Show me a company that can grow stronger when the chips are down, and I'll show you a company that's ready to rumble once those chips fall back into place.
Diana Shipping (NYSE: DSX) is sailing through these decidedly dark days for dry-bulk shipping with unrivaled poise. And throughout it all, the shipper's capacity to build itself an empire from among the crumbling rubble of this industry has expanded considerably. In early 2010, I marveled at Diana's capacity to leverage its healthy cash position of $282 million into carefully timed, opportunistic vessel purchases in the $500 million to $700 million range.
All this time later, we're still waiting for Diana Shipping to signal the perception of a bottom in this viciously oversupplied dry-bulk market by initiating its long-awaited shopping spree. But to the company's substantial credit, it now stands ready to pounce with even greater force now that its cash hoard has grown to $451 million! This company has managed to expand its treasury by 60% during some of the most brutal business conditions imaginable, and that singular accomplishment in my mind speaks volumes on the quality of this management team.
Rival Navios Maritime Holdings (NYSE: NM) has likewise weathered the storm, but after the first quarter Navios held a far smaller cash balance of $160 million and total liquidity of just $223 million. And with epic total debt of nearly $4.4 billion, the cash position at the overleveraged DryShips (Nasdaq: DRYS) can hardly be taken seriously. With shipwrecked peers like Genco Shipping and Trading (NYSE: GNK) turning in a second-quarter loss of $27.7 million, in contrast to Diana's resilient net profit of $17.4 million, the oceanic divide between Diana's patiently stored acquisitive capacity and the rest of the fleet's more constrained capital conditions makes Diana an extremely attractive vehicle within an extremely unattractive industry.
While Diana has yet to embark on its acquisition blitz, the company did expand the fleet with a 22% increase in vessel operating days over the prior-year quarter. That helped somewhat in absorbing a noteworthy 27% decline in average realized charter rates, but the company's $17.4 million bottom-line haul was still a full 37% behind the prior-year mark. Although a few of what I'll term "legacy" charters from before the industry's collapse continue to collect outstanding charter rates, recent Capesize charters are dipping as low as $13,000 per day from a peak "legacy" contract rate of $74,750 per day.
I am maintaining a vigil with respect to Diana Shipping's vessel acquisitions, in search of signs that this well-run operator perceives a bottom in dry-bulk's disastrous collapse. If you would like to catch the alert when Diana Shipping sounds the all-clear, please bookmark my article list or follow me on Twitter.
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