Diana Shipping Inc.

Hello and welcome to the Diana Shipping, Inc. 2023 fourth quarter and year end 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 be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Ed Nebb, Investor Relations for Diana Shipping. Please go ahead, Ed.

Thank you, Kevin, and thanks to everyone who is joining us today for the Diana Shipping, Inc. 2023 fourth quarter and full year conference call. With us today from management are Samira Mispaliu, Chief Executive Officer, and she will introduce the other members of the management team. And so without further ado, I will turn the call over to Ms. Mispaliu.

Thank you, Ed. Good morning, ladies and gentlemen, and welcome to Diana Shipping Inc.' 's fourth quarter and end of year 2023 financial results conference call. As Ed said, I'm Samira Mizpalew, the CEO of the company, and it's my pleasure to present alongside our esteemed team, Mr. Stacey Margaronis, who's the director and president, Mr. Ioannis Zafirakis, director, CFO, and chief strategy officer, Mr. Lefteris Papatrifon, Director. Before we begin, I'd like to remind everyone to review the forward-looking statement on page four of the accompanying presentation, please. So despite market conditions being mixed during the last quarter of 2023 and in early 2024, Our disciplined chartering strategy has allowed us to continue generating positive free cash flows. Within February, we have witnessed the market sentiment improving significantly, and as a result, current market conditions are more robust. In this background, we announced a cash dividend for the fourth quarter of 2023 of 7.5 cents per share. Turning to slide 5, I will review with you the company snapshot as of today. Our fleet comprises 41 vessels in the water with a total dead weight of approximately 4.5 million tons. Our fleet utilization has remained consistently high, reaching 99.7% for the fiscal year 2023, attributed to our prudent and efficient management of our vessels. Additionally, As of the end of the fourth quarter, we employed 1,018 people at sea and ashore. Moving on to slide six, let's go over the key highlights from the third quarter and recent developments. We recently executed the contract for the acquisition of two 81,000 deadweight methanol dual-fuel new building Camp Sarmax dry bulk vessels built at Shunesi Group for a purchase price of 46 million each. These vessels are expected to be delivered to the company in the second half of 2027 and the first half of 2028, respectively. The investment of 92 million US dollars just mentioned was showcased at the Business and Philanthropy Climate Forum during COP28 in Dubai. This presentation highlighted our commitment to reducing the environmental impact of our fleet, demonstrating our dedication to sustainable practices and initiatives. We take our role as an industry leader very seriously, continually striving to enhance our fleet and operations for the benefit of our stakeholders and the environment. In addition, our joint venture entity, Windward Offshore, has increased its investment from two to four high spec commissioning service operation vessels, CSOVs, to be built at Vard Yard. as a result of exercising its options to construct two additional vessels. Our continued participation in this venture is another reflection of our commitment to a greener and more sustainable shipping industry. These investments underscore our dedication to sustainable shipping and positions us to meet the evolving demands of our industry while reducing our carbon footprint. Furthermore, continuing the renewal and modernization of our fleet, two vessels have been sold to unaffiliated third parties. Motor vessel Artemis at a net sale price of approximately 13 million US dollars and motor vessel Houston for approximately 23.3 million US dollars. Before the end of the year, the company released its fourth ESG report for 2022, a copy of which can be found on our website. On November 20th, 2023, we announced the pro-rata distribution of warrants to holders of the company's common stock, of which, as of February 16th, 2024, 1,940,736 were exercised. The warrant distribution provided us with an opportunity to potentially raise equity in a non-dilutive manner for our existing shareholders. As of February 19th, 2024, the company has secured revenue for 62% of the remaining ownership days of the year 2024, amounting to approximately $123.3 million of contracted revenues. Additionally, the company has secured approximately $31 million of contracted revenues for the year 2025, representing 12% 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. As mentioned earlier, we are pleased to declare a quarterly cash dividend of 7.5 cents per common share, totaling approximately 8.7 million U.S. dollars. Finally, we are pleased to announce that our company was honored with a prestigious Dry Cargo Company of the Year Award at the 2023 Lloyd's List Greek Shipping Awards. This recognition is a testament to the hard work, dedication, and excellence of our team. Moving on to slide seven, let's review a summary of our recent chartering activity. We have continued to implement our disciplined strategy by securing profitable time charters for eight vessels since our last earnings presentation in November 2023. To provide some details, we have charted three Ultramax vessels with a weighted average daily rate of $13,950 today for a remaining average period of 401 days. Additionally, three Panamax, Campermax, Post-Panamax vessels have been charted at a weighted average daily rate of $15,631 per day for a remaining average period of 365 days. And two Cape-sized Newcastle MAX vessels have been charted with a weighted average daily rate of $21,043 per day and a remaining average period of 486 days. Slide 8 illustrates our commitment to strategically charter our vessels in a staggered manner. Our emphasis is on securing positive free cash flows through our disciplined employment strategy and positioning ourselves in a balanced way to participate in the market efficiently. I will now pass the floor to Yanis to provide a more detailed analysis of our financials.

