Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Carriers conference call on the second quarter 2022 financial results. We have with us Mr. Petros Pappas, Chief Executive Officer, Mr. Hamish Norton, President, Mr. Nicos Rescos, Chief Operating Officer, Mr. Simos Spyrou, and Mr. Christos Begleris, Co-Chief Financial Officers of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session at which time, if you wish to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today. I'll now pass the floor to one of your speakers today, Mr. Begleris. Please go ahead, sir.
Thank you, operator. I am Christos Begleris, co-CFO, CFO of Star Bulk Carriers, and I would like to welcome you to our conference call regarding our financial results for the second quarter of 2022. Before we begin, I kindly ask you to take a moment to read the safe harbor statement on slide number two of our presentation. In today's presentation, we will go through our second quarter results, cash evolution during the quarter, an overview of our balance sheet, an update on our scrubbers and vessel operations, the latest on the ESG front, and our views on industry fundamentals before opening up for questions. Let us now turn to slide number three of the presentation for a summary of our second quarter 2022 highlights.
Net income for the second quarter amounted to $200.2 million and adjusted net income of $204.5 million or $2 adjusted earnings per share. Adjusted EBITDA was at $258.3 million for the quarter. For the second quarter, as per our existing dividend policy, we declared a dividend per share of $1.65, payable on or about September 8, 2022. The graph on the bottom of the page highlights the cumulative performance over the last 12 months, which illustrates the strength of the platform in a robust dry bulk market. Our last 12 months adjusted EBITDA is $1.12 billion and adjusted net income is $907 million.
Over the same period, we have returned a cumulative dividend of $6.55 per share or $674 million to our shareholders. On the top right of the page, you will see our daily figures per vessel for the quarter. Our time charter equivalent rate was 30,451 per vessel per day. Our combined daily OpEx and net cash G&A expenses per vessel per day amounted to $5,684. Therefore, our TCE less OpEx and G&A is 24,767 per vessel per day. Looking at our chartering coverage for the third quarter of 2022, we have covered 61% of our fleet's available days at the daily rate of $29,000 per day. Slide four graphically illustrates the changes in the company's cash balance during the second quarter.
We started the quarter with $444.4 million in cash and generated meaningful positive cash flow from operating activities of $239.9 million due to the strong freight market. After including debt proceeds and repayments, CapEx payments for ballast water treatment system installments, and the first quarter dividend payment, we arrive at a cash and cash equivalent balance of $385.6 million at the end of the quarter. Please turn to slide five, where we highlight the continued strength of our balance sheet. Our total cash today stands at $474 million. Meanwhile, our total debt stands at approximately $1.4 million.
We have refinanced $300 million of older facilities, debt facilities that decreased our annual debt repayments by $11 million and reduced our interest costs by $4 million per year as a result of achieving significantly lower margins. Our next 12 months' amortization is $188 million. After the completion of the recent refinancings, we have 12 unlevered vessels with market value in excess of $210 million and no debt maturities until 2024, where we have $32 million of balloon payments, part of which we're in the process of refinancing. In a decreasing interest rate environment, we have fixed 55% of floating interest rate exposure at an average fixed rate of 45 basis points for an average remaining maturity of 1.7 years. I will now pass the floor to our CFO, Nicos Rescos, to talk about our scrubbers and provide an update on our operational performance.
Thank you, Christos. On slide six, we would like to update investors about our scrubber investment. We are pleased to report that as of mid of June, within a time span of two and a half years, we have recovered $250 million scrubber investment. This cost includes only capital expenditure as well as the higher cost involved during the installation of our scrubbers. On the scrubber utilization front, Star Bulk has by now surpassed 108,000 scrubber operating days with an average of 99.5% system availability on board. With 94% of our vessels scrubber fitted and a higher and higher spread acceptable, our confidence to provide better visibility for the foreseeable future.
