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spk01: Ladies and gentlemen, thank you for your patience and please remain on the line. Today's Diana Shipping Conference will be starting shortly. Again, we do thank you for your patience and ask that you please remain connected. Today's conference will be beginning shortly. Ladies and gentlemen, thank you for your patience and please remain on the line. Today's Diana Shipping Conference will be starting shortly. Again we do thank you for your patience and ask that you please remain on the line. Today's Diana Shipping Conference will be starting shortly. Thank you. Thank you. Greetings and welcome to the Diana Shipping, Inc. 2022 Third Quarter Conference Call and Webcast. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, you may do so by pressing star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Ed Nebb, IR Advisor. Thank you, sir. Please go ahead.
spk03: Thank you, Donna. And thanks to everyone for joining us for the Diana Shipping Inc. 2022 third quarter conference call. With us today from management are Samir Rameez Palu, Chief Executive Officer, Anastasios Margaronis, President, Yanis Zafiropoulos, CFO, and Chief Strategy Officer, Treasurer and Secretary, Eleftherios Papatrifon, Chief Operating Officer, and Maria Dede, Chief Accounting Officer. Without further ado, I will turn it over to Ms. Pagliu.
spk02: Thank you, Ed. Good morning, ladies and gentlemen, and welcome to Diana Shipping, Inc.' 's third quarter 2022 earnings call. My name, as Ed mentioned, is Samira Mishpagliu, the company's CEO, and it is an honor to have the opportunity to present to you today. Before I begin, I kindly ask everyone to review the forward-looking statements applicable to today's presentation, which can be found on page four of the accompanying third quarter presentation. The third quarter of 2022 has been another very profitable quarter for our company, but also has been a very busy and productive one with the acquisition of the nine vessel Ultramax fleet in August. While market conditions have become less robust, especially towards the end of the third quarter, our disciplined chartering strategy has allowed us to continue generating attractive free cash flows. As a result, we have announced another attractive dividend for this quarter, continuing to reward our shareholders. Turning to slide five, I will review with you the company snapshot as of today. This time round, we do have changes since last quarter and we find ourselves owning and operating an expanded fleet of 40 vessels in the water with a carrying capacity of approximately 4.7 million deadweight tons. As already announced, we expect our fleet to increase to 43 vessels by the end of the year as we take delivery of the remaining three Ultramaxes within December. Our fleet utilization has remained at very high levels, coming in at 99.1% for the nine months of 2022. 36 vessels in our fleet are managed in-house by Diana Shipping Services, and four vessels are managed by our 50-50 joint venture, Diana Williamson Management Limited. At the end of the third quarter, we employed 860 people at sea and ashore. Moving on to slide six and seven, I will go over the highlights of the third quarter and recent developments. More specifically, in July of this year, we declared a dividend of 27.5 cents per common share or approximately 23.7 million US dollars in aggregate for the second quarter of 2022. Also in July, we made a prepayment of 4.8 million US dollars for the release of the mortgage on the motor vessel Baltimore, a vessel that we had agreed to sell earlier in the year. In August, we were particularly pleased to have agreed to acquire nine modern Ultramax dry bulk vessels built between 2015 and 2018, with an average vessel age of approximately 5.4 years from Sea Trade Holdings Inc. The aggregate purchase price of the fleet is $330 million, of which $220 million will be paid in cash, and $110 million is to be paid in the form of $18,487,395 in aggregate newly issued common shares of the company at the price of $5.95 per share. So far, we have taken delivery of six out of the nine vessels, and as mentioned before, we expect to take delivery of the remaining three within December. We view this transaction to be fully supportive of our strategy of expanding and modernizing our fleet, while at the same time maintaining a strong balance sheet with low cash flow break-even points. Also in August, in anticipation of the motor vessel New Orleans and Santa Barbara's sale and lease-back transactions, we made a prepayment of US$30.8 million on the relevant debt facilities and successfully released the vessel's mortgages. In September, we proceeded with the sale of the two vessels to unaffiliated Japanese third parties for an aggregate amount of 66.4 million US dollars and bare boat chartered in the vessels for a period of eight years. In September, we delivered the motor vessel Baltimore to her buyers, OceanPal Inc., and received 25,000 series deconvertible preferred shares issued by the buyers as part of the sale consideration. Also in September, we signed an up to 200 million US dollars credit facility