C3is Inc.

Good morning everyone and welcome to our C3IS fourth quarter and full year 2023 earnings conference call and webcast. This is Yamadis Andriotis, CEO of the company. With me on the call today is our CFO, Ninap India. Before we commence our presentation, I would like to remind you that we will be discussing forward-looking statements which reflect current views with respect to future events and financial performance and are based on current expectations and assumptions which by nature are inherently uncertain and outside of the company's control. At this stage, if you could all take a moment to read our disclaimer on slide 2 of this presentation. I would also like to point out that all amounts quoted, unless otherwise clarified, are implicitly stated in US dollars. Today we released our earnings results for the fourth quarter and full year 2023. So let's proceed to discuss these results and update you on the company's strategy and the market in general. Slide 3 shows the dry bulk shipment volume growth in 2023 as compared to 2022. Global seaborne iron ore trade grew by 4.5% to 1.63 billion tonnes in 2023, with Chinese imports rebounding by 7% year on year. Chinese steel production increased by 0.9% in 2023 after two years of contraction. Domestic iron ore output and stockpiles moved higher. coal ton miles expanded by 6.5% compared to 2022, a result of the global focus on energy security which inflated the coal trade. Chinese imports surged during 2023 as thermals electricity increased, hydropower underperformed and domestic coal production was limited at 4.3%. India emerged as a leading buyer of coal cargos as electricity demand outpaced domestic coal production growth. Grain shipments grew by 1.7% compared to 2022, as record soybean and corn season in Brazil have helped fill the gap of crop losses from Ukraine and Argentina. Falling prices of agricultural commodities and better crop yields in North and South America are expected to support grain trade in 2024. Minor bulk trade high correlation to global GDP growth resulted in an expansion of 2.1% in 2023. Atlantic steel shortages incentivized Pacific exports and inflated backhaul trades. Slide 4 shows the increasing demand for dry bulk commodities versus the handy-sized fleet growth. As shown in the previous slide, dry bulk demand increased by 4.4% in 2023, and is expected to increase by 2.1% in 2024. After contracting by 1.2% in 2022, minor bulk ton-mile trade increased by 4.1% in 2023, while it is expected to further increase by 4% in 2024. A strong fourth quarter, mainly driven by the Atlantic Basin in December, helped to maintain the average rates at $12.8k, the highest rate compared to the first three quarters of 2023. Especially for Q4, the increase was up an astonishing 45% compared to Q3, where traditionally we see the strongest rates of the year. This increase was mainly attributed to heavy delays at Panama Canal, causing a backlog of vessels waiting to transit through the canal and causing an imbalance in the supply-demand ratio, especially in the USG and ECSA markets. The IMF has upgraded the global GDP growth forecast by 0.2% to 3.1% for 2024, with China projection up by 0.4% at 4.6% and India projection up by 0.2% at 6.5%. The Chinese economic recovery for COVID-19 is still at its early stages and expect to accelerate once the property market stabilizes and consumer confidence returns. Gradual stimulus measures, heavy investment on infrastructure and higher exports provided support for raw materials demand. Lower energy, food and boring costs currently support the demand recovery for the rest of the world. On the fleet growth, the handy size segment is quite over age with a very small order book. In December 2023, indicative average new building prices for handy size was around 32.5 million and 24.8 million for five year old vessel. The dry bulk area of the Buchanli stands at 30 years historically low levels, while 16% of the dry bulk handy size fleet is above 20 years of age. The small handy fleet is expected to shrink by 0.2% in 2024. Compliance with new environmental regulations, EXI, CII, capped with an overage fleet are likely to accelerate demolition, thus reducing average fleet supply. Moving on to slide 5, 2023 has been another positive period for crude oil trade, undeterred by high oil prices and risks of economic recession. Despite the ongoing crude oil production cuts enforced by OPEC members, industry participants believe that the tanker market environment will remain positive through 2025. The ongoing war in Ukraine created trade patterns shifts benefiting long-haul crude and causing charter rates for tankers to rise. Crude oil demand in ton-mile terms grew by 5.9% in 2023 and is expected to grow by 4.3% in 2024. Seaborne crude oil trade has been supported by increasing demand from China and rising exports from suppliers in the Americas. In 2023, crude oil trade was estimated to have increased by 5.2% or 335 million