Costamare Inc.

Thank you for standing by, ladies and gentlemen, and welcome to the Costa Mare, Inc. conference call on the second quarter 2021 financial results. We have with us Mr. Gregory Zicos, Chief Financial Officer 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 then one on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today, Wednesday, July 28, 2021. We would like to remind you that this conference call contains forward-looking statements. Please take a moment to read slide number two of the presentation, which contains the forward-looking statement. And I will now pass the floor to your speaker today, Mr. Zikos. Please go ahead, sir.

Thank you and good morning, ladies and gentlemen. The container market rebound that has begun in the second half of last year has continued into the first half of this year, drawing strength from favorable supply and demand dynamics. Strong consumer demand, low inventory levels, and supply chain constraints have all contributed to record charter rates and longer charter durations. All our contingency charter during the quarter have been fixed at increasingly high levels of height. On the dry bark side, we are pleased to report the acquisition of 21 additional vessels since we first announced our entry into the sector. Our dry bark fleet comprises of 37 vessels in total, between 32,000 and 85,000 deadweight, with an average age of 10 years. Up to now, 14 ships have been delivered, with the rest of the fleet expected to be delivered by year-end. The dry bulk acquisitions result from our decision to invest in this liquid sector, where supply is limited by a low order book and demand is being driven by increased infrastructure spending and commodity consumption. Supported by a contracted revenue of $3.3 billion and an average time-traded duration of more than four years from our contingency fleet, We have 15 containers coming off-charter over the next 18 months and 37 dry-buck versions operating in the spot market, favorably positioning our company should the currently strong market conditions continue. Moving now to the slide presentation. On slide three, you can see the highlights. Net income for the quarter is 82.8 million and the EPS is 67 cents. Adopted net income is 58.3 million, up 84% compared to the second quarter of last year, and adapted EPS is 47 cents, increased 81% relative to the year-ago period. We have decided to expand into the dry bag sector by assigning commitments for 37 dry bag vessels, and we have already accepted delivery of 14 ships. 23 ships are expected to be delivered between now and the end of the year. Moving to the next slide. We have taken delivery of three more container ships during the quarter, and we expect to take delivery of two more vessels between now and the end of the year. Incremental revenues from these vessels are around $200 million. We have also concluded the sale of one vessel and expect the sale of two other ships to be concluded within 2021, with a total estimated capital gain of around $22 million. On slide five, you can see our new financing arrangements since our last earnings release. In total, we have concluded financing of about $650 million, and we have a new financing commitment subject to documentation of $150 million. All our container ship and drive-by passengers that have not yet been delivered have funding in place. We do maintain a strong balance sheet with liquidity of about $600 million, market value-based leverage of 31%, and no meaningful debt maturities until 2025. On slide six, you can see our new chartering arrangements. We have entered into new or extended the charters of seven vessels at much higher levels. On average, the new charters were fixed at the rate of 2.1 times higher with a longer average duration. Our most recent fixtures, the COSCO Guam II and the COSCO Ningbo, were done at $72,700 per day per vessel for three years, more than 2.4 times higher than the current rate. In addition, we have a total of 15 containerships coming off charter over the next 18 months. Moving to the next slide. On slide 7, you can see the chartering of our dry vessels. We have chartered in total seven ships at very healthy rates. On top of this, we have also fixed four vessels whose delivery is expected to be delivered to – is expected to occur within 2021. Slide eight. The contingency charter market has continued to rise on the back of policy supply and demand fundamentals. The island fleet reached 0.7 percent in July, indicating a fully employed market. The drive-out market has also reached levels not seen since 2010. as demand for commodities is surging. We have also paid our 42nd dividend in April, and we will pay our 43rd dividend in the coming August. Slide 9. On this slide, you can see the second quarter 2021 results. The company generated revenues of $167 million and adjustment income of $58 million. Based on the above, the second quarter adjusted EPS is 47 cents, up 81% year-over-year. Our adjusted figures take into consideration the following non-cash items, accrued charter revenues, accounting gains or losses from asset disposals, prepaid lease rentals and other non-cash charges, as well as changes in the fair value of equity securities. On slide 10, you can see our capital structure. Our leverage is comfortably at about 31% based on current market values. EBITDA over net interest is at 6.2 times when our governance have a minimum requirement of 2.5 times coverage. On slide 11, you can see distribution for our contingency fleet. Our revenue comes from like MERS, MSC, Evergreen, Costco, and Hapagloid. We have 3.3 billion in contracted revenues, and the remaining times are the duration of about 4.3 years. On the next two slides, we discuss the contingency market. Charter rates have significantly improved since Q2 2020 across all vessel sizes. Box rates have increased by approximately 300% on a yearly basis. Slide 13. The idle fleet is at 0.7% from a high of 20% one year ago. The order book has risen to 21% as new ordering has accelerated over the past quarters. It should be noted, however, that it takes close to two years to build a new vessel, and the majority of new building vessels that have been ordered will not be delivered until 2023 onwards. In the last two slides, we discussed the drive-by market. As shown on slide 14, charter aids have significantly improved since Q3 2020. Although asset values have been trending upwards since late 20s, they have lacked the increase in charter aids. On the last slide, you can see that the bounty consumer spending combined with government stimulus has created positive momentum in the seaporn commodities trade. At the same time, the order book for the dry grasses remains at historical low levels, especially for the sizes that we have invested in, and fruit growth is expected to decline over the next several years. This concludes our presentation, and we can now take questions. Thank you. Operator, we can take questions now.

Thank you. As a reminder, if you would like to ask a question, please press star then 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star then 2. That's star 1 to ask a question. And our first question today comes from Chris Weatherby with Citi.