for the partial financing of the nine Ultramax vessels. As announced, we have declared a dividend for the third quarter, which is part cash and part in stock. The cash dividend is 17.5 cents per common share, or 17.3 million in aggregate. With the payment of this quarter's dividend, the total amount of cash dividends paid since we reinitiated our dividends in last November is one dollar. In addition, this quarter we also declared a stock dividend of all OceanPal Series D convertible preferred shares that our company has received as partial consideration for the disposal of motor vessel Baltimore on a pro-rata basis to all our shareholders. This stock dividend will either be in the form of OceanPal common shares or Series D convertible preferred shares. at the election of each Diana shareholder. The distribution of the stock dividend will be made after the registration statement filed by OceanPal with the SEC has been declared effective. We are very pleased that we are continuing to reward our shareholders with these outputs. Our board will continue evaluating the market conditions for the declaration of dividends for further quarters. Lastly, as of November 14th, We have secured approximately $35 million of contracted revenues for the remainder of the year with 80% contract coverage and $123.7 million of contracted revenues for 2023 with 36% contract coverage. Yanis will provide later on a more detailed analysis of our cash flow generation potential based on the current market environment. Turning to the financial highlights of this quarter of 2022 on slide 8, we find ourselves as of September 30th, 2022, with a cash and cash equivalence position of $129.7 million, including restricted cash, as against $126.8 million as of December 31st, 2021. Our debt, net of deferred financing costs, at $471.8 million at the end of the third quarter of 2022, as against $423.7 million at the end of 2021. Our time charter revenues for the third quarter of 2022 amounted to $73.8 million, as against $57.3 million for the third quarter of 2021. Lastly, Our earnings per share for the third quarter of 2022 came in at 37 cents versus 16 cents per share for the same period in 2021. Yanis will go over these numbers in more detail further on in the presentation. Moving on to slide nine, we find a summary of our recent chartering activity. Consistent with our disciplined chartering strategy, we have continued chartering our vessels in a staggered manner and have secured profitable time charters for seven vessels of our fleet since our last quarterly earnings presentation. More specifically, we have charted one CancerMax, one Panamax, one Post Panamax, and four Ultramax vessels at a weighted average daily rate of 14,862 US dollars, and for a remaining average period of 374 days per vessel. We intend to keep chartering our vessels in a similar way by staggering maturities, locking in cash flows and positioning us in a manner that allows us to participate in the market in a balanced way. I now turn it over to Yannis to go over the financials in more detail.
spk04: Thank you, Samira. This has been another very strong quarter for our company. The time chart revenue stood at 73.8 million US dollars with an average number of vessels at 34.9 compared to 57.3 million dollars with an average number of vessels of 36.3 at the same quarter last year. The time chart equivalent rate for this quarter was 23,289 compared to $17,143 at the same quarter as the previous year. I think what is also notable is the decrease in our operating expenses of approximately $130 per day compared to the previous year's quarter. If we move to slide 11, You can see that the same picture applies and we have the same picture for the nine months. The time charter revenues were $214 million, compared to only $145 million at the same period last year, even with a smaller average number of vessels. Looking at the average time charter equivalent, it was at, this quarter it was at 23,363. approximately $10,000 more than the previous year. Operating expenses for the nine months were more or less the same at around $5,500 per day. Slide number 12, on this slide we can see the 0.39 being the basic earnings per share. and $0.37 per share on a diluted basis. We remind you that the last year, same indicators stood at only $0.17 and $0.16 per share, respectively. Again, for the nine months, the same picture, $1.15 per share basic and $1.10 diluted. compared to only 0.15 and 0.14, respectively, last year. As always, our balance sheet has been on a pristine condition with, I'm choosing only one number from the balance sheet, the net debt being at approximately $249 million. And in... As of December 31st, the last year, it was $305 million. Very, very healthy. Slide number 15. Again, you have seen that slide before, and the maturities of our data clearly are where we want them to be. Also, the projected loan balances are very manageable compared to the estimated steel values of our vessels. We are sure that the maturities will keep changing well ahead of their final days. Our track record is such that we have always acted proactively. Slide number 16. As of September 2022, our