When it comes to the slide, we were able to illustrate the impact the scrubber benefits can have on our bottom line based on consumption of approximately 700,000 tons of HSFO consumed per annum. Indicatively, the average Hi-5 spread achieved during the second quarter was $323 per ton. As you can see at the bottom part of the slide, the forward Hi-5 spread is in steep backwardation versus the spot market. Please turn to slide seven, where we provide an operational update. Operating expenses, excluding non-recurring expenses, was at $4,674 for the quarter, second quarter of 2022. Net cash G&A expenses were $1,010 per vessel per day for the same period.
Despite continued adverse COVID-related expenses and inflationary pressures, which have a direct impact on our operating expenses, the combination of our in-house management and the scale of the group enable us to sustain a very competitive cost base and maintain our position as the lowest cost operator among our peers. In addition, we continue to rate at the top among our listed peers in terms of ESG rating. Slide eight provides a fixed snapshot and some guidance around our future dry dock and ballast water system expenses for the next 12 months and the relevant total off-hire days. Our expected dry dock expense for the next 12 months is estimated at $33.2 million for the dry docking of 33 vessels with another $13.4 million towards our vessel upgrade CapEx.
In total, we expect to have approximately 1,000 off-hire days for the forward 12 month period. We anticipate that 98% of our fleet will be fitted with ballast water systems by the end of Q4 of 2022. The above numbers are based on current estimates around dry dock and retrofit planning, vessel employment, and yard capacity. I will now pass the floor to our Chief Strategy Officer, Charis Plakantonaki, for an ESG update.
Thank you, Nicos. Please turn to slide nine, where we highlight our continued leadership on the ESG front. A major new development is a decision by Star Bulk's board of directors to establish an ESG committee which will guide and support management on environmental, social, and governance matters in order to ensure that the company promotes and integrates ESG in its strategy and business operations. On the environmental front, Star Bulk has taken part for a second year in the annual assessment cycle for the Carbon Disclosure Project. In addition, we are actively participating in the IRR Consortium, along with some of our major charterers, to assess the feasibility of a green corridor on the Australia-Asia route up to 2050.
Furthermore, in an effort to continue to improve on our sustainability performance, we have participated in the annual S&P Global Corporate Sustainability Assessment, which will provide us with a score and ranking based on various financially relevant ESG criteria. Finally, from the societal point of view, Star Bulk has partnered with UNICEF to provide psychosocial support to refugee women and children who have fled to Greece as a result of the war in Ukraine. I will now pass the floor to our CEO, Petros Pappas, for a market update and his closing remarks.
Thank you, Charis. Please turn to slide 10 for a brief update of supply. During the first half of 2022, a total of 15.6 million deadweight was delivered, and 1.8 million deadweight was sent to demolition for a net fleet growth of 13.8 million deadweight or 1.5% year-to-date and 3% year-on-year. The supply outlook is the best in the recent history of dry bulk shipping. The order book stands at only 7.1% of the fleet, with just 9.4 million deadweight reported as firm orders between January and June. Uncertainty in future propulsion, along with surging shipbuilding costs, have helped keep new orders under control while shipyards continue to fill 2025 capacity with more profitable to the shipyards vessels.
Furthermore, despite the correction of global steel prices during the second quarter, inflated scrap prices may incentivize the demolition of overage tonnage without scrubbers during seasonal downturns. We expect this to intensify after the implementation of the EEXI, CII regulations that come into effect as of 2023. The average steaming speed of the fleet has decreased by 2.8% during the last year to 11.3 knots, as a result of a strong increase of bunker costs. We expect oil prices and bunker costs to remain inflated for the next quarters amid the sanctions imposed by the Western countries on Russia. This situation, along with the new environmental regulations, will continue to incentivize slow steaming and will also support wider scrubber savings.