deadweight, whereas in 2024 it is expected to further increase by 3.4% or 346.5 million deadweight. The tanker order book remained at historically low levels, standing at 6.7% of the fleet capacity at the end of December 2023. Emission regulations are expected to have a further moderating impact on active tanker supply. Slide 6 shows the handy size fleet age and growth. The handy size market by the end of 2023 was the third largest size sector in dry bulk shipping in number of units, around 23% of the trading dry bulk fleet. The handy-sized bulk air fleet includes many old vessels with plenty of demolition potential. Almost 40% of the handy-sized dry bulk carrier fleet is between 10 to 15 years of age, while a total of 30% of the trading fleet is estimated to be 15 years old or older. New environmental regulations are likely to accelerate demolition. Order book to trading ratio was 10% in deadweight terms. In 2023, net fleet growth for handy size of 20,000 to 43,000 deadweight was 3.3% year on year. Net fleet growth is expected to continue at around 4.3% in 2024 and then at around 3.1% in 2025. Fleet growth forecast for 2024-2026 is based on the current order book after assuming slippage and expected demolition. Looking forward to 2024, the outlook for the handy bulkier market is cautiously optimistic with room for gradual improvements. According to current projections, the growth in bulkier demand is expected to be slightly above fleet expansion, combined with constrained delivery schedule and potential for increased demolitions. Several factors, including the recent escalating attacks from Houthis in the Gulf of Aden, the implementation of reduced vessel speed and extended retrofitting time due to environmental regulations, coupled with recently announced constraints in the Panama Canal, are poised to shape market dynamics. Slide 7 shows the Afromax tanker's fleet age and growth. Order book for Afromax tanker vessels stood at just 5% of the existing fleet at the beginning of 2024, the lowest level since the past 28 years. Almost 30% of the Afromax tanker vessel's fleet is between 15 to 19 years of age, while 90% of the trading fleet is older than 20 years. Compliance with strict environmental regulations is likely to accelerate demolition, thus reducing available Afromax tanker fleet supply. Emission regulations are expected to have a further moderating impact on active tanker supply. Tanker supply, combined with geopolitical factors and environmental impacts, will heavily affect tanker rates. The effects of the redrawing of trade lanes resulting from Russia's invasion of Ukraine continue to support the Afromax market in particular. However, the same peaks and corresponding freight rates seen in Q4 of 2022 were not reached. After the attacks commenced on vessels passing through the Red Sea Gulf of Aden around the end of November, a gradual strengthening of the tanker market east of Suez were observed, as vessels started rerouting via Cape of Good Hope instead. This has resulted in less availability of vessels east of Suez, and a less efficient mechanism to rebalance the vessel supply on either side of Suez. If the Red Sea situation persists, upwards pressure will also be expected in Atlantic Afromax Market, as less tonnage will be available due to the longer routes taken. During the last quarter of 2023, there was a clear gap between tanker shardings west and east of Suez. We saw a significantly further market in the west, both on dirty and clean trades. The afro-axe rates increased in Q4 compared to Q3, as crude oil exports out of US Gulf reached record figures, and this combined with improved export quantities also from other key export areas in the Atlantic kept the fleet increasingly busier. Slide 8 shows the current fleet of C3IS. By the end of Q4 2023, C3IS owned and operated a fleet of two handy-sized dry bulk carriers and one Afra-Maxoil tanker with an average age of 13.4 years. All vessels have had their ballast weather systems already installed. Furthermore, there are no immediate capital commitments for special surveys as the next one due is in Q3 2025. All vessels are currently unencumbered and currently employed on short- to medium-term period charters and spot voyages. For the contracted revenues of the company, the EcoBoost Fire is on time charter at a daily rate of $13,000 until April 2024. The EcoAngel Bay is on a time charter at a daily rate of $14,000 until March 2024. The Afrapel II X-Telc Burana is on spot voyages. Slide 9 shows a sample of the international charters with whom the management company has developed strategic relationships and has experienced repeat business. Repeat business highlights the confidence our customers have for our operations and the satisfaction of the services we provide. The key to maintaining our relationships with these companies are high standards of safety and consistency of service. I will now turn over the call to NINAP India for our financial performance.