Africa slow break-even was 13,153 per day. Again, a very healthy number as regards the ability of the company to pay dividend. Now, talking about dividend, and especially the dividend we have announced, I think that if someone does the necessary calculations based on current prices of OceanPal shares, that they may be distributed in the form of common shares to our existing shareholders. Together with the cash announced, this is a very meaningful dividend, close to 40 cents that will be distributed to our shareholders. Slide 17 is the usual boring slide that we have always. that represents our discipline, non-speculative chartering strategy. What we can say for that slide is that we have secured another $35 million for the remaining of the year, and we still have another 20% of the days unfixed for the remaining. This is going to be my last slide, and then I'm going to hand it over to Stacy. But this slide should be seen in continuation with the previous slide. And based on the very recent FFA rates that we have used for the unfixed revenues, it is estimated that the total revenues for 2023 can be around $254 million. Before I turn it over to Stassi, I would like to mention once again that the company today has announced very good results and also a very healthy dividend for our shareholders. And our balance sheet remains in a very, very good condition with excess cash in our accounts with un-mortgage vessels, low finance lead, secure employment. and relatively young vessels together with other safety valves that we have. We feel very, very comfortable with the ability of the company to pay dividends. And with that, I give the floor to Stacey for the market analysis. Thank you, Yanni.
spk05: looking at what has happened during this geopolitically turbulent year with the bulk carrier earnings across all the bulk carrier size ranges. In this first slide, I'd like to point out that Clarkson summarized recent developments by reminding us that after the strongest year for the sector in 13 years, that was 2021, bulk markets have softened in 2022. The main reasons? as will be mentioned below, were problems with demand for commodities and easing port congestion. After rebounding by 3.5% to 5.5 billion tons in 2021, seabourn dry bulk trade will probably increase only marginally by 0.6% in ton mile this year. According to Hal Robinson, there are a number of contributory factors behind the recent fall in dry cargo rates, but the unwinding during October of a record number of vessels tied up in China has certainly been significant. Congestion in China peaked near the end of September at around 640 vessels. Today, this figure has come down to around 427 across all size ranges. The release of over 200 additional vessels onto the international market in a month has clearly led to a shift in the supply-demand balance in the Pacific with a knock-on effect globally. Even though the gradual easing of COVID restrictions has been partially responsible for the lower congestion in Chinese ports, the sharp drop over the last month in particular has more to do with fewer vessels arriving in China. These arrivals were down 22% in October on a year-on-year basis. To put things in perspective, at its peak in October 2021, the Baltic Cape Index reached 10,485. Yesterday it closed at 1,333. The Baltic Panamax index peaked last October at 4,328 and closed yesterday at 1,688. The BSI reached 3,624 in October of last year and closed yesterday at 1,180. Cape-sized market earnings have come down at the point as much as 74% from the 2021 highs. In the Panamax sector, earnings have also softened but have seen less acute pressure than in the Cape Side sector. Panamax sport earnings averaged $15,691 a day in the third quarter of this year. Earnings have also softened in the Handimax Ultramax sectors this year, but have for most of the year outperformed the larger sectors. Supramax Ultramax trip earnings have come down about 40% from last year, but are more than double their pre-COVID 10 year average. Grain and minor bulk commodity imports carried mostly in Ultramax and Handimax vessels have been coming down due to several factors among which energy rationing and current high commodity price. Turning to the next slide, we look at macroeconomic considerations. The IMF has been reducing It's estimates of GDP global growth recently. The latest forecasts for growth this year and next are 3.2 and 2.7% respectively. For China, growth is estimated to come in at 3.2% this year and 4.2% in 2023. India might grow at between 6% and 6.5% this year and next, while the Euro area is estimated to grow by 3.1% this year and just 0.5% next. The US is estimated to grow by 1.6% this year and 1.5% next year. As the US is the country where inflation pressures are expected to ease before this happens elsewhere in the Western world, growth should return more swiftly than, for example, in Europe. In China, consumer spending has been recovering so far this year. It has been going up for four straight months, according to Commodore Research, with the latest increase being the September year-on-year increase of 2.5%. Lending by Chinese banks has steadily increased