Global port congestion, and especially deep-sea congestion in China, has experienced a decline during the last months as pandemic-related restrictions are easing and reduced arrivals helped ease port delays. Having said that, congestion for smaller vessel types remains at high levels due to changes in trading patterns and seasonal bottlenecks. As a result of the above trends, net fleet growth is projected to drop below 2.5% in 2022 and is unlikely to exceed 2% during 2023 and 2024. Let's now turn to slide 11 for a brief update of demand. According to Clarksons, total dry bulk trade during 2023 is projected to expand by 0.1% and 1.7% in tons, and by 1.4% and 1.9% in ton-miles respectively.
During the first half of 2022, total dry bulk volumes were down by approximately 0.5%, mainly due to a 6% decrease of Chinese imports as a result of the country's zero-COVID policy, export disruptions, and the war in Ukraine. However, trade growth is expected to recover during the rest of the year, supported by export seasonality and winter restocking needs worldwide. Furthermore, the reshuffling of coal, grain, and minor bulk trade patterns to longer haul routes will inflate ton-miles and help moderate the weaker volumes seen during the first half of 2022. Iron ore trade is expected to expand by 0.3% in tons and 0.1% in ton-miles during 2022. China's steel industry went through a strong slowdown over the last year due to significantly higher input costs and a weak real estate market.
During the first half of the year, steel output from China decreased by 6%, and from the rest of the world by 3% due to negative profit margins and a drop of production from the high energy-intensive electric arc furnaces. Nevertheless, China pig iron output is experiencing a recovery supported by infrastructure stimulus, and iron ore port stockpiles during the second half of the year experienced a sharp decline. During the first half of the year, Brazil iron ore exports decreased by 7% with Vale recently announcing an annual guidance between 310 and 320 million tons, which is flat from last year, but indicates higher shipments for the rest of the year. Coal trade is expected to contract by 0.44% in tons, but to expand by 3.3% in ton-miles during 2022.
Sanctions announced by major importers on Russian coal, limited capacity for expansion of Atlantic producers and soaring gas prices have pushed coal prices to record high levels. European buyers are restocking coal ahead of the winter and are substituting imports from Russia with Australia and Indonesia, while Russia is exporting more coal to China, India, and other Asian countries, a situation that is benefiting ton-miles. During the first half of the year, China and India have increased their domestic production significantly in order to help raise stocks, reduce prices, and be less dependent on imports. However, India's stockpiles still stand at relatively low levels, and imported coal needs to remain high in order to avoid last year's blackouts, and therefore, strong demand is expected after the monsoon season.
Grain trade is expected to contract by 3.7% in tons and 0.5% in ton-miles during 2022. Ukraine exports account for approximately 10% of total grain trade, and since the invasion in late February, exports have fallen to almost zero. During the first half of the year, grain shipments declined by 11.5% as a result of the war, poor weather conditions in Brazil, and a strong spike in prices. On the other hand, U.S. soybean outstanding sales stand at record high levels for this time of the year, while the Brazilian corn season has started with inflated volumes, indicating stronger grain trade during the second half and the fourth quarter. During the next few years, China's demand for grains is projected to be strong as the five-year plan is focused on food security and inventory building.
Minor bulk trade is expected to expand by 1.1% in tons and 2.1% in ton-miles during 2022. Minor bulk trade has the highest correlation to global GDP growth and is receiving support from the strong container ship markets. The IMF projects global GDP growth to 3.2% during 2022 and 2.9% during 2023. Shortages of steel products in the Atlantic and a positive price arbitrage should further inflate backhaul flows from the Pacific and provide support for year tonnages. Moreover, expanding West African bauxite exports continue to inflate ton-miles with year-to-date exports up by 8%. Finally, we remain optimistic for the prospects of the dry bulk market and our company is well-positioned to enjoy and take advantage.
The record low order book, combined with the lack of yard space, upcoming environmental regulations and high bunker costs and suppressing orders and speeds and create a favorable supply side picture for our industry in the long term. On the demand side, there are short-term risks, but strong commodity flows over longer distances due to the change of trade patterns are expected to support earnings over the next years. Without taking any more of your time, I will now pass the floor over to the operator to answer any questions you may have.
