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Operator
Thank you for standing by, ladies and gentlemen, and welcome to the Starbuck Carriers Conference Call on the second quarter 2022 financial results. We have with us Mr. Petros Papas, Chief Executive Officer, Mr. Hamish Norton, President, Mr. Nikos Reskos, Chief Operating Officer, Mr. Simo Spiro, and Mr. Christos Beglaris, co-chief financial officers of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session, at which time, if you wish to ask a question, please press star 1-1 on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today. I'll now pass the floor to one of your speakers today, Mr. Beglaris. Please go ahead, sir. Thank you, moderator.
Petros Papas
I am Christos Begleris, co-CFO of Startup Carriers, and I would like to welcome you to our conference call regarding our financial results for the second quarter of 2022. Before we begin, I kindly ask you to take a moment to read the safe hardware statement on slide number two of our presentation. our second quarter results, cash evolution during the quarter, an overview of our balance sheet, an update on our scrubbers and vessel operations, the latest on the ESG front, and our views on industry fundamentals before opening up for questions. Let us now turn to slide number three of the presentation for a summary of our second quarter 2022 highlights. Net income for the second quarter amounted to $200.2 million, and adjusted net income of $204.5 million, or $2 adjusted earnings per share. Adjusted EBITDA was at $258.3 million for the quarter. For the second quarter, after our existing dividend policy, we declared a dividend per share of $1.65, The graph on the bottom of the page highlights the cumulative performance over the last 12 months, which illustrates the strength of the platform in a robust drive-out market. Our last 12 months adjusted EBITDA is 1.12 billion, and adjusted net income is 907 million U.S. dollars. Over the same period, we have returned a cumulative dividend of $6.55 per share, or $674 million to our shareholders. On the top right of the page, you will see our daily figures per vessel for the quarter. Our time charter equivalent rate was 30,451 per vessel per day. Our combined daily OPEX and net cash GNA Therefore, our TCE is 24,767 per vessel per day. Looking at our chartering coverage for the third quarter of 2022, we have covered 61% of our fees available days at the daily rate of $29,000 per day. Slide 4. We started the quarter with $444.4 million in cash and generated meaningful positive cash flow from operating activities of $239.9 million due to the strong freight market, after including debt proceeds and repayments, capex payments for ballast water treatment system installments, In the first quarter dividend payment, we arrive at a cash and cash equivalent balance of $385.6 million at the end of the quarter. Please turn to slide number five, where we highlight the continued strength of our balance sheet. Our total cash today stands at $474 million. Meanwhile, our total debt stands that decreased our annual regular debt repayments by $11 million and reduced our interest costs by $4 million per year as a result of achieving significantly lower margins. Our next 12-month amortization is $188 million. After the completion of the recent refinancings, we have 12 unlevered vessels with market value nexus of $210 million and market maturity where we have 22 million of common payments, part of which we're in the process of refinancing. In an increasing interest rate environment, we have fixed 55% of floating interest rate exposure at an average fixed rate of 45 basis points for an average remaining maturity of 1.7 years. I will now pass the floor to our CMO, Nikos Veskos, to talk about our scrappers and provide an update on our operational performance. Thank you, Christos. In slide 6, we would like to update investors about our scrapper investment. We are pleased to report that as of mid-June,
Christos Begleris
Yes, 94% of our best-described features, in regards to our past, present, and future, are covered by students with disabilities in the foreseeable future.
Petros Papas
As you can see at the bottom part of the slide, the forward car-five spread is in steep backwardation versus the front parking. Please turn to slide seven, where we provide an operational update. Operating expenses, excluding non-recurring expenses, was at $4,674 for the second quarter of 2022. Netcast GMA expenses were $1,010 per vessel per day for the same period. Despite continuing adverse COVID-related expenses and recessionary pressures, which have a direct impact on our operating expenses, the combination of our in-house management and the scale of the group enable us to sustain a very competitive cost base and maintain our position as the lowest cost operator amongst our peers. In addition, we continue to rate at the Fly Day provides a fleet snapshot and some guidance around our future dry dock and balanced water system expenses for the next 12 months and the relevant total off-high days. Our expected dry dock expense for the next 12 months is estimated at $33.2 million, with a dry docking of 33 vessels, with another $13.4 million towards our vessel upgrade CAPEX. In total, we expect to have approximately 1,000 off-high days for the forward 12-month period. We anticipate that 98% of our fleet will be fitted with ballast water systems by the end of Q4 of 2022. The above numbers are based on current estimates around dry dock and retrofit planning, vessel employment, and yard capacity. I will now pass the floor to the Chief Strategy Officer, Haris Plakotonaki, for an ESG update.