this year, and China remains, according to Commodore Research, only one of three nations that has actually cut rates this year, with the central and regional governments continuing to work on stimulating the economy. Loans in September total 2.47 trillion yuan. One of the outcomes of the war in Ukraine is that China and Russia have been strengthening their commercial ties over the last few months. Imports of Russian coal, for example, by China in September came in at the highest level seen in over five years. Turning to commodities, a brief look at steel industry. According to the World Steel Association, Chinese steel production was up 4% month-on-month in September, even though it was still 6% down on 2021 levels. The problems of the property sector are the main pressure currently as regards Chinese steel production. India appears to be the only key producer where output is set to rise this year, with September production being up 7% year-on-year on firm demand trends. Commodore Research reported global steel production has gone down for 12 straight months. Weakness in the steel market, while not new, remains an important headwind in the cave-sized market. Turning to iron ore, as Commodore Research points out, Brazil's iron ore exports have contracted on a year-on-year basis this year by 14.5 million tons, or 5%. Sustained strength in that trade is needed for the cave-sized market to be able to find consistent support. According to Clarkson's iron ore seaborne trade will contract slightly by 0.2% in 2023 on the back of weaker demand and steel production trends in China and economic pressures elsewhere. For 2024, Clarkson's predicted Chinese demand for iron ore imports would ease further, although global trade is projected to rise by 0.8% year on year, potentially supported by improving economic trends in Europe and other key regions. Steam coal now. According to Clarkson, global seaborne thermal coal trade is forecast to grow 2% in 2023 to 985 million tons, mainly driven by increased Asian demand, which is likely to be met by increased Indonesian and Australian exports. Further ahead, 2024 is initially projected to see seaborne thermal coal trade shrink by 0.3% to 981 million tons as European energy mixes potentially start to shift once again away from coal. Clarkson's report that the EU and the UK imported 68% more coal in September 2022 than they did the same time last year. Up to September, Russia was the largest exporter of coal to Europe. In September, however, a new trend seems to have developed. Most of the coal imported by the EU came from the US, Colombia, Australia, And South Africa, a total of 75% of imports came from those countries. If this trend continues, it will no doubt benefit the Panamax and Ultramax vessel due to the longer distances introduced in the coal trade. For coking coal, Clarkson's report, the global coking coal market continued to feel several negative impacts from the conflict in Ukraine, as well as related macroeconomic headwinds. In 2023, Clarkson's predict imports to increase by 2%, to 268 million tons, with Australian exports likely to improve as some new mine projects come online. In China, domestic output and land-borne imports, mainly from Mongolia, are expected to continue to grow. On grain cargoes now, according to Clarkson, the grain trade is expected to increase by about 4% in the 2022-23 grain season. and reach 537 million tons on the back of recovering Ukrainian grain exports and expanding U.S. and Brazilian soybean production. Clarkson's forecast for 2024 is for an additional 4% increase in seabourn volumes as Ukrainian exports potentially return towards pre-war levels, Brazilian exports continue to grow, and North American shipments return to more robust levels, helping to ease somewhat food security concerns worldwide. This trend, if it materializes, will be particularly helpful for the earnings of smaller bulk carriers. Turning to slide 21, commodity prices have finally stopped going up apart from grain, cargoes, which for seasonal reasons and some supply-related issues have been firming up lately. On the next slide, 22, We look at the new building order book. In early October, the bulk carrier order book stood at around 7% of the trading fleet. According to Clarkson, the new building order book for CAPES stood at the beginning of October at 22.1 million deadweight, which was 5.8% of the current fleet. The Panamax Zone order were a similar 21.8 million deadweight, which however represent 9% of the fleet. Candy maxes on order total 17.2 million dead weight, the equivalent of 7.6% of the existing fleet. Let's have a brief look at environmental issues now. According to Clarkson, shipping's fueling transition continues to gain momentum. The alternative fuel capable order book stands at 1,079 ships of all types of 76.9 million gross tons. which represents 44% of the total order book. Today, only 5% of the world fleet in GT terms is alternative fuel capable. Most of the order book of alternative fuel capable ships involves LNG, but there has recently been interest in methanol dual fuel units. Some owners are even pursuing fuel optionality by ordering LNG