Thank you, sir. As a reminder, to ask a question, you will need to press star one one on your touch tone keypad. Please stand by while we compile the Q&A roster. I show our first question comes from the line of Amit Mehrotra from Deutsche Bank. Please go ahead.
Hi, guys. This is Chris Robertson on for Amit. Thanks for taking our call.
Hi, Chris.
I just wanted to ask, so you have relatively young Newcastlemaxes and Ultramax vessels as well. You spend quite a bit of time talking about the scrubber premiums, but could I ask about the premiums you're getting or uplift you're getting on the younger eco vessels?
You're talking, Chris, about the premiums due to the vessels being younger as opposed to due to the scrubbers?
Correct.
Yeah. Interesting. Well, the younger vessels have lower consumption than the older vessels, and therefore in effect, they have. On the one hand, they have the advantage of being eco. On the other hand, by burning more or less tons, they get less of a scrubber advantage. For example, a Newcastlemax that burns, let's say 40 tons versus an older Capesize that burns 50 tons, on the one hand has the eco advantage, but on the other hand it burns 10 tons worth of scrubber benefit less.
Okay. Yeah, that's fair. Thanks for clarifying that. My next question is on you guys mentioned the speed of the fleet around 11.3 knots at the moment. How do you foresee that kind of evolving over the next few quarters and into 2023? Could you quantify or kind of look at the effective capacity reduction that you expect?
Okay. It depends on two things. First of all, it depends on the price of bunkers, and second, it depends on how the market rates are. The highest speed would be at very high rates and very low bunker prices. The lowest speed would be with very high bunker prices and very low rates. We expect oil prices to remain where they are, not to fall much. Therefore, we also expect the market to be decent during the next four or five months, especially towards the fourth quarter. Therefore, we think that speed will remain where it is at around 11.3 knots give or take.
Vessels are at sea for about 60% of the time. One knot difference from 11.3 to 12.3 is about, I think, a 9% reduction or 8.5% reduction. If you multiply that by 60%, that's about 5% effect on supply. One knot less or one knot more in speed would be ±5% on supply.
Okay. Yeah, thanks for that. My last question here is around the unwinding of the Chinese port congestion and also as it relates to the container ship market. Let's say container ship rates fall from here and port congestion eases, what do you think the impact will be, to dry bulk rates?
First of all, congestion has, Chinese congestion has eased mostly on the Capesize sector. I think I was reading a figure of like 68% less congestion this year than last year, which we think actually it has run its course. If anything, as we expect to have much more trade in during the next four or five months. We believe that for the Capesize congestion will actually increase in China going forward. Regarding Supramax, container ship market and Supramax vessels, yes, if container ship rates collapse, this will have a negative effect on Supramax.
However, I was just last week I saw that containers from a well-known public big public shipping company fixed for three years at like $54,000. It doesn't seem to me that the container ship market is yet that much affected to have a major impact on Supramaxes. Also, one interesting thing is that congestion on Supramaxes has actually increased by a bit, like 6%. All in all, on the Capesize question, I think we will see more congestion. On the Supramax question, it will have an effect, but I don't think it's gonna be immediate.
All right. Yeah. Thank you very much for the time, and congrats on the solid quarter.
Thank you very much.
Thanks.
Thanks, Chris.
Thank you. I show our next question comes from the line of Omar Nokta from Jefferies. Please go ahead.
Thank you. Hey, guys. Good afternoon. Just wanted to ask about the,
Hi, Omar. Hey, Hamish.
Hey. Yeah. Just wanted to ask, you know, you guys have secured, you know, several new credit facilities and extended your maturities, lowered your cost base. You now have the 12 unencumbered ships. I guess, are you willing to give us maybe a sense of where you have those down in terms of market value? Maybe, you know, give us a sense of what you're thinking about those ships going forward. Are those sales candidates, or are they just for flexibility's sake?
