New York-listed Eagle Bulk Shipping achieved its best-ever results in the second quarter although its headline numbers were blunted by non-cash accounting losses on derivatives. The Gary Vogel-led owner became the latest dry bulk owner to report eye-popping results, with adjusted net income of $40.3m or $3.31 per share, reflecting the best Ebitda in company history. However, $31m in accounting losses on freight forward agreements (FFAs), which the Stamford, Connecticut-based owner uses to hedge its spot-market positions, brought down the result to $9.2m or $0.76 per share. The owner of supramax and ultramax bulkers recorded time-charter equivalent rates of $21,580 per day, its best in 11 years. But it has bettered that number in the current quarter, reporting TCE of $28,300 per day as of Thursday, with 75% of available days booked.

Eagle’s adjusted net income is substantially above analyst consensus expectations of $3.09 per share, although it falls below the $3.76 figure projected by Jefferies equity analyst Randy Giveans. Under Vogel, Eagle has adopted an active-management model for its fleet under which it prefers to use paper contracts to hedge spot exposure rather than entering physical time charters. At least from an accounting standpoint, that dampened the picture for the past quarter as the spot market roared to near-record highs, creating non-cash losses against the FFA positions when compared to FFA indices.

“The market for the midsize drybulk segment continued to strengthen in the second quarter on the back of robust demand across the commodity spectrum, and especially for grain and infrastructure-related cargoes that we carry such as cement, manganese ore, and steel,” Vogel said in the earnings statement. “We achieved our best ever operating performance, producing an adjusted Ebitda of over $62m, as the Baltic Supramax Index rose by almost 60% during the quarter, reaching levels not seen in more than a decade.” Vogel said asset prices had rallied accordingly in recent months, with values of mid-aged vessels up about 75% year to date, thereby boosting Eagle’s 53-ship fleet. “Given both positive demand and historically low supply-side fundamentals, we maintain an optimistic outlook on market developments going forward,” Vogel said.

Revenue for the quarter soared to $129.9m compared to $57.4m in the corresponding months of 2020. Eagle’s adjusted profit of $40.3m compared to a loss of $20.5m, or $1.99 per share, in the first quarter of 2020.

Eagle explained the adjustments to net income as follows: “Adjusted net income is net income that is adjusted to exclude non-cash unrealized losses on derivatives. The company utilizes derivative instruments such as FFAs to partially hedge against its underlying long physical position in ships. The company does not apply hedge accounting, and as such, the mark-to-market gains or losses on forward hedge positions impact current quarter results, causing timing mismatches in the statement of operations. We believe that adjusted net income is more useful to analysts and investors in comparing the results of operations and operational trends between periods and relative to other peer companies in our industry.”