Gearbulk Integrated Report 2023 - Report - Page 36
GEARBULK
OUR OPERATING CONTEXT
EFFECTS OF
EXTERNAL FACTORS
The environment in which we operate is a昀昀ected by various factors
impacting our business, such as global in昀氀uences, economic conditions in the countries where we operate and trends in the shipping
market segments in which we invest. While we may not have direct
control over these factors and risks, we thoroughly analyse them
to identify opportunities and make informed strategic decisions.
MACRO ECONOMIC INDICATORS IMPACTING OUR BUSINESS
Despite the continued and increased
geopolitical tensions, the global
economies have started to recover.
However, the outlook could still have
a severe impact on our business as
elevated in昀氀ation and high interest
rates continue to persist, impacting
our value.
Outcomes
It is projected that key economic indicators will begin to show
improvement in 2024. Despite having strong economic foundations in areas we operate, further tension could result in
the indicators not improving, thus leading to higher costs
stemming from in昀氀ation and interest rates.
Our Strategic Response
Gearbulk has a robust risk management process to deal with
possibilities of impacts macro economic indicators might have
on the business. This includes having a diversi昀椀ed capital structure with a large element of long-term 昀椀nancing. Commercially our revenue is secured through a portfolio of short-,
Elevated in昀氀ation is expected to ease further in 2024
medium- and long-term COA contracts, mainly executed via
Despite elevated levels in most countries, global headline in昀氀a-
our Joint Ventures, creating a platform of predictable freight
tion is anticipated to decline from an annual average of 6.8%
earnings. Certain risks are reduced using natural hedges where
in 2023 to 4.1% in 2024 as per latest market consensus. This
possible and otherwise 昀椀nancial hedges (covering interest rates,
anticipated decrease is primarily attributed to the stabilisation
foreign exchange and fuel oil risks via our Joint Ventures). We
of energy prices, improved energy mix and much lower depend-
are currently structuring our debt and looking for alternatives
ence on Russian gas and oil, stabilisation of global supply chains,
to support our strategic goals to build a sustainable business.
alongside weaker-than-anticipated economic activity and energy
demand from China, resulting in signi昀椀cant decreases in energy
Capitals Impacted
and food prices—although food prices remain volatile.
Interest rates remain at elevated levels
These high borrowing costs have a signi昀椀cant impact on funding
our expenditure and capital. While we maintain a prudent
hedging level of at least 50% of group 昀氀oating-rate debt, the
unhedged portion of debt is a昀昀ected by the higher interest
rates. This elevated cost of debt also a昀昀ects various ratios and
has an impact on our covenant requirements with our lenders.
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PART 2 – OUR BUSINESS IN CONTEXT
Financial
capital
Social and
relationship
capital
