Diana Shipping Inc.

Q1 2023 Earnings Conference Call


spk04: Hello and welcome to the Diana Shipping Inc. first quarter 2023 conference call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may press star one at any time to be placed into question queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Ed Nebb, Investor Relations. Please go ahead, Ed.
spk01: Thank you, Kevin, and thanks to everyone who is joining us today for the Diana Shipping, Inc. 2023 First Quarter Conference Call. With us today to lead the call from management is Samira Mispaliu, Chief Executive Officer, who will introduce the other executives of the company and begin the presentation.
spk00: Thank you, Ed. Good morning, ladies and gentlemen, and welcome to Diana Shipping, Inc.' 's first quarter 2023 earnings call. My name is Samira Mispaliou, the CEO of the company, and it is a great pleasure to have the opportunity to present to you today. As mentioned by Ed earlier, I'm joined by our esteemed team, Mr. Stacey Margaronis, President of Diana Shipping, Mr. Ioannis Zafirakis, CFO and Chief Strategy Officer, Mr. Lefteris Papatrifon, Director of Diana Shipping Inc., Ms. Maria Dede, the Company's Chief Accounting Officer. Before we begin, I would like to remind everyone to review the forward-looking statements applicable to today's presentation, which can be found on page four of the accompanying first quarter 2023 presentation. Q1 2023 has proven to be a profitable quarter for our company, despite less robust conditions prevailing in the market. Our disciplined chartering strategy, once again, has largely insulated us from the market weakening and has allowed us to generate positive free cash flows. In line with the guidance provided during the company's end-of-year earnings call, we are pleased to declare the distribution of a dividend for this quarter amounting to 15 cents per share. We aim to continue rewarding our shareholders when the conditions allow us to do so. Turning to slide five, I will provide an overview of the company's snapshot as of today. We currently own and operate an extended fleet of 42 vessels in the water with a carrying capacity of approximately 4.7 million deadweight tons. Our fleet utilization has remained consistently high, reaching 99.4% for the first quarter of 2023. Additionally, we employed 1,013 people at sea and ashore by the end of the first quarter. Moving on to slide six and seven, let's review the highlights of the first quarter and recent developments. In January, We concluded the unblocked deal signed in August 2022 to purchase nine Ultramax vessels with the delivery of the motor vessel DSI Aquarius. Also in January, we agreed to sell the motor vessel Aliki for a price of $15.08 million. She was delivered to her new home in February 2023. In February, we agreed to sell the motor vessel Melia for an aggregate sale price of $14 million. million U.S. dollars with a portion paid in cash and the remainder in Series D convertible preferred shares issued by Ocean Palink. Motor vessel Melia was delivered to her new owners in February. Furthermore, within the same month, we purchased the motor vessel Nord Potamak, later named the motor vessel DSI Drammen for a purchase price of 27.9 million U.S. dollars. The vessel was delivered to the company in April. And within the same month, we completed a joint venture for our ownership and procured debt financing from Lordea Bank. Also in February, we declared a cash dividend of 15 cents per common share for the fourth quarter of 2022, amounting to approximately 16 million US dollars. Additionally, we announced the special stock distribution of all Series D convertible preferred shares of OceanPal Inc. held at the time by the company. In March, we filed the 2022 annual report on Form 20S, which is available on our website. Moving to more recent developments. In April, we signed a $100 million US term loan facility with Danish ship finance SAS, which has been drawn down to refinance existing loan facilities. Last week, we entered into two separate term sheets with two major European banks for two senior secured term loan facilities of up to 100 million US dollars and 22.5 million US dollars each. Lastly, today, we announced a quarterly dividend of 15 cents per common share, totaling approximately 16 million US dollars to be paid in the form of DSX shares or cash at the election of each shareholder. As of May 22nd, we have secured revenue of 79% for the remaining ownership days of 2023, amounting to approximately $128.3 million of contracted revenues. Additionally, we have secured approximately $66.4 million of contracted revenues for 2024, representing 26% of the available ownership days for the entire year. Yanis will provide a more detailed analysis of our cash flow generation potential based on the current market environment. Turning to the financial highlights of the first quarter of 2023 on slide 8, as of March 31, 2023, we held a cash and cash equivalent position of $115.7 million, including restricted cash and time deposits, compared to $143.9 million as of December 31st, 2022. Our net debt, including deferred financing costs, stood at $630.8 million at the end of the first quarter of 2023, compared to $663.4 million at the end of December 31st, 2022. Time charter revenues for the first quarter of 2023 amounted to $72.6 million, compared to $65.9 million for the same period in 2022. Lastly, our earnings per share for the first quarter of 2023 came in at 22 cents, compared to 31 cents per share for the same period in 2022. Yanis will provide a more detailed analysis of these numbers later in the presentation. Moving on to slide nine, let's review a summary of our recent chartering activity. We have continued to implement our discipline chartering strategy by securing profitable time charters for nine vessels since our last earnings presentation in February, 2023. To provide some detail, we have charted one Ultramax vessel at a daily rate of 18,250 US dollars for a remaining average period of 326 days. Additionally, we have charted three CamSar Maxes, one Panamax and two post Panamax vessels with an average daily rate of 14,010 US dollars and a remaining average period of 446 days per vessel. Furthermore, we have chartered two Cape-sized vessels with an average daily rate of 19,360 and the remaining average period of 466 days per vessel. We intend to continue chartering our vessels in a staggered manner, focusing on locking in cash flows and positioning ourselves in a balanced way to participate in the market efficiently. I will now pass on the floor to Yannis to provide a more detailed analysis of our financials.
