Corporate Information

Early repayment of parent company loans, easing the burden of high dividends... New long-term contracts, securing a stable growth footholdPolaris Shipping's financial and business uncertainties seem to be gradually resolved. First, the risk of massive cash outflows was eased as Polar Energy & Marine (Polar E&M), the parent company of the company, paid back most of the funds raised by Meritz Securities. In addition, as Polaris Shipping has won a large-scale long-term contract, it is expected that stable profit-generating power will be maintained and efficient working capital management will be possible.◆ Granting credit rating of unguaranteed bonds 'BBB / Stable'... Polar E&M borrowing repayment 'main effect'According to related industries on the 16th, NICE Credit Rating (NICE Rating) rated Polaris Shipping's credit rating for unguaranteed bonds as 'BBB (stable),' while its corporate bill and short-term bond ratings remained at 'A3'. In detail, NICE Investors Service viewed Polaris Shipping positively as having a stable business base centered on long-term transportation, having excellent operating profitability based on a stable fare structure of the cost compensation method, excellent EBITDA creation, and improving free cash flow due to the sale of its ships.Polaris Shipping, the nation's third-largest shipping company in terms of capacity (DWT), is a mid-sized shipping company established in 2004 and operates a fleet consisting of large bulk carriers such as VLOCs. The company has generated fixed sales and profits by signing long-term transportation contracts with Brazilian mining company 'VALE'.The industry cites the early repayment of loans from Polar E&M, the largest shareholder, as the main reason why Polaris Shipping received an "investment eligibility" rating. Earlier, Polar E&M raised 250 billion won worth of long-term loans from Meritz Securities in September last year. It has a high interest rate of 12.5%, and the maturity is two years until September 2026. When Polar E&M raised its borrowings, Polaris Shipping also posted BWs worth 90 billion won.The total cash raised by the two companies from Meritz Securities is 340 billion won, but at this point, about a year later, the remaining balance is only 30 billion won. More than 88% of the loan was repaid early. If Polar E&M and Polaris Shipping simply estimate that they will repay at maturity, they will have to pay a total of 80.5 billion won in interest over two years. However, Polar E&M repaid 180 billion won in March this year and then shook off an additional 60 billion won in August this year, and Polaris Shipping also repaid a significant amount.Polar E&M's reduction in borrowing is leading to the creation of a stable business environment for Polaris Shipping. This is because Polaris Shipping, which pays high dividends as its parent company, is the actual repayment entity for the loan. The financial resources of the loans Polar E&M repaid in March this year are dividends collected from its subsidiaries. Polaris Shipping paid 280 billion won in interim dividends and 230.6 billion won in settlement dividends last year, totaling 510.6 billion won. If it is substituted for Polar E&M's 94.14% stake, it is estimated that it has received about 480 billion won. Furthermore, it is widely expected that governance risks will be resolved, given that Polar E&M has set its current Polaris Shipping shares as collateral for borrowing.◆ Long-term contracts with an average of 11 years left, stable profits... Fuel cost conservation and new contracts 'competitiveness'As of the end of last month, Polaris Shipping has a total of 34 long-term operating ships, including 27 private ships and 7 long-term charter ships. In particular, based on long-term contracts with blue-chip shippers, it is stably generating about 70-80% of total sales. In addition, the fact that the remaining contract period is an average of 11 years is a factor that supports business stability. Long-term transportation contracts are characterized by applying a fixed fare to the contracted volume of transportation. It is noteworthy that even fixed-fare contracts are preserved under the fuel surcharge (BAF) clause even if fuel costs, a major factor in cost fluctuations, are increased. Through this, profitability fluctuations are effectively managed.In fact, Polaris Shipping recorded consolidated sales of 1.1914 trillion won and operating profit of 165.6 billion won at the end of last year, with an operating profit ratio of 13.8%. The average operating profit ratio over the past five years (2020-2024) was 16.4%. During the same period, the average EBITDA margin rate was 28%. Regarding Polaris Shipping's performance, the Korea Credit Rating (Korea Investors Service) explained, "We are maintaining an annual operating profit ratio of around 15% and an EBITDA margin ratio of around 25% due to long-term contracts."It also raised concerns that a total of five long-term contracts will be terminated by the end of next year. As of last month, four contracts have already expired. However, Polaris Shipping proved its market competitiveness by signing a new five-year long-term transportation contract with Valle. The contract, worth 410 billion won, calls for Polaris Shipping to operate four 210,000-ton bulk carriers signed with Valais in 2019 for five years, and the contract has been renewed.The fact that there are no plans to invest in new shipbuilding for the time being is a factor that raises expectations for smoother cash flows. Polaris Shipping has seen a significant improvement in free cash flow (FCF) as the delivery of major ships has been completed as of 2022. The FCF, which fell below 50 billion won at the end of 2019, nearly quadrupled to 191.3 billion won at the end of 2022 and achieved 555 billion won at the end of last year.An official from NICE Investing said, "Polaris Shipping has solid EBITDA creation power, a marketed borrowing structure, asset value such as ships provided as collateral for loans, and additional funding capacity through the sale of its owned ships," adding, "The burden of repayment of the remaining loans is not as large as in the past, and uncertainties in the overall governance structure of the affiliate have been resolved to a large extent."