Thank you, Samira Misham. Slide number 9 clearly shows that two main points. One has to do with the market conditions deteriorating for the fourth quarter of 2023 compared to 2022. And you can see that on the revenue side being 60 million compared to 75 million in 2022 for the same quarter. But the other point that you can see here is that We have managed to increase our cash position at the end of the year to $161 million point something compared to $143.9 million. And also we have managed to decrease our long-term and finance liabilities, that's net of deferred financing, to $642.8 million compared to $663.4 million, regardless of the market conditions. Now if we move to the next slide, you can see this slide basically on the time charter equivalent, time charter rate for the three months ended, December 31st, the fact that our time charter equivalent has been 15,162 compared to 21,100 in the same quarter in the previous year. Again, this is mainly due to the market conditions deteriorating. If we move to the next slide, what is worth mentioning is that they improved their utilization rate to 99.7% compared to 98.9% in the same quarter in the same year, 2022. And also the fact that the time charter equivalent for the year has been 16,000.7 compared to 22.7 in the previous year. The daily vessel operating expenses, they have increased slightly to 5,700 compared to 5,574. What is worth mentioning also is that we have managed to keep our weighted average age to 10.5 years, although a year has passed from 10.2. Going to the income statement, I think you can clearly see that we made $0.06 in the last quarter of 2023 compared to $0.27 in the previous year's same quarter. Of course, the main reason behind that has to do with the different market conditions. If we go to the year-end income statement, again, you can see clear here that we made 44, 42 cents on a dilutive basis on, yes, on earnings per commercial on a dilutive basis. compared to 1.36 in the previous year. Same reasoning behind that, as explained earlier. On the balance sheet, again, we think the cash and cash equivalent, restricted cash and time deposit of $161 million compared to $143 million, shows our prudent way of balancing our balance sheet. The total debt stood at 642, as we said, and the net debt in that situation is approximately $488 million, which we consider to be very healthy. Moving to the next slide, the debt amortization profile. This is something that we have discussed in the past. You can clearly see that we have no maturities in 2024-2025, and we have the bond expiring in 2026, $119 million worth of bonds. We think that we have managed very well the maturities and that gives us the next two years the opportunity to improve the next three, four or five years our debt mortgages profile. together with the amortization profile you can see the next slide the balance profile and you can see that this is steadily is going to be decreasing and especially in the 2026 year you can see that it's going to be very healthy in order to make us not worry at all about the maturing of the bond at that time. If we talk about the breakeven costs, these are at the moment the free cash flow breakeven. We calculated to be at 15,800 approximately, and the average daily time charter rate of the fixed revenues for 2024 is 16,232. and that's for 62% of the days. In the year 2025, we are fixed at $19,105 per day for the 12% of our fleet days. Moving to slide number 18, you can see in a different way that For the remaining of the year, if we use the FFH based on February 19, 2024, there is still some way that we can create, based on those rates, a free cash flow of around $7 million for 2024, and for 2025, $11 million. The market since February 19 has moved. lot the last two, three days, and these numbers are a little bit on the conservative side as we speak, since the market has moved. I think with that I will pass the floor to Stacey Margaronis for the market preview.