Haris Plakotonaki
Thank you, Nikos. Please turn to slide nine, where we highlight our continued leadership on the ESG front. A major new development is a decision by Starbucks Board of Directors to establish an ESG committee which will guide and support management on environmental, social, and governance matters in order to ensure that the company promotes and integrates ESG in its strategy and business operations. On the environmental front, Starbuck has taken part for a second year in the annual assessment cycle for the Carbon Disclosure Project. In addition, we are actively participating in the Iron Ore Consortium, along with some of our major charterers, to assess the feasibility of a green corridor on the Australia-East Asia route up to 2050. Furthermore, in an effort to continuously improve on our sustainability performance, we have participated in the annual S&P Global Corporate Sustainability Assessment, which will provide us with a score and ranking based on various financially relevant ESG criteria. Finally, from the societal point of view, Starbuck has partnered with UNICEF to provide psychosocial support to refugee women and children who have fled to Greece as a result of the war in Ukraine. I will now pass the floor to our CEO, Petros Papas, for a market update and his closing remarks.
Nikos
Thank you, Haris. Please turn to slide 10 for a brief update of supply. During the first half of 2022, a total of 15.6 million deadweight was delivered and 1.8 million deadweight was sent to demolition for a net fleet growth of 13.8 million deadweight, or 1.5% year-to-date and 3% year-on-year. The supply outlook is the best in the recent history of dry box shipping. weight reported as firm orders between January and June. Uncertainty on future propulsion, along with surging sea building costs, have helped keep new orders under control, while shipyards continue to fill 2025 capacity with more profitable to the shipyard's vessels. of the EEXI-CII regulations that come into effect as of 2023. The average steaming speed of the fleet has decreased by 2.8% during the last year to 11.3 knots as a result of a strong increase of bunker costs. This situation, along with the new environmental regulations, will continue to incentivize slow steaming and will also support wider scrubber savings. Global port congestion, and especially keep-size congestion in China, has experienced a decline during the last months as pandemic-related restrictions are easing and reduced arrivals helped ease port delays. Having said that, congestion for smaller vessels Let's now turn to slide 11 for a brief update of demand. According to Clarkson's total drive-up trade and the war in Ukraine. However, trade growth is expected to recover during the rest of the year, supported by export seasonality and winter restocking needs worldwide. Furthermore, the resupply of coal, grain, and mineral-bought trade patterns to longer haul routes will inflate ton-miles and help moderate the weaker volumes seen during the first half of 2022. Iron ore trade is expected to expand by 0.3% in tons and 0.1% in ton miles during 2022. China's steel industry went through a strong slowdown over the last year due to significantly higher input costs and a weak real estate market. During the first half of the year, steel output from China decreased furnaces. Nevertheless, China pig iron output is experiencing a recovery supported by infrastructure stimulus and iron ore port stockpiles during the second half of the year experienced a sharp decline. During the first half of the year, Brazil iron ore exports decreased by 7%, with Vale recently announcing an annual guidance between 310 and 320 Coal trade is expected to contract by 0.54% in tons, but to expand by 3.3% in ton miles during 2022. Sanctions announced by major importers on Russian coal, limited capacity for expansion of Atlantic producers, and soaring gas prices have pushed coal prices to record high levels. European buyers are stocking coal ahead of the winter. coal to China, India, and other Asian countries, a situation that is benefiting ton miles. During the first half of the year, China and India have increased their domestic production significantly in order to help raise stocks, reduce prices, remain high in order to avoid last year's blackouts, and therefore strong demand is expected after the monsoon season. Grain trade is expected to contract by 3.7 percent On the other hand, U.S. soybean outstanding sales stand at record high levels for this time of the year, while the Brazilian corn season has started with inflated volumes, indicating stronger grain trade during the second half and the fourth quarter. link. Finally, we remain optimistic for the prospects of the dry bag market and our company is well positioned to enjoy and take advantage. The record low order book combined with the lack of yard space, upcoming environmental regulations and high banker costs and suppressing orders and speeds and create a favorable supply side picture for our industry in the long term. On the demand side, there are short-term risks
Operator
Thank you, sir. As a reminder, to ask a question, you will need to press star 1-1 on your touchtone keypad. Please stand by while we compile the Q&A roster. I show our first question comes from the line of Amit Merota from Deutsche Bank. Please go ahead.
