Star Bulk Carriers Corp. (SBLK) Earnings

Management highlights

- Overall Financial Performance & Capital Allocation * Q2 2026 net income was $144.9 million; adjusted net income reached $134.8 million ($1.21 adjusted EPS), and adjusted EBITDA hit $184.2 million, demonstrating strong cash-generating capacity. * The company follows a policy of distributing 100% of operating cash flow (subject to a $2.1 million per vessel minimum cash balance); a $0.90 per share dividend was declared for Q2, payable September 3. * Balance sheet remains a strategic advantage: $532 million in total cash, $955 million in outstanding debt, $110 million in undrawn revolver capacity, and 29 debt-free vessels with an aggregate market value near $790 million, providing substantial financial flexibility. * Since 2021, the company has executed $3.2 billion in value-enhancing actions, returning ~$14.9 per share in dividends (52% of current share price) and reducing total net debt by 66% to 50% of the fleet's demolition value. - Operational Performance & Fleet Strategy * The company maintains one of the most cost-efficient platforms in the dry bulk sector: daily demi-opex of $5,180 per vessel and daily net cash G&A of $1,362, among the lowest in its peer group. * Five new-generation high-spec Kamsarmax newbuildings are on track for 2026 delivery, with $122 million in remaining capex and full financing in place; three of the eight total newbuildings have already been delivered, with the remaining five coming in Q3 and Q4 2026. * Fleet rejuvenation is ongoing via selective disposals of non-economic vessels to reduce average age and improve efficiency: 50 vessels have been sold since 2023, with most net sale proceeds reinvested in accretive share buybacks; three additional vessel sales are completed or scheduled for Q3 2026. * 88% of the fleet is now fitted with energy-saving devices (ESDs), with efficiency upgrades delivering 7-15% tangible performance improvements that cut emissions and boost commercial performance. - ESG & Regulatory Compliance * The company is actively engaged in IMO discussions on net-zero GHG reduction frameworks, advocating for practical, consistent global regulations; it participates in the Maritime Emission Reduction Center focused on sustainable marine technologies. * 2026 marks the first sustainability reporting cycle under the EU Corporate Sustainability Reporting Directive (CSRD), aligned with European Sustainability Reporting Standards. * The company is rolling out responsible AI integration across operations and has enhanced cybersecurity measures to address AI-related risks, including mandatory staff training and a new AI usage policy. - Industry Fundamentals * Net global dry bulk fleet growth is 1.9% year-to-date 2026, with newbuilding ordering held back by limited yard availability, high construction costs, and uncertainty around green propulsion; ~50% of the global fleet will be over 15 years old by end-2027, supporting a favorable supply backdrop. * 2026 total dry bulk trade is projected to grow 2.4%, with ton-miles expanding 4.5% driven by longer voyage distances; key segments: coal demand has been revised upward amid energy market dislocations, grain trade is projected to grow 6.5% driven by inventory building amid Black Sea uncertainty, and high-quality iron ore exports from the Atlantic are ramping up to support long-term ton-mile growth.

Guidance

- For the remainder of 2026 and 2027, the company guided to the following capex and off-hire levels for dry dock activities: $16 million capex / 460 off-hire days in Q3 2026; $11 million capex / 280 off-hire days in Q4 2026; $17 million capex / 450 off-hire days in 2027. - Based on the current next-12-month TCE curve of ~$22,000 per day fleet-wide, the company projects annualized free cash flow of ~$4.1 per share, representing a 14.3% implied cash flow yield; every $1,500 per day fleet-wide increase in TCE would increase annual EBITDA by $72 million, translating to $0.64 per share in incremental dividends under the company's distribution policy. - The Simandou high-quality iron ore project in Guinea is projected to ramp to 15-20 million tons of annual export capacity by end-2026, 45-50 million tons by 2027, ~100 million tons by 2029; combined with other Atlantic iron ore expansion projects, total incremental high-quality iron ore volumes will reach up to 150 million tons over the next 3-4 years. - Management maintained its optimistic outlook for the dry bulk market, supported by favorable supply dynamics, growing long-distance Atlantic trade, and tightening environmental regulations.