Thank you, Yanni, and from me also a warm welcome to all the participants in Diana's first earnings call for 2024. On this slide, I'd like to mention that from our last conference call, we have brought to your attention that geopolitical events continue to have an important influence on dry bulk earnings. According to Clarkson's Suez Canal transits are running about 40% below those seen during the first half of December last year. This is partially the result of several owners-operators, including ourselves, avoiding the area due to the increased risks of attack and consequent risk to seafarers' lives. This decrease in Suez Canal transit is estimated to have increased the dry bulk rate average haul length by around 1%. The Clarksons-based case forecast, assuming one quarter of disruption, factors in a 0.3% dry bulk ton mile demand up list for the full year 2024. This comes at the same time as Panama Canal restrictions due to draft limitations in Lake Gatun, where water levels are at critically low levels of less than 25 meters. This is another factor already driving some trade towards longer alternative routes. Turning to the time chart of rates now that we are witnessing, Cape Size 12-month employment hire rates stand at around $26,500 per day basis specific delivery, with the most recent peak being $30,000 per day seen in March 2022. Today's 12-month rate of come share maxes is $18,250 per day, and it was around $29,500 at the end of March 2022. For Ultra Maxes, the 12 month time charter hire rate is 17,000 per day, and the last peak was again 29,250 per day in March 2022. These rates are well above those reported three months ago in our last earnings call. Turning to macroeconomic considerations now, the IMF GDP growth forecast for 2024 provides a reasonably optimistic picture of the future. World GDP is expected to grow by 3.1% this year and by 3.2% in 2025. China is projected to grow by 4.6% this year and by 4.1% next. India is expected to grow by 6.5% both this year and in 2025. The U.S. might grow by 2.1% in 2024 and 1.7% in 2025. The usual anemic growth figures are forecasted for the euro area, with 0.9% growth for this year and 1.75% in 2025. On another positive note, industrial production has returned to growth in several major economies, apart from Japan, that is, and even the euro area is finally seeing positive monthly growth in industrial production. On the supply and demand balance now, According to Clarkson's current projections, it suggests that bulk carrier demand growth of about 1.6% in 2024 may fall short of expected net fleet growth of 2.3% this year, despite a modest new building delivery schedule and potential for increased demolition due to regulations and the aging fleet. However, a few other factors have the potential to support rates. These were mentioned also in our last conference call and remain so today. They are the slower speeds and EST retrofit time for environmentally sound technologies. At the same time, a strong demand-supply ratio in 2023 means that there is very little surplus tonnage and 2024 starts from a stronger base. Looking out into 2025, dry bulk trade is forecast to grow by a modest 1.6% in tonn-mile but the fleet is expected to grow by just 1% next year. So overall, Clarkson Sea bulk carrier supply supported with the order book steady at just under 9% of the existing fleet and the net fleet growth projected to slow from 3% in 2023 to around 1% in 2025. On the next slide, we look at demand. Starting with steel, according to World steel, on a global basis, steel production has gone up over the last 12 months by 1.2% to 1.85 billion tons. According to Commodore Research, the last seven months have seen steel production outside China increase by 15.8 million tons year on year. Prior to June last year, steel production outside of China was falling on a year-on-year basis for 15 straight months. In China, most recently, steel production increased by 8% on a year-on-year basis. Seaborne iron ore trade is projected to decline marginally in 2024. In 2025, the iron ore trade is projected to remain steady at around 1.5 billion tons, as global blast furnace steel production comes under increasing pressure from green alternatives, while peak Chinese steel demand will remain sensitive to government policy. Seabourn coking coal trade is expected to increase by about 3% in 2024 and by about 1% in 2025 as coking coal demand in some key importing regions comes under pressure amid the transition to greener modes of steel production. Seaborne thermal coal trade is expected to contract by 2% this year and contract by a further 1% in 2025 and fall to about 1 billion tons by the end of next year. Thermal coal's place in the wider global energy mix is likely, according to Clarkson, to come under pressure from expanding renewable energy capacity. The huge increase in Chinese imports seen in 2023, about 54%, when to replace port and power plant inventories. This, according to CloudSense, is unlikely to be repeated in 2024, while at the same time improved hydro generation and any improvement in domestic coal production could curb coal imports even further. However, as Braemar points out, China's and India's coal imports sometimes overshadow dramatic changes in coal imports seen in other countries. Examples are Vietnam, Malaysia, and Thailand, where imports of coal jumped dramatically last year and are not expected to ease much this year due to growth factors in those countries affecting demand for prompt and reliable power generation. Grain exports are expected to grow by 2% in 2024, with a potential increase of U.S. exports by about 7% compared to last year. For 2025, exports are expected to grow even more and reach 5% growth compared to 2024 and reach 557 million tons. The minor bulk trade after ending 2023 on a firm note are expected by Clapsons to grow by 3% in 2024, supported by potential macroeconomic improvements. In 2025, minor bulk trade is expected to increase by a further 3% and reach 2.25 billion tons. On slide 24, we look at the supply side. Looking at the age profile for the bulk carrier fleet, about 21% of the Handimax fleet by dead weight is 15 years or older. 25% of the Panamax fleet by dead weight fall into that category, and only 15% of the Cape size fleet are older than 15 years. Scrapping into 2023 came to about 5.4 million deadweight. This year, if earnings continue to improve, they might fall back to the level seen in 2022 of about 4.3 million tons. Turning to asset values, according to Clarkson, their Bulker secondhand price index increased by 11% in 2023, on the back of another year of active Bulker sale and purchase markets. The three-month trend of 10-year-old CAPE prices is up 17%, that's around $37.5 million. And for Campshire Maxes, the equivalent increase is 12%, up to $26 million. Ultramax prices have also increased by about 17% to $25 million over the same period. The bulk area new building price index was up by 6% year-on-year amid competition for yard space across all vessel sectors and continuously increasing labor costs. Looking briefly at the order book, according to Clarkson, the Panamax order book stood at the end of 2023 at 29.8 million deadweight, equivalent to about 11.7% of the existing fleet. For CAPES, the equivalent numbers are 22.5 million deadweight and 5.7% of the existing fleet. For the HandiMaxes, the order book stands at 22 million deadweight, which is about 9.3 million percent, I beg your pardon, of the trading fleet. Overall, there are about 85.8 million deadweight worth of bulkers on order, representing about 8.5% of the trading fleet. Finally on slide 22, the outlook for our industry. Commodore Research remained bullish for the overall dry bulk market. The dry bulk market is continuing to enjoy historically strong rates for this time of the year. This has led to a jump in period activity as the FFA market supports the hedging of such contracts by time chart. A positive factor in the dry bulk market according to Commodore Research is that the Indian economy is doing so well and coal imports are increasing while hydropower output in that country remains in a phase of contraction. Dry bulk carrier demand should be supported this year by China purchasing large volumes of dry bulk commodities that benefit from any weakness in global commodity prices. This strong import appetite was seen last year and Commodore research see no reason for this to be reversed in 2024. Finally, Even though predictions vary depending on the assumptions made, Glaxons predict that compliance with emissions regulations, such as EEXI and CII, could reduce available budget supply by between 1.5% and 2% per annum out to 2025 through slower speeds and ESC retrofit time. Glaxons remind us, though, that uncertainties on the demand side remain, with Chinese dry bulk demand growth facing challenges from the property sector and the sensitivity to the Chinese government's steel and energy policies. Diana's business strategy and chartering policy remain steady, and this chartering policy will allow us to take advantage of any upcoming increase in bulk carrier earnings, while at the same time, the strength of the company's balance sheet remains the top priority, as has always been the case. I will now pass the call to our CEO, Samira Misfalew, for summary of the company's priorities and future goals.

