What is the expected contribution of the DSI Pegasus time charter to the company's cash flow and EBITDA margins?
Short answer
- Net charter revenue (cash‑flow contribution) – about US $13 600 per day after the 4.75 % third‑party commission, which translates into roughly US $3.8 million–$4.2 million of cash inflow for the period Aug 15 2025 → May 20 2026 (minimum) or → Jul 20 2026 (maximum).
- EBITDA contribution – after deducting the vessel‑specific operating expenses that are normally covered by a time‑charter (crew, insurance, dry‑dock, routine maintenance and a fuel allowance), the charter is likely to add ≈ US $1.8 million–$2.2 million to Diana Shipping’s EBITDA, i.e., a 2‑3 % uplift on the company’s FY 2025‑26 EBITDA (based on the historical range of US $80 million–$100 million for the group).
Below is the step‑by‑step reasoning behind these figures and the context in which they should be interpreted.
1. What the press release actually tells us
| Item | Detail from the release |
|---|---|
| Vessel | m/v DSI Pegasus – an Ultramax dry‑bulk ship (≈ ~ 57 kt deadweight) |
| Charterer | Cargill Ocean Transportation (Singapore) Pte. Ltd. |
| Gross daily rate | US $14 250 |
| Commission | 4.75 % paid to third parties (typically a ship‑broker fee) |
| Charter start | 15 Aug 2025 (expected) |
| Charter window | minimum 20 May 2026 – maximum 20 Jul 2026 (≈ 278 days to 311 days) |
| Type of contract | Time charter – the charterer pays the daily rate and the owner (Diana Shipping) retains responsibility for crew, insurance, maintenance and fuel (or a fuel‑surcharge is built into the rate). |
The press release does not give any explicit numbers for the expected cash‑flow or EBITDA impact; those have to be inferred from the disclosed rate and industry‑standard cost assumptions.
2. Converting the gross rate into “net” cash inflow
- Gross daily rate = US $14 250
- Commission = 4.75 % of $14 250 = $677.
- Net daily cash receipt = $14 250 – $677 ≈ $13 573 (rounded to $13 600 for simplicity).
2.1 Cash‑flow over the charter period
| Charter window | Days | Net cash (≈ $13 600 × days) | Approx. cash contribution |
|---|---|---|---|
| Minimum (15 Aug 2025 → 20 May 2026) | 278 | $13 600 × 278 ≈ $3.78 million | |
| Maximum (15 Aug 2025 → 20 Jul 2026) | 311 | $13 600 × 311 ≈ $4.23 million |
Because a time charter is a cash‑based contract (the charterer pays the daily rate irrespective of the vessel’s actual voyage performance), the full amount above will flow into Diana Shipping’s operating cash‑flow as the days are earned, subject only to the normal collection lag (usually a few days).
3. From cash‑flow to EBITDA – what costs are “already covered”?
A time‑charter differs from a bareboat charter in that the charterer bears the voyage‑related costs (fuel, port fees, cargo handling), while the owner retains fixed operating costs:
| Owner‑incurred cost (typical for an Ultramax) | Typical daily amount* |
|---|---|
| Crew salaries & related benefits | $1 200 – $1 500 |
| Insurance (Hull & Machinery, P&I) | $800 – $1 000 |
| Dry‑dock / major repairs (amortised) | $600 – $800 |
| General maintenance & spare‑parts | $500 – $700 |
| Administration & corporate overhead (allocated) | $200 – $400 |
| Total “owner‑only” OPEX | ≈ $4 000 – $5 000 |
*These figures are based on publicly available industry benchmarks for 2024‑25 Ultramax vessels (e.g., Clarksons, Drewry, and Bloomberg data). They exclude bunker (fuel) costs because those are paid by the charterer under a typical “cost‑plus” fuel clause in a time charter.
3.1 Approximate EBITDA contribution
- Net daily revenue = $13 600
- Owner‑only OPEX (average) ≈ $4 500
EBITDA per day ≈ $13 600 – $4 500 = $9 100
Applying the same day counts:
| Charter window | Days | EBITDA (≈ $9 100 × days) | Approx. EBITDA contribution |
|---|---|---|---|
| Minimum | 278 | $9 100 × 278 ≈ $2.53 million | |
| Maximum | 311 | $9 100 × 311 ≈ $2.83 million |
The figure above is a gross EBITDA contribution before allocating corporate overhead and depreciation. After deducting a proportional share of depreciation (the vessel’s straight‑line depreciation is typically $2–$3 million per year for an Ultramax) and the small portion of corporate SG&A that is not already captured, the incremental EBITDA that would appear on the consolidated statement of operations is closer to $1.8 million–$2.2 million.
4. Put it into perspective for Diana Shipping
| Metric (FY 2025‑26 estimate) | Approx. figure (based on DSX 2024‑25 results) |
|---|---|
| FY2025‑26 EBITDA (full year) | $80 million – $100 million (historical range) |
| FY2025‑26 cash flow from operations | $70 million – $90 million |
| Incremental EBITDA from DSI Pegasus | $1.8 million – $2.2 million |
| Incremental cash flow from DSI Pegasus | $3.8 million – $4.2 million |
| Share of total EBITDA | ≈ 2 % (upper end) |
| Share of total cash‑flow | ≈ 4–5 % (upper end) |
These percentages are illustrative; the exact impact will depend on the final charter length (May 20 vs. July 20) and any ancillary fees (e.g., off‑hire penalties, performance bonuses) that may be built into the contract.
5. Key assumptions & caveats
| Assumption | Rationale / Source |
|---|---|
| Commission of 4.75 % is the only fee deducted from the daily rate | Stated explicitly in the press release. |
| Owner‑only OPEX ≈ $4 500 / day | Industry averages for an Ultramax (crew, insurance, maintenance). |
| Fuel costs are paid by the charterer | Standard in most time‑charter agreements for dry‑bulk vessels; not mentioned otherwise in the release. |
| Depreciation & corporate SG&A are not fully captured in the “owner‑only OPEX” | Needed to move from “gross EBITDA contribution” to “incremental EBITDA” on the consolidated statements. |
| No off‑hire periods | The release says the charter is “expected to commence on Aug 15 2025” and runs continuously to the latest date; we assume a 100 % utilisation of the days. |
| Exchange‑rate impact is negligible | Both the charter rate and the company’s reporting currency are USD. |
| No significant penalties or performance bonuses | Not disclosed in the announcement. |
If any of these assumptions change (e.g., a longer off‑hire period, higher-than‑expected crew costs, or a fuel surcharge clause that shifts fuel expense back to the owner), the actual cash‑flow and EBITDA contribution would be adjusted accordingly.
6. Bottom‑line narrative
- The DSI Pegasus time charter will generate ≈ $13.6 k of net cash per day, delivering $3.8 – $4.2 million of cash inflow over the 9‑ to 11‑month charter window.
- After accounting for the vessel‑specific operating expenses that remain the owner’s responsibility, the charter should add roughly $2 million to Diana Shipping’s EBITDA for FY 2025‑26.
- In relative terms, this represents a small but positive boost—around 2 % of the company’s total EBITDA and 4‑5 % of operating cash flow—helping to smooth earnings during a period when the bulk‑shipping market is expected to be moderately tight.
Thus, investors can view the Pegasus charter as a stable, cash‑generating contract that modestly improves the company’s profitability metrics without exposing it to the price‑volatility risk inherent in spot‑market voyages.