spk03: Thank you, Semiramis. All in all, I think this has been a good quarter. As we have already said, our time charter revenues for the quarter stood at $72.6 million, compared to $65.9 in the same quarter in 2022. Of course, you understand This is mainly because of the increased number of operating days, i.e., number of vessels. The time shutter rate was at $18,500 compared to $22,000 per day in 2022 for the same quarter. This is... This is showing the market, the current or the previous quarter's market conditions. An important point to pinpoint someone for this slide is the daily operating expenses where we are at similar levels like a year ago or even a little bit lower. Moving to slide number 11. The important point on this slide is the earning per common shares diluted. As we have already said, we managed to have $0.22 per share compared to $0.31 for the previous year's quarter, same quarter as the previous year. Moving to slide number 12. Again, we have kept our balance sheet at a very healthy condition. You can see the cash and cash equivalent and time deposit to be at the level of $115.7 million, and the total debt only at $630-plus-something million. If you do the math, This leaves the company with a net debt position of only $523. something million. Slide number 13. As we have mentioned many times, managing our amortization profile is very important. Taking into account the last two loan agreements we did the one for $100 million and another one for $22 million. We have successfully managed not to have maturities for the remaining of 2023 and the entire 2024 and 2025, the entire 2025. Of course, this should not be news for you since you know that from the beginning we have... being very prudent with the management of our liabilities. Slide number 14. In addition to the previous slide, looking at the total debt and its composition, it can clearly be demonstrated how reasonable is the debt amount for the years to come, and also its composition of various financial instruments some with fixed interest rates, others with variable, and that gives a good hedge position in this unstable interest rate environment. Slide number 15, our breakeven costs also have been kept at very low levels. We are talking here approximately $14,600. Looking at the average time charter rate for fixed revenues for the remaining of 2023, it is at 17,170. And for 2024, of course, only 26% of the days, but still we're talking about $17,248 per day. Slide number 16. I'm pretty much certain that you are bored looking at this slide, but this is the usual graph that depicts the essence of our chartering strategy, which is exactly the same since 2005, a strategy that is proven that provides the best risk-reward ratio for our revenues. The specific numbers we have already mentioned on previous slides Slide number 17. Using the May 15 FFAs, which of course are not on the high side, it looks as if we can have a cash flow surplus of $16-something million for 2023 and $1.6 million for 2024. And now I will pass the call to Stacy Margaronis from the Dry Bank Market Outlook.
spk02: Stacy. Thank you, Gianni, and welcome from me as well to the participants of this conference call on Diana's Q1 financial performance and the look at the industry outlook. I'd like to start by looking at recent bulk carrier earnings developments. The bulk carrier sector has experienced softer earnings recently across all size ranges. Average bulk carrier earnings are down to around 12,000 per day amid limited inquiry in key cargo loading regions and weaker sentiment. Looking at the indices, we observed the following trends, which help us put into perspective the present state of the market. The Baltic Dry Index started the year at 1,250 and closed yesterday at 1,215. The 2022 high was 3,369. The Baltic Cape Index moved from 1,635 on January 3rd of this year to 1,758 yesterday. The 2022 high was 4,602, and the 5TC route earnings peaked at 38,169 per day. The Baltic Panamax Index
spk00: Index started the year at $1,438 and closed yesterday at $1,141.
