 2023. Operating profit was $8.1 million, and EBITDA was $11.1 million for the quarter. Earnings per share was $0.21. Revenues were $17.1 million for the second quarter, and the average time charter equivalent rate was approximately $23,800 per day gross. Vessel operating expenses were $5 million, and the average operating expenses per ship per day was approximately $6,900 in the second quarter. G&A for the second quarter was $0.8 million. 2020 Bulkers charged Himalaya Shipping $0.3 million in management fee for the second quarter, which is recognized as other operating income in the financial statements.
Net financial expenses was $2.6 million, including interest expense of $2.8 million in the second quarter. Shareholders' equity was $155.5 million at the end of the quarter. Interest-bearing debt was $213.9 million at the end of the second quarter, down from $217.6 million at the end of the first quarter, reflecting scheduled debt repayments. Cash flow from operations was $6.8 million for the second quarter. Cash and cash equivalents were $15.1 million at the end of the quarter. The company declared total cash distributions to shareholders of $0.21 per share for the months of April, May and June 2023. That completes the financial section. Now back to you, Magnus.
Thank you, Vidar. As you can see from this slide, we continue to show strong commercial performance. Not only are we outperforming the Capesize Index, but we're also performing very well compared to our listed peers, who report separate earnings for their Cape and Newcastlemax fleets. Having a look at the markets and the year so far, we started off with the usual seasonal weakness during January and February, before the market firmed towards the end of Q1 and during Q2. During Q3, the market has so far not shown its usual seasonal strength, in spite of very strong ton mile growth at 5% up compared to last year for the same period.
We think the main reason for the market not being stronger yet is that we've seen a significant unwinding of congestion, which is now down to historically very low levels that we'll get back to a little bit later. Now, looking at our dividend potential. This slide shows our illustrative dividend capacity as well as our current charter coverage. As you can see, the fixed rate coverage we had earlier in the year is rolling off and will be completely spots towards the end of September. The FFA curve for the balance of the year currently sits at just under 18,000 per day, which would imply a monthly yield of just under NOK 1 per share per month for the balance of the year if the FFA curve was locked in today.
This, of course, is not guidance that the market may move, but should give you at least an indication of where the current expectations in the FFA market sits. Now, taking a look at some of the main drivers in the market. Overall ton miles, as mentioned, was up around 5% year-to-date relative to the same period last year. This is mainly driven by recovering iron ore shipments, but also a continued increase in bauxite volumes. Bauxite now represents 10% of the Capesize trade, measured in ton miles, up from 4% five years ago. Interestingly, congestion, here measured as the percentage of Capesize fleet import at any given point in time, is now down to around 22%. This is the lowest level seen in years, including the pre-COVID period.
Needless to say, the unwinding of these congestions had, had a negative impact on rates, and any normalization would tighten the effective utilization in the market. Now, looking at some of the key metrics for the steel market. The global crude steel production for the period of January through June was down 0.9% compared to the same period last year. The world ex-China was down 4.8%, while Chinese steel production increased around 2.3%. Moving on to the iron ore market. We've seen strong iron ore imports to China this year, with 660 million tons imported, up around 7% year-over-year. In spite of the increased imports, as you can see, the iron ore inventories have been dropping, are currently at levels below the last year level and below the five-year averages.
This could suggest some need for restocking going forward. Also, based on the collective guidance from the largest iron ore producers, we expect to see an increase in output this year compared to last year, which should continue to support the shipping volumes. Having a review of the order book. It keeps on shrinking, and we're now down to 4.7% of the existing fleet on order. This, in combination with Chinese yards having very little capacity for new orders before the end of 2026, gives us great visibility for the coming years. Growth in vessel supply will be moderate, and looking at Clarksons data, it's expected that around 10.9 million DWT will be delivered in 2023, dropping further to 7.3 in 2024, and 5.5 million DWT in 2025.
As a consequence of the high ordering of container vessels, the Chinese yards, as mentioned, have very little capacity for new orders until the end of 2026. Scrapping this year sits at 0.85 million DWT , compared to 1.67 million DWT during the same period last year. Lastly, although it's still hard to quantify the exact effects, we are great believers that the implementation of CII and EEXI will have an impact on all the less fuel efficient ships going forward. As data from Clarksons suggest that 67% of the large bulker fleet may be non-compliant by 2030. Looking at this in context of the low order book just mentioned, we believe we are facing a very attractive supply side in the coming years. With that, I'll conclude the presentation and leave it over to the operator for questions.
Thank you. If you do wish to ask a question, please press five star on your telephone keypad. To withdraw your question, you may do so by pressing five star again. There will be a brief pause while questions are being registered. The first question will be from the line of Frode Mørkedal from Clarksons Securities. Please go ahead. Your line will be unmuted.
Hello, Frode.
Thank you. Thank you. Hi, Magnus. yeah, thanks for the good, detailed, slide deck there. I guess sentiment in dry bulk is fairly weak recently, not helped by the ongoing problem in China. It's interesting that the FFA market has been moving quite significantly higher recently in the past few days, right? Above $18,000 per day now for Q4. Just curious, what do you think is driving that strength?