spk01
Hi, guys. This is Chris Robertson on for a minute. Thanks for taking our call. Hi, Chris. I just wanted to ask, so you have relatively young Newcastle Maxes and Ultra Max vessels as well, so you spend quite a bit of time talking about the scrubber premiums, but could I ask about the premiums you're getting or uplift you're getting on the younger Eco vessels?
Chris Robertson
You're talking, Chris, about the premiums due to the vessels being younger as opposed to due to the scrubbers?
Nikos
Well, the younger vessels have lower consumption than the older vessels, and therefore, in effect, they have...on the one hand, they have the advantage of being echo. On the other hand, by burning more or less tons, they get less of a scrubber advantage. On the one hand, as I said, it has the equal advantage, but on the other hand, it makes 10 tons' worth of scrubber benefit less.
spk01
Okay, yeah, that's fair. Thanks for clarifying that. My next question is on... You guys mentioned the speed of the fleet around 11.3 knots at the moment. How do you foresee that evolving over the next few quarters and into 2023? And could you quantify or kind of look at the effective capacity reduction that you expect?
Nikos
Okay, it depends on two things. First of all, it depends on the price of bankers. And second, it depends on how the market rates are. So the highest speed would be at very high rates and very low banker prices. We expect the oil prices to remain where they are, not to fall much. And, therefore, we also expect that-we expect also the market to be decent during the next
Christos Begleris
As versus RCT for about 6% of the time, one knot difference from 11.3 to 12.3 is about, I think that's about a 9% reduction.
Nikos
or 8.5% reduction, and you multiply that by 60%, so that's about 5% effect on supply. So, one knot less or one knot more in speed would be
spk01
Okay, yeah, thanks for that. My last question here is around the unwinding of the Chinese port congestion and also as it relates to the container ship market. So let's say container ship rates fall from here and port congestion eases. What do you think the impact will be to dry bulk rates? Well, first of all, congestion has...
Nikos
trade during the next four or five months, we believe that the Cape Sides congestion will actually increase in China going forward. Regarding containership market and supramax vessels, yes, if containership rates collapse, this will have on Supramax. However, I was just last week, I saw that containers from a well-known Greek public shipping company fixed for three years at like $54,000. So it doesn't seem to me that major impact on supermaxes. Also, one interesting thing is that congestion on supermaxes has actually increased by a bit, like 6%. So, all in all, on the clip size question, I think we will see more congestion.
spk01
All right, yeah, thank you very much for the time, and congrats on the solid quarter. Thank you very much.
Chris Robertson
Thanks, Chris.
Operator
Thank you. And I show our next question comes from the line of Omar Noctar from Jefferies. Please go ahead. Thank you.
Omar Noctar
Hey, guys, good afternoon. Just wanted to ask about the... Hey, Amish. I just wanted to ask, you know, you guys have secured several new credit facilities and extended your maturities lower to cost base. You now have the 12 unencumbered ships. I guess, are you willing to give us maybe a sense of where you have those down in terms of market value? And then maybe give us a sense of what you're thinking about those ships going forward. Are those sales candidates or are they just for flexibility's sake?