< Chairman Han (right) presents a childbirth incentive to an employee who recently gave birth to twins.>Polaris Shipping is drawing attention as it is taking the lead in spreading a culture of supporting work-family balance.   Polaris Shipping announced on the 8th that it is actively participating in the spread of a culture of work-family balance support by introducing a new childbirth incentive system to ease the burden of childbirth and childcare on executives and employees and create a stable work-life parallel environment.   Under the recently introduced childbirth incentive system, Polaris Shipping recently paid 9 million won to employees who gave birth to twins and 6 million won to executives and employees who gave birth to their second child. Polaris Shipping also provides a monthly childcare allowance of 200,000 won until the age of 6 (72 months) after childbirth.   With the implementation of Polaris Shipping's newly introduced childbirth incentive and childcare allowance system, a total of 24.4 million won will be provided, including 10 million won in childbirth incentives and 14.4 million won in childcare allowances (200,000 won per month × 72 months), for example, if you give birth to your third child.   "In addition to the childbirth incentive and childcare allowance system, we will establish a corporate culture where employees and their families can be happy together by establishing a vacation for spouse checkups and expanding the scope of flexible work for caregivers," a Polaris Shipping official said. We will continue to strengthen the maternity protection and work-family balance support system to create an environment where employees can work with confidence, he said. 

₩310 billion in early repayments; only ₩30 billion debt remains Additional long-term contract signed with Vale, new business ventures underway   Polaris Shipping, having secured stronger financial stability through the early repayment of loans, is now actively pursuing business expansion.   The company announced on the 8th that its holding entity, Polar Energy & Marine, has repaid ₩60 billion early from a loan it borrowed from Meritz Securities in September last year.   Out of the ₩340 billion total loan, Polaris repaid ₩70 billion at the end of last year, ₩180 billion in March this year, and another ₩60 billion this time—bringing total early repayments to ₩310 billion. As a result, the outstanding balance has been reduced to just ₩30 billion. Although the loan maturity with Meritz runs until September next year, Polaris Shipping plans to repay the remaining balance as soon as possible.   Thanks to the faster-than-expected repayment, the company has significantly improved its financial soundness and stabilized its governance, paving the way for business expansion. A Polaris Shipping official stated, “With the early repayment, management has secured an independent decision-making structure free from external influence, allowing us to focus on strategic growth.”   In fact, as its management stabilized, Polaris signed a $300 million five-year iron ore transport contract with Brazil’s mining major Vale in June, followed by another $270 million five-year contract this month. Both contracts, covering 2026–2030, will see dedicated Newcastlemax bulk carriers transporting iron ore from Brazil to China, generating stable revenues from 2026 onward.   Having built a strong relationship with Vale through multiple long-term contracts based on its large VLOC fleet, Polaris Shipping is now reinforcing ties with the miner while expanding its scope.   Beyond Vale, Polaris is considering acquiring vessels tied to long-term contracts currently owned by domestic private equity funds, aiming to diversify its customer base. The company also plans to acquire tanker tonnage to complement its bulk-focused portfolio.   In addition, Polaris is exploring investments in offshore wind-related vessels such as WTIVs and AHTSs, positioning itself in the eco-friendly marine infrastructure sector. It is also preparing to participate in Arctic shipping route development as part of its strategy to secure future growth drivers through new businesses.     

180 Billion Additional Repayment... Net Profit Growth of 64% Last YearPolaris Shipping, a local bulk carrier, said it repaid an additional 180 billion won out of 340 billion won borrowed from Meritz Securities in September last year. Following the repayment of 70 billion won at the end of last year, the balance of Meritz Securities loans has decreased to around 90 billion won as the amount of early repayment has been increased to a total of 250 billion won this time. The company plans to reduce the amount of short-term loans to around 20 billion won by the end of the year. Separately, Polaris Shipping received back 85.6 billion won in bonds it had lent to its holding company Polar Energy & Marine. The parent company repaid 53.1 billion won last year and 32.5 billion won in the first quarter of this year to Polaris Shipping, respectively. Polaris Shipping approved the financial statements at the 21st general shareholders' meeting held on March 28. According to financial statements, the company posted sales of 1.1913 trillion won, operating profit of 165.5 billion won, and net profit of 152.3 billion won last year. Compared to a year ago, sales and operating profit decreased by 4% and 19%, respectively, but net profit increased by 64%. The operating profit ratio was 14% and the debt ratio was 353%. A company official said, "We have secured financial stabilization and transparency in fund transactions between affiliates by reducing the size of loans to address high interest costs and repaying all loans from holding companies." 

Vice Minister of Oceans and Fisheries Song Myung-dal held an emergency situation inspection meeting at the Haeun Building in Yeouido, Seoul, on the afternoon of the 26th in response to the recent continued decline in container fares.   At the meeting, the Ministry of Oceans and Fisheries shared the recent decline in container sea freight rates and prospects with major national carriers and related organizations such as the Korea Shipping Association, the Korea Maritime Promotion Agency, and the Korea Maritime Institute, and examined the impact of the U.S. government's strengthening of protectionism on the shipping industry and the management situation of shipping companies.   The Global Freight Index (SCFI), released by the Shanghai Shipping Exchange, plunged from an average of 2,373 in December last year to the 1,200-point level as of March.   Vice Minister Song urged each shipping company and related agencies to reorganize their management strategies in preparation for falling sea fares and changes in the international situation, and sought preemptive measures by discussing ways to operate the "Low Market Emergency Response TF," a public-private response system, as prolonged situations are feared to disrupt management.   The meeting was attended by nine chairmen of the Korea Shipping Association, including HMM, Pan Ocean Korea Shipping, Janggeum Merchant Marine, Polaris Shipping, Hwive Ocean, KSS Shipping, and SK Shipping.   "We are closely monitoring the recent changes in the shipping market due to the rapidly changing international situation, and we will further strengthen monitoring," he said. "In the future, the government will work closely with related agencies and industries to respond to the low market conditions."