spk02: It reached a high of $3,416 in 2022, with the five TC average earnings peaking at $30,746 a day. The Baltic Supermax Index stood at $968 on January 3rd and closed yesterday at $980. The 2022 high was $3,033, and the 10 time charter average earnings peaked last year at $33,366 per day. The 12-month time charter rate for CAPE stands at around $15,000 per day. For Panamaxes, the rate is a low $12,500 per day, while for Ultramaxes, it stands at around $11,500 per day. Now let's try to explain the reasons behind these rather wild movements in earnings and indices. On slide 19, we can have a look at macroeconomic development. According to the latest forecast published by the IMF, world GDP is expected to grow by 2.8% this year and 3% in 2024. Uncertainties which may create headwinds for the bulk carrier market include the U.S. banking system stability or instability, monetary policy trajectory, energy prices, inflation, the Chinese economy, and the continuing Russia-Ukraine conflict. According to Clarkson, the Chinese GDP grew by 4.5% during the first quarter of this year, which was up from 2.9% in the last quarter of last year. Manufacturing and infrastructure spending were supportive, while domestic consumption and the property sector have not performed as well. New construction spending was down 19% during the first three months of this year. For 2023, China's GDP is anticipated to grow by 5.2% and by 4.5% next year. The United States is expected to grow by 1.6% this year, and only 1.1% in 2024, while the Eurozone area is expected to grow by 0.8% this year and by 1.4% in 2024. A quick look at the grain trade now. The global seabourn grain trade is projected to grow by 3% this gray season from a reduction of 3% in 2022. Last year, several factors, including the Russia-Ukraine conflict, put pressure on seaborne volumes. This year, the Black Sea Grain Initiative came up for renewal on 18 May. It appears that a fresh agreement is now in place, and Ukrainian exports will not be disrupted further, at least by these regulations. Ukrainian grain exports reached 29 million tons this year to May 1. For 2024, world seaborne grain trade is expected to increase by a further 4%. As you got coking coal, global seaborne coking coal trade is currently projected to grow by 2.9% this year compared to 2022, which will follow a drop of about 0.5% last year. China is expected to import less coking coal than last year, while India will probably increase imports by 9% to 78 million tons. In 2024, seaborne transportation of coking coal is expected to increase marginally by about 1%. Thermal coal. Global seaborne thermal coal trade is currently projected by Cloxon to grow by 2.8% this year and reach 991 million tons. India's imports are once again projected to grow by around 10% this year, while Chinese imports are also expected to increase by 6% to 210 million tons. Indonesia is expected to increase its coal exports by about 32% this year. In 2024, thermal coal exports as a whole are expected to grow by a further 1%. On the all-important iron ore trade, the global seaborne iron ore trade is projected by Clarkson to grow by around 2% this year at 1.5 billion tons. Chinese imports are expected to grow by 1.6% and come to 1.127% billion tons on the back of improving sentiment in the steel sector. The main concern here is the Chinese government's decision to place a cap on steel production at 2022 levels. If implemented, this could reduce iron ore imports over the rest of the year. According to Commodore Research, Chinese iron ore stockpiles are at their lowest level since last July. Strong steel production in China has helped this destocking. Turning to the minor bulk trades, the global seabourn minor bulk trade is currently projected to increase marginally this year by 1% after contracting by 4% in 2022. Agribulks, fertilizers, metals and minerals are all affected one way or another by sanctions against Russia and trade restrictions between the warring parties in the Ukraine. Furthermore, macroeconomic pressures and other headwinds have been responsible for weakness in demand for minor bulk commodities. One bright spot has been the bauxite trade. According to Clarkson, China's imports of bauxite, mainly from Australia and Guinea, last year were such that without them, ton-mile demand for bulkers would have been 0.6% lower than it actually was. This is something Clarkson expects will continue this year as well. Turn to slide 20 now, and looking at the new building order book and the supply side. According to Clarkson's high new building prices, limited birth availability at shipyards, uncertainty about fueling technology options, and economic uncertainties have had a negative impact on owner's willingness to place new building orders. The overall bulker order book stood at 7% of the entire fleet at the end of March. For CAPES, this percentage was just 5%, for Panamax's 8.9%, and for Handimax Ultramax's 7.7%. Ordering this year has been down by an average of 65% across the size spectrum of bulk carriers. New buildings ordered this year will not be delivered before late 2025 due to the backlog of ordering of LNG carriers, car carriers, and container ships. Checking now with fleet development, according to Clarkson, the CapeSide fleet is expected to grow by 2.2 percent this year and only 0.3 percent in 2024. The Panamax-CamsorMax fleet is anticipated to grow by 3.3 percent this year and 0.7 percent in 2024. The Handimax-UltraMax fleet is expected to grow by 2.2 percent in 2023 and just 