Segment performance

Star Bulk Carriers operates across three dry bulk vessel segments with a total of 138 vessels and over 12,200 ownership days in Q2 2026: 1. Newcastlemax and Capesize: Contributed 35% of total company revenue and 39% of adjusted EBITDA, representing 41% of the fleet's total market value, supported by strong market positioning. 2. Panamax and Kamsarmax: Contributed 28% of total revenue ($77.7 million) and 24% of adjusted EBITDA ($42.4 million), delivering stable earnings for the company. 3. Ultramax and Supramax: Remained the largest revenue contributor at 37% of total revenue, generating $104.4 million in revenue and $66.5 million in adjusted EBITDA, reflecting the strength of the company's exposure to geared vessel segments.

Risks & headwinds

- Geopolitical tensions in the Middle East create uncertainty for the global economic outlook and dry bulk demand; elevated bunker prices from these tensions have encouraged prolonged slow-steaming, and recent port congestion has rebounded due to war-related inefficiencies. - El Niño is expected to keep Northern Hemisphere temperatures elevated through summer 2026, increasing cooling demand and supporting elevated coal volumes, but is also contributing to drought conditions that are lowering water levels in the Panama Canal, which could reduce transits and disrupt trade routes. - Current asset prices for secondhand dry bulk vessels are relatively high, making cash acquisitions challenging as they require very high break-even rates to deliver meaningful returns to shareholders. - Weak economic growth in China, driven by low domestic consumption, a prolonged property sector downturn, and lower fixed-asset investment, poses a downside risk to dry bulk demand; Chinese steel production declined 3.1% year-over-year in H1 2026. - Uncertainty remains around the development and adoption of green propulsion technologies for new vessels, which adds uncertainty to newbuilding planning.

Analyst Q&A

• Q: With stronger dry bulk markets, higher cash balances, and upcoming newbuilding deliveries, how does management view acquisition strategy for fleet growth, and is the company planning to become more acquisitive in the current environment? /

  A: Management notes that current asset prices are relatively high, so the company prefers to conserve cash for the time being. Cash acquisitions at today's price levels require very high break-even rates to generate meaningful returns for shareholders. If the company can use its higher trading share price as an acquisition currency to do accretive deals, it will pursue opportunities as they arise.

• Q: Previous commentary noted Kamsarmax vessels deliver better ROE than Capesize; is this still the relative outlook when evaluating asset classes for future capital deployment? /

  A: Management states the ROE spread between the two classes is now more balanced than it was a few quarters ago, as Kamsarmax values have increased. Opportunities for attractive returns are now more scarce across larger vessel classes, with newbuilding delivery windows pushed out to 2029-2030 and prices remaining firm. Management will remain cautious and pursue arbitrage opportunities only when they can secure contracted future revenue to lower break-even levels.

• Q: Is the company planning to accelerate sales of older, less eco-friendly tonnage into the current strong market, and what is the strategy for remaining disposals? /

  A: Management is actively assessing opportunities to dispose of remaining older assets, and older vessels still command strong premiums from buyers. However, the large current spread between heavy fuel oil and very low sulfur fuel oil has significantly boosted the yield of older fitted vessels, while earnings are currently very attractive. Additionally, the company's smaller discount to net asset value reduces the incentive to sell these high-yield vessels, so management is pacing disposals and waiting for potentially firmer prices before moving on the next batch of sales.

• Q: What is the impact of El Niño-related drought and reduced transits on the Panama Canal for Star Bulk's fleet and broader dry bulk capacity, and how much diversion to the Cape of Good Hope is occurring? /

  A: Dry bulk transits of the Panama Canal have already declined in recent years, particularly for larger vessels. Lower water levels from El Niño are expected to reduce transits further, which will create a positive market impact especially for Panamax vessels during the upcoming US soybean season (September-November 2026). For Star Bulk's larger vessels, the company already uses the Cape of Good Hope route, consistent with broader market practice.

• Q: Can you provide an update on the timing and ramp-up of the Simandou iron ore project, which the company has highlighted as a major driver of future ton-mile growth? /

  A: The project faced minor delays in late 2025 but is now ramping up in 2026, and is expected to reach 15-20 million tons of annual export capacity by the end of 2026. It will ramp to 45-50 million tons per annum by 2027, and approach 100 million tons by 2029. Combined with other West African and Brazilian iron ore expansion projects, total incremental Atlantic high-quality iron ore volumes will reach as much as 150 million tons over the next 3-4 years.