Well, right now, in the short term, I think it's Brazilian volumes, which, as you know, are, are long haul, that are, are the strongest point. There's actually a bit more tightness in, in that basin than in the Pacific. Also, as you know, we're, we're kind of heading into where we should be in a period where there is more seasonal strength. Typically, Q3 and Q4 are the, the seasonally stronger months. I, I think if you look at the market, and I think if you look at the slides, Yes, the narrative in China is very negative, and there's no doubt that the Chinese property industry, in particular, is having its issues in spite of the government's attempt to revive it.
I, I think what's quite encouraging is to see that trade is actually up this year. I, I think, if you look at that graph we provided, showing how, you've had the very sharp move down in congestion, I think that's probably the explanation why rates aren't stronger right now. I think you also see that we're now at levels where the market very rarely has sustained in terms of efficiency in the past. I think as long as the volumes are flowing at the rate they are now, if, if the operating patterns with a bit more idle time were more normal, I think we, we would see a stronger market. That's probably what's, what's led the, the, the recent move in FFAs.
I think today was probably the first day where the physical Baltic Index actually followed up with a reasonable move as well. I guess it remains to, to, to be seen, but, but I think there's some interesting data points out there. I think another thing as well, which is worth mentioning or highlighting on the market, is, in spite of a strong recovery in iron ore imports into China, their inventories keep on dropping. There's quite a lot of negative analysis out these days with regards to iron ore prices, and seems to be a consensus forming that we're heading into a more supply-driven market for iron ore. That could be an interesting thing for, for our market.
As we know, the Chinese have typically, in the past, used moments of weakness in, in any commodity price to accumulate. Seeing that in, in context of the low inventories we're having now, I think, I think it could be, could be interesting. The short answer to your question is, right now, it's, it's, a pickup in Brazilian activity that's, that's driving, the expectations.
Yeah. Great. I guess that the Brazilian typically tend to build inventories, during the fall in anticipation of the Q1, you know, season of weakness, right? Where there's typically difficulties in the shipping volumes that you have.
Yeah, what we saw earlier in the year was that, I think to a larger extent than normal, Vale, was producing more than they had, than they shipped. I think there's a bit of a catch-up to be done there. I think what will be interesting to see this year, which happened last year, bauxite, volumes were very good in Q4 last year out of West Africa. I think as we pointed out, bauxite has become quite a meaningful trade. I mean, in terms of, volumes, we're talking 10%, but it's also, a trade that absorbs a lot of shipping capacity due to the transshipment that's taking place in the West Africa ports of Kamsar.
Yeah, we'll, we'll see what happens, but for the market to be stronger in Q3 and Q4 would be quite normal.
Yeah. I guess again, the Q1 is coming up, and the FFAs are weaker there as always. I guess you on, on the one side, you have a El Niño effect, which probably will make it drier, right? Less export hiccups, if that's the right word. I'm just curious, how, how do you think about that Q1? You, you usually try to bridge Q1 weakness by taking some coverage, right? When you, when you, when you look at FFA curve now at $18,000+, is, is that interesting levels to, to think about Q1 weakness?
Yeah, I think, as you're right, I think you should expect that we, at some point, do some blending where we use the Q4 and Q1 curve, average it out to get some coverage and, and cash flow coverage for, for, for the, for the seasonally weak period. I think just the way we're looking at the market right now, with volumes being good, with, hopefully, efficiencies or lack of congestion being unsustainably low and, and the prospects of an active season out of Brazil and, and, and for bauxite, I think, we'll probably have a better chance to do that a few weeks out from now to start doing it.
Expect us to do the same, but, but we, we haven't done anything yet, and I think it seems to have some legs, this market now. Hopefully that can give us an opportunity to get some higher coverage than what we're seeing presently.
Yeah, makes sense. My final question is more on the long-term vision for the company. Maybe you could remind us what's your, what's your strategy here? I understand, you want to focus on distributing dividends, rather than acquiring newbuilds, at least. Could you consider maybe acquiring second-hand ships now that prices have come up a bit, and you have this fairly optimistic view, on the future, I guess? How flexible are your strategies?
No, it's not in our strategy to look at newbuilds, we want to keep on being able to earn free cash flow and, and, and distribute that to shareholders. As you know, you know, newbuilds, you have to start putting down money now for something you get late 2026, 2027. I think we would definitely look at modern, similar vessels to what we have, but that would require two things. We would need to have a currency that's that's strong, and we would need to be able to buy something cheaper than where we're trading. With where things are now, I think the, the stock currently values our average ship around $51 million or so.
Anything we bought, I think, would be more expensive than, than where we're trading. It's not out of the question, but with the, the, the stock is not too cheap or in the priced well enough to give an attractive opportunity. Of course, if we were to do anything along those lines, it would have to be something that's really meaningful in terms of, of, of, of being accretive, on the dividends, or cash flow distribution. I think if you're priced at $55 million, and you buy something at $54 million, you know, it's a very thin margin, and, and you have to pay some fees to bankers, et cetera. It needs to be a, a, a more meaningful premium, where the transaction actually makes a difference and, and does increase the, the distribution capacity per share.
That's where we are now.
Great. Understood. Thank you.
Well, thank you.
Thank you. As there are no more questions, I will hand it back to the speakers for any closing remarks.
Okay. I think no further comments from our side. Feel free to reach out if you have questions you forgot to ask, and thanks for those calling in to our conference call. Thank you.