1.8 percent next year. Still on the supply side, port congestion has also dropped, with the Clarkson's Index having dropped to about 33% of Cape and Panamax capacity globally in early April, down from about 36% a year ago, and closer to the 2016-19 average of about 30%. A quick look at fueling transitions. According to statistics published by Clarkson and the American Bureau of Shipping, 93 alternative fuel-capable ships of all types were ordered during the first quarter of this year, which is 49% of the total tonnage order. While LNG remained the most popular option in Q1, there was some interest in methanol, with 32 ships ordered, primarily container vessels, which were 21. Some owners are ordering ships with full fuel optionality by ordering vessels with LNG, methanol, or ammonia-ready notations. The extent of readiness is directly proportional to the premium payable for these very few ships' orders. At the beginning of this year, at least 38% of the order book in gross ton terms will be fitted with at least one energy-saving technology. This is the result of the IMO's short-term measures, on EEXI, the Energy Efficiency Existing Ship Index, and CII, the Carbon Intensity Index. It is estimated by Granular Capital that by the end of 2023, around 30% of the world fleet, all types of ships, will be modern eco-tonnage, 6% will be alternative-fueled, and 25% will be equipped with some sort of energy-saving technology, such as bow enhancement, half-fin, propeller ducts, or other bulk, among others. A quick look at demolition. The forecast published by Clarkson for dry bulk demolition this year is for 13.5 million deadweight tons, while for next year the forecast is for 30.9 million deadweight, mainly due to the aging fleet and the environmental regulations coming into force. The benchmark price for bulk carrier scrapping candidates stands at around $550 to $575 per lightweight ton displacement. Finally, the outlook for our industry. We agree with Clarkson's on supply backdrop of our industry. The order book stands near the 30-year low of around 7% of ship damage in the water, as mentioned earlier. Improvements to bulker earnings, are broadly anticipated in 2023, with supply-demand fundamentals appearing marginally positive for this year, with ton-mile demand expected to grow by 2.5% against a fleet growth estimate of about 2.4% overall. Furthermore, compliance with emissions regulations mentioned earlier could reduce bulk air supply by an estimated 2 to 2.5% per annum during 2023-24, through lower speeds and retrofitted time. In 2024, Clarkson's forecast some further improvements in the bulkhead market based on more positive supply demand fundamentals. Sun mile demand is initially projected to grow by about 2.5% while total fleet capacity growth could be slightly less than 1% given slowing deliveries and potentially increased demolition. If these forecasts come to pass, and considering the fact that for the last few quarters the bulk carrier market has been evenly balanced with no significant shortage or surplus of tonnage, earnings should indeed improve. However, Clarkson highlights uncertainty over the scale and timing of potential market improvements and weaknesses in the world economy, which still need to be monitored closely. This uncertainty makes us more cautious about the prospects of our industry, as adverse developments could easily influence future demand growth and ruin the benign supply demand forecast for 2024 and beyond. We continue, therefore, adopting the agnostic view in the chartering and commercial management of our fleet, and at the same time strengthening our balance sheet with, among other things, actions mentioned by our CFO, Ioannis Zafirakis, earlier, in this conference call. I will now pass the call back to our CEO, Samira Mispali, for an overview of our corporate strategy and goals going forward. Thank you.
spk00: Thank you, Stacey. Before we open up the call to questions and answer sessions, I would like to summarize the key points from today's presentation. Firstly, we continue putting emphasis on generating and securing positive free cash flows. Since November 2021, we have consistently distributed substantial cash and in-kind dividends. Additionally, we have provided clear guidance of our intention to declare a quarterly dividend of 15 cents per share for the next two quarters of 2023. Secondly, our company maintains a strong balance sheet, allowing us to pursue creative growth opportunities and fleet renewal initiatives. Third, We remain committed to our strategy of providing stability in a cyclical business while maximizing long-term shareholder value. Thank you all for joining us today, and we look forward to addressing your questions during the Q&A session.
spk04: Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 at this time. One moment, please, while we poll for questions. Once again, that's star one to be placed into question Q. If you're using speaker equipment, it may be necessary to pick up your handset before pressing star one or take your cell phone off of mute before pressing star one. One moment, please, while we poll for questions. If there are no questions at this time, I'd like to turn the floor back over to management for any further or closing comments.
spk00: Thank you. Once again, thank you all for joining us today. We look forward to talking to you on our next earnings call. Thank you very much.
spk04: Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

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