Well, Omar, you know, as I think you can appreciate, you know, we make a policy of not discussing, you know, value of our fleet, you know, in terms of value per ship because frankly, you know, the ships are worth more in our hands than in the hands of others because of the way we operate them. You know, the ships that are unencumbered are unencumbered more or less by happenstance. They're not particularly sales candidates.
Okay. Thank you. That's pretty clear. This is maybe perhaps in a little nuance, but I noticed, and it maybe just so happens to be this way, but you spent $20 million on the buyback this year, you know, buying at an average price of, let's say, 25. You've issued close to $20 million also under the ATM at 31. Definitely good pricing on both counts. Is that a coincidence that they're lined up like that at $20 million or
No, it's not a coincidence. We basically had an arbitrage situation lined up where we could issue shares and buy assets in a way that was very advantageous to the shareholders. You know, sort of in the middle of that, the arbitrage situation started becoming, you know, less probable, and our share price started to drop. Basically, we spent precisely the money that we raised by issuing shares on buying back shares at a lower price and so in effect retired some shares at zero net cost.
Do you think that would be how you guys approach it in the future?
Well, hopefully in the future, we'll be able to, you know, issue shares and buy, you know, loads of vessels in a way that's very profitable for the shareholders.
Yeah. Yeah. Very good. One final one. I just I saw in the cash flow statement a $35 million T-bill outlay. Just I don't think I've noticed that before. I'm just wondering what if you could give me a sense of what that was for.
Omar, this is Simos. This was just a short-term investment we placed for below six months, but since the maturity was after the end of the quarter, June 30th, under U.S. GAAP, we have to report them not in our cash but in our investment portfolio. However, you know that, you know, this product, these T-bills are considered to be in reality cash. So we consider them cash, and we add them back to the cash balance for the calculation of the dividend. All of these bills are maturing within the third quarter.
Got it. Okay, thanks for that. That makes sense. Thank you. I'll turn it over.
Thanks, Omar.
Thank you. As a reminder, to ask a question, you will need to press star one one on your touchtone telephone. Our next question comes from the line of Clement Mullins from Value Investor's Edge. Please go ahead.
Good morning. Thank you for taking my questions. I wanted to start by asking about the dividend. You have declared another very strong distribution equal to like the quarter one payout, despite the slightly lower cash balances at the end of the quarter. What has been the driver behind this decision, and should we expect this to be rebalanced looking at the remainder of the year?
It's the same dividend policy. It's not a management decision. You know, the cash balance divided by the number of shares outstanding came up with $1.65, you know, based on the formula. You know, it was a pretty mechanical operation. I think you can anticipate that we would go through the same, basically mechanical calculation every quarter.
Let us discuss those. It was basically a coincidence that the dividend for the second quarter just equaled the figures of the dividend of the first quarter. Essentially, as Hamish Norton said, what counts is the exact cash balance at the end of each quarter.
The number of shares.
Yeah.
Indeed. Makes sense. Your incentive program, retrofit program is giving outstanding results given the outsize spread we have seen as of late. Although the spread in the futures market is lower, scrubbers should continue to provide a significant tailwind. Is there any willingness to hedge part of your 2023 bunker consumption, or do you prefer to remain open?
At the moment, there is quite a steep discount of the 2023 forward curve on the spread compared to the prices that we're getting now. Indicatively, the spread in Singapore is in the high 200s, close to $300 per ton. The calendar 2023 right now is at levels around $160-$170 per ton. Given essentially that we have repaid the entire investment and given our expectation of strong energy markets and a wide spread in 2023, the choice right now, given what we know now, is to basically ride the spot market also on the spread. Of course, we may change decision in the future.
All right. Thank you very much for the color. Thank you for taking my questions, and congratulations for another excellent quarter.
Hey, thank you so much.
Thank you. That concludes our Q&A session for today. At this time, I'd like to turn the call back over to Mr. Petros Pappas, CEO, for closing remarks.
Thank you, operator. No, no, further remarks. Have a nice summer to everybody.
Thank you everyone for participating in today's conference call. This concludes the program. You may all disconnect.