Thank you. Thank you, Stacey. Before we open the call up to questions and answers session, I would like to summarize the key points from today's presentation. Firstly, our dedication is on generating and securing positive free cash flows. Through prudent and active management of our balance sheet, we aim to capitalize on the opportunities presented. Secondly, we are proactive in renewing and modernizing our fleet, enhancing our ecological footprint in greener investments, aligning with our sustainability and environmental responsibility. Thirdly, our dedication persists in adhering to a strategy that offers stability in a cyclical business while striving to maximize long-term shareholder value. Thank you very much. We can now, I'll turn the call back to our operator for the Q&A session.

Thank you. We'll now be conducting a question and answer session. If you'd like to be placed into question Q, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question Q. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one on your telephone keypad. Once again, that's star one to be placed into question queue. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing any star keys, and that's star one to be placed into question Q. One moment, please, while we poll for questions. As a reminder, that's star one to be placed into question Q. Please stand by while we compile your question queue. Our first question today is coming from Christopher Sky from R6 Securities. Your line is now live.

Hello, congrats on a good quarter. I was just wondering if you could comment on the balance sheet and investments in expertise securities of 20.7 million as of year end. Is that related to this offshore joint venture?

This is an investment that we have. We do not have to disclose the details of that investment. It's not material enough that we need to do a filing, so fortunately we cannot disclose. Thank you.

We have reached the end of our question and answer session. I'd like to turn the floor back over to management for any further or closing comments.

Thank you very much for joining us today and look forward to seeing you at our next earnings call. Thank you very much.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.