dual fuel and methanol through cammonia-ready ships. Optionality, though, comes at a high price. New building costs escalate rapidly. The larger the number of optional fuels a main engine can operate on. So far this year, 13% of tankers in deadweight terms delivered have been alternative fuel capable, while only 3% of bulkers in deadweight terms have the same flexibility. This highlights the comparatively faster uptake of alternative fuels in the tanker new building sector. A recent study has been published by the Chalmers University of Technology in Sweden, claiming that discharge of water from scrubbers is responsible for up to 9% of certain emissions of carcinogenic and environmentally harmful substances. The Swedish Transport Agency for Marine and Water Management has proposed a new ban on vessels using scrubbers in the internal waters of the Baltic Sea. Since the date of this study's data collection, the number of ships fitted with scrubbers has tripled according to Commodore research. Therefore, we will no doubt be hearing further on this subject over the next few months. In the meantime, the price spread between very low sulfur fuel and the 3.5% high sulfur fuel has been hovering around $260 over the last few weeks. Finally, let's look at the outlook of our industry. Overall, in 2023, supply-demand fundamentals could see some improvements. A 2.2% ton-mile demand growth is initially projected versus just 0.6% fleet growth. However, easing congestion looks likely to see earnings remain below the high seen in 2021. Environmental regulations are expected to curb active supply, though, which may help markets to remain healthy, at least by historical standards. A positive sign for Panamax's and Ultramax vessels is the fact that the Chinese Customs Agency has been preparing a longer list of approved Brazilian corn exporters. Bremer points out that overall, a scenario is developing in which China will gradually replace U.S. corn with corn bought from Brazil. If this materializes, it will certainly help boost demand for Panamax and Ultramax faster. China is forecast, according to Maersk Broker, to import 18 million tons of corn in the 2022-23 grain season, which began this October. According to Komodo research, the dry bulk market needs ongoing improvement, with China having to continue to offset the deterioration in much of the rest of the world. It is unfortunate that global inflation will not subside anytime soon, and the industrial demand destruction we have been witnessing so far this year might continue for a short while. Nevertheless, with the benign supply picture and longer voyage duration, For several reasons, a positive trend might develop next year and earnings might surprise us positively. Even without the much hoped for ending of the war in Ukraine, we would see a return in demand growth and a gradual increase in earnings across all size ranges. Interest rates will probably level off in the US and later in the year in Europe and the rest of the Western world. This will provide another impetus. as the shadow of ever higher interest rates has been negatively affecting sentiment for the last month. Therefore, if less negative developments take place than feared, the market which will have prepared itself for the latter might move higher. That has happened several times in the past shipping cycle. I'd like now to pass the call to our CEO, Semiramis Pallou, for some closing remarks and takeaways. Thank you.
spk02: Thank you, Stacey. So before we open up the call to questions and answer sessions, I would like to provide a summary of what I believe to be the most important points. Firstly, we remain focused on taking advantage of favorable market conditions for securing positive free cash flows that allow us to continue rewarding our shareholders with attractive dividends. We believe that the payout of $1 of cash dividends since last November, in addition to the stock dividends relating to OceanPal Inc., firmly exemplifies our efforts to reward shareholders. Secondly, we remain vigilant in maintaining a strong balance sheet that allows us to entertain creative growth and fleet renewal opportunities. We have demonstrated our ability to deliver on this point with our recent three modern vessel acquisitions. Finally, we are committed to our long-term strategy of providing relevant stability in a cyclical business with an emphasis on maximizing shareholder value. Now I will turn the call over to the operator to commence the Q&A session.
spk01: Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Once again, that is star 1 to register questions at this time. We'll pause a moment for questions to be submitted. Once again, ladies and gentlemen, that is star one if you would like to register a question at this time. We're showing no questions in queue at this time. Management team, did you have any additional comments today?
spk02: No, I would just like to thank everyone for joining us today, and we look forward to talking to you again in our next financial results call. Thank you very much.
spk01: Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
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