Thank you, Diamantis, and good morning to everyone. Please turn to slide 10, and I will go through our financial performance for the fourth quarter and 12 months of 2023. Voyage revenues for the three months ending December 31, 2023 amounted to $13.8 million and $28.7 million for the 12 months ending December 31, 2023. Compared to Q3-23, our net revenues increased by 36%, primarily due to the increase in the average number of vessels. Our fleet operational utilization was 87% for the fourth quarter and 91.6% for the full year 2023. For the fourth quarter of 2023, the daily TCE was $34,060, and for the 12-month period, the value was $23,453. Voyage expenses and vessels operating expenses for the three months ended 31st of December 23 were $4.4 million and $1.5 million respectively. For the 12-month period, the figures were $7.6 million and $4.8 million respectively. The increases in both voyage expenses and vessels operating expenses are attributed to the increase in the average number of vessels and the addition of our Aframax tanker in the initial fleet. Voyage expenses for the 12 months ended December 31st, 23 mainly included bunker costs of 3.4 million corresponding to 45% of total voyage expenses and commissions to third parties of 1.2 million corresponding to 16% of total voyage expenses. Operating expenses for the 12 months ended December 31, 23 mainly included crew expenses of 2.8 million corresponding to 58% of total operating expenses. Spares and consumable costs of 1 million corresponding to 21% and maintenance expenses of 400,000 representing works and repairs on the vessels corresponding to 8% of total vessel operating expenses. Total calendar days for our fleet were 276 days for the three months ended December 31, 23 and 901 days for the 12 months of 23. Of the total calendar days in the fourth quarter of 23, 174 or 63% were time-chartered days and for the 12 months, 680 or 75.5% were time-chartered days. General and administrative costs for the 12 months ended 31st of December 23 were 1.2 million. Depreciation costs for the 12 months ended 31st of December 23 was 4.1 million, a 3.5 million increase from 0.6 million for the same period of last year due to the increase in the average number of vessels. Interest and finance costs for the 12 months ended 31st of December 23 was $1.4 million and related to the accrued interest expense related party as of December 31, 23 in connection with the $38.7 million acquisition price of our AfraMax tank, AfraPower 2, which is payable by July 24. EBITDA for the 12 months ended 31st of December 23 amounted to 14.6 million and 7.6 million for Q4-23, representing an increase of 41% from Q3-23. As a result of the above, for the 12 months ended December 31-23, the company reported a net income of 9.3 million. The net income for the fourth quarter was 5.6 million, corresponding to an increase of 67% from Q3 23. Turning to slide 11 for the balance sheet, the fleet book value as at the end of December 23 was 75.2 million. As at the end of 23, the cash and cash equivalent was 9.1 million, whereas the company had no outstanding bank debt. The financial liability of 39 million relates to the Aframax oil tanker that was acquired in July 23 and is due in July 24. Based on the current estimated fleet market value as of March 24, the company's net asset value is approximately 50.45 million, representing 10.3 times its current market capitalization. Concluding the presentation on slide 12, we outlined the key variables that will assist us progress with our company's growth. Owning a high-quality fleet reduces operating costs, improves safety, and provides a competitive advantage in securing favorable charters. Maintaining the quality of vessels by carrying out regular inspections both while in port and at sea, and adopting a comprehensive maintenance program for each vessel. Discipline growth with in-depth technical and condition assessment review, timely and selective acquisitions of quality vessels, current focus on short- to medium-term charters and spot voyages, chartering to high-quality charters, such as commodity traders, industrial companies, and oil producers and refineries. Maintaining an adequate level of cash flow and liquidity. No outstanding bank debt. At this stage, our CEO, Dr. Diamantis Andriotis, will summarize the concluding remarks for the period examined.

Since our company's listing in late June 2023 and following the acquisition of our Afromax, the first step of our growth strategy, our expanded and diversified fleet has enabled our company to enjoy solid financial performance. Indicatively, during the fourth quarter of 2023, we achieved the fleet-wide time charter equivalent rate of $34,000 per day. As a result, during the fourth quarter of 2023, we generated revenues of $13.8 million a net income of 5.6 million, representing increases of 36% and 67% respectively from the previous quarter. The revenue generation of 23.9 million achieved during the second half of 2023, since our company's spin-off from its parent company, represents approximately 83% of the full year's revenue. We believe that this is indicative of our ability to efficiently operate our fleet and capitalize on the sustainable freight rate environment. Specifically, our two-handy sized bulk carriers, which are mainly employed under short-term time charter contracts, are currently earning charter rates ranging from $13,000 to $14,000 per day. The earnings raised from our two-handy bulk carriers are enhanced through the operation of our aftermath tanker in the spot market. The vessel is currently capturing the prevailing robust aphramic spot rates, which stand in excess of 40,000 per day, a level that is in line with the time charter equivalent rate achieved by our tanker during the last quarter. Our diversified fleet and deployment in the spot market enables our company to take advantage of the promising charter rate environment and is expected to generate strong cash flow going forward. We believe that our capital structure, comprising of no bank debt and strong cash balance, currently standing at 35.6 million, will further enhance our company's ability to fund selective vessel acquisitions following payments of the remaining purchase price of our Afromax tanker. We would like to thank you for joining us today and look forward to having you with us again on our next call for first quarter of 2024 results.