Chris Robertson
Omar, you know, as I think you can appreciate, you know, we make a policy of not discussing the value of our fleet, you know, in terms of value per ship. Because, frankly, you know, the ships are worth more in our hands than in the hands of others because of the way we operate them. And, you know, the ships that are unencumbered are, you know, unencumbered more or less by happenstance. They're not particularly sales candidates.
Omar Noctar
Okay, thank you. That's pretty clear. And this is maybe a little nuanced, but I noticed that maybe it just so happens to be this way, but you at an average price of, I want to say, $25 million, and you've issued close to $20 million also under the ATM at $31 million. So definitely good pricing on both counts. Is that a coincidence that they're lined up like that at $20 million?
Chris Robertson
No, it's not a coincidence. We basically had an arbitrage situation lined up where we could issue shares and buy assets in a way that was very advantageous to the shareholders. And, you know, sort of in the middle of that, the arbitrage situation started becoming, you know, less probable, and our share price started to drop. So basically, we spent precisely the money that we raised by issuing shares on buying back shares at a lower price, and so, in effect, retired some shares at zero net cost.
Omar Noctar
Okay, and so do you think that would be how you guys approach it in the future?
Chris Robertson
Well, hopefully in the future we'll be able to issue shares and buy loads of
Omar Noctar
Yeah, yeah, very good. One final one. I just saw in the cashless statement a $35 million T-bill outlay. I don't think I've noticed that before. I'm just wondering if you give me a sense of what that was for.
spk06
Omar, this is Simos. This was just a short-term investment statement. since the maturity was after the end of the quarter, June 30th, under US GAAP we have to report them not in our cash, but in our investment portfolio. However, you know that these products, these T-bills are considered to be in reality cash. So we consider them cash and we add them for the calculation of the dividend, all of these bills are maturing within the third quarter.
Omar Noctar
Got it. Okay, thanks for that. That makes sense. Thank you. I'll turn it over.
Operator
Thanks, Omar. Thank you. As a reminder, to ask a question, you will need to press star 1-1 on your touchstone telephone. I show our next question. It comes from the line of Clement Mullins from Investors Edge. Please go ahead. Good morning. Thank you for taking my questions.
Omar
I wanted to start by asking about the dividend. You have declared another very strong distribution, equal to like the quarter one payout, despite the slightly lower cash balances at the end of the quarter. What has been the driver behind this decision?
Chris Robertson
It's the same dividend policy. It's not a management decision. You know, the cash balance divided by the number of shares outstanding came up with $1.65, you know, based on the formula. And, you know, it was a pretty mechanical operation. And I think you can anticipate that we would go through the same quarter.
Petros Papas
So, Clemens, this is Christos. It was basically a coincidence that the dividend for the second quarter just equaled the figure of the dividend of the first quarter. Essentially, as Heinrich said, what counts is the exact cash balance at the end of each quarter and the number of shares. Yeah, obviously, yeah. Indeed. Makes sense.
Omar
The Retrofit program is yielding outstanding results, given the outside spread we have seen as of late. And although the spread in the futures market is lower, scores should continue to provide a significant tailwind. Is there any willingness to hedge part of your 2023 banker consensual, or do you prefer to remain open?
Petros Papas
At the moment, there is quite a steep discount of the 2023 forward curve on the spread compared to the prices that we're getting now. Indicatively, the spread in Singapore is in the high 200s, close to $300 per ton, and the calendar 23 right now is at levels of around $160, $170 per ton. Given essentially that we have repaid the entire investment and given our expectation of strong energy markets and a widespread in 2023, the choice right now, given what we know now, is to basically ride the spot market also on the spread. Of course, we may change decision in the future. All right, thank you very much for the call.
Omar
Thank you for taking my questions, and congratulations for another excellent quarter.
Operator
Thank you. Thank you. That concludes our Q&A session for today. At this time, I'd like to turn the call back over to Mr. Petros Papas, CEO, for closing remarks. Thank you, operator. No further remarks. Have a nice summer to everybody. Thank you, everyone, for participating in today's conference call. This concludes the program. You may all disconnect.
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