Diana Shipping Inc.

Greetings and welcome to the Diana Shipping third quarter 2024 conference call and webcast. At this time, all participants are in listen-only mode. 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. Please go ahead, Ed.

Thank you, Kevin, and thanks to everyone who is joining us today for the Diana Shipping, Inc. 2024 Third Quarter Conference Call. With us today from management is Ms. Samira Mispaliu, Chief Executive Officer, who will introduce the other members of the management team. And so without further ado, I will turn the call now over to Samira Mispaliu. Please go ahead.

Thank you, Ed. Good morning, ladies and gentlemen. Welcome to Diana Shipping Inc.' 's third quarter 2024 financial results conference call. As Ed said, I'm Tamira Mispalou, the chief executive officer of the company. It's a pleasure to address you today alongside our esteemed team, Mr. Ioannis Zafirakis, director, chief financial officer and chief strategy officer, Mrs. Maria Veve, chief accounting officer, and Mr. Dave Vanderlinden, Chief Commercial Officer of Steamship Shiproking Enterprises, Inc. Before we begin, I kindly remind you to review the forward-looking statements on page 4 of the accompanying investor presentation. The third quarter of the year has been a tale of two markets. Cape-sized vessels maintained their relative strength, averaging higher returns than in the previous quarter, while the smaller segments weakened significantly. This disconnect has persisted throughout the year, but became more pronounced as the market struggled to absorb the steady flow of CancerMax and Ultramax new buildings. That said, we successfully secured period employment for nine vessels during the quarter, achieving an overall average rate higher than their previous fixtures. Turning to slide five, Let's review our company's snapshot. Diana Shipping Inc., founded in 1972 and listed on the New York Stock Exchange since 2005, operates a fleet of 38 dry bulk vessels, seven of which are mortgage-free. Our fleet has an average age of 11 years and a total deadweight capacity of approximately 4.2 million tons. We anticipate the delivery of two methanol dual fuel new building CAMSAR MAX dry bulk vessels at the end of 2027 and early 2028 respectively. Fleet utilization reached 99.7% in the nine months period of 2024, highlighting our effective vessel management. As of the end of September, we employed 984 individuals at sea and ashore. Financially, our net debt stands at 37% of market value, supported by US$186.8 million in cash reserves and total secured revenues of approximately US$135.3 million as of November 19th. On slide six, we outlined the key developments from the third quarter through November. In July, we issued 150 million senior unsecured bonds that are listed on the Oslo Stock Exchange, maturing in July, 2029, with a fixed coupon of 8.75%. The net proceeds were used to refinance the company's a $125 million senior unsecured bond due in 2026. The approval and publication of the company's prospectus for the bond listing on the Oslo Exchange was completed in October. In July, we signed a term loan facility with Nordia Bank, secured by 10 vessels. drawing $167.3 million to refinance two existing term loan facilities. This refinancing released two previously financed vessels. In October, we entered $80.2 million seven-year secured term loan facility with Danish Ship Finance, maturing in April 2031, secured by seven vessels. This proceeds, refinanced our existing loan with Danish Ship Finance, releasing two previously mortgaged vessels. In November, completed a $25 million US tap issue under our outstanding senior and secure bond due July, 2029. Issued at 102% of our value with a fixed coupon of 8.75%. This was the total outstanding amount of the 2029 bond to $175 million. As of November 19th, we have raised $25.5 million through the exercise of 6,381,900 warrants under our ongoing warrant program with the potential to raise an additional $64.9 million under the full scope of the program. As of November 19th, we have secured revenue for 78% of the remaining ownership days of 2024, amounting to approximately 22.1 million US dollars and 38% of available ownership days in 2025, amounting to approximately 95.8 million US dollars Yanis will provide further details on our cash flow generation potential. Earlier this month, we released our 2023 ESG report, the fifth in a row, underscoring our ESG strategy and commitment to sustainability. For the quarter ending September 30th, 2024, we're pleased to declare a quarterly cash dividend of one cent per common share, totaling approximately 1.3 million US dollars. On slide seven, we summarize our current chartering activity. Since our last earnings presentation, we have secured favorable time charters for nine vessels. Three Ultramax vessels at a weighted average daily rate of $14,539 for 379 days. Five Panamax, Campsamax, and post-Panamax vessels at the weighted average daily rate of 12,664 US dollars for 155 days. One, Newcastle-Mexico at 26,800 US dollars for 699 days. Slide eight highlights our disciplined chartering strategy. We focus on staggered medium to long-term charters to avoid clustered maturities ensuring earnings visibility and resilience against market downturns. Now I'll pass the floor to Yanis for a detailed financial analysis.

Thank you, Shamira. We'll go through very quickly the financial highlights for the third quarter of 2024, where you can see that our time charter revenues have decreased by approximately 5 million from the third quarter 2023 being 62.1 million to 57.5 million for the third quarter 2024. The net income has been 3.7 million and at the same period in 2023, it was 7.4 million. The good thing about our highlights is that we have managed to increase our cash and cash equivalent time deposits and restricted cash to $186.8 million. Today, as we speak, the number is much higher. That was as of September 30th, compared to $161 million in December 31st. The long-term debt... has gone down from $642.8 million to $627 million. And looking at our balance sheet, as we said earlier, we have managed to be in a position to have our net debt compared to the values of our vessels at 37%, as we have already said. The summary of selected financial and other data, you can see that in this quarter, our time charter equivalent has dropped to $15,333, compared to $15,800 at the same period last year. The operating expenses have increased to $5,964 compared to $5,621 at the same period last year. Looking at the nine-month period, the same numbers, i.e., the time charter equivalent rate has gone down to $15,162 compared to $17,235 for the nine-month period last year. And the daily expenses have increased to $5,900 approximately from $5,700 approximately. Having said all of the above, looking at our current debt profile and generally speaking our balance sheet, we think that we are in a very good position. One of the indicators of that is the profile of the debt. As you can see in this slide, we have no maturities. Basically, we have managed to have no maturities up to 2029, which gives us a very nice profile and cash flow-wise help us do our strategic things. At the bottom of this slide, you can see how well the debt decreases, and we end up in 2029 with slowly getting to lower and lower numbers. Next slide, if we go to the breakeven versus estimated revenue. We still have some days that they are unfixed for 2024, but if we assume, based on the FFA rates, that we fix the unfixed date for around $15,000, that will bring us to a time charter equivalent rate of $16,765, which is going to be above around $650 per day, per vessel, for all of our vessels. As regards 2025, more or less we think we're going to be very close to our break even if we take as an assumption the current FFA rates. Having said all of these things, if we move to slide number 14, We have just declared a dividend of one cent, but since 2021, the third quarter of 2021, we have never missed a dividend payment. And the intention is to keep that in the future as well. Having said all of these things, now it's time to pass the floor to to the Chief Commercial Officer of Steamship Seabroking Enterprises, Dave van der Linden, for the market overview.

Dave? Thank you, Yanni, and welcome again to all participants on this call. Now for a brief market update. A recurring theme during this year's conference calls has been the important role that geopolitical developments have played in the shipping industry. and the third quarter of this year has been no exception. Rerouting of dry bulk vessels away from the Red Sea remains in focus with Suez Canal transits hovering at about 40% less compared to the second half of 2023. Clarkson estimates that the Red Sea disruption has increased bulk carriers on mile demand by about 1.2%. However, the Chinese economy has continued to struggle with the property sector being the biggest drag on economic growth. So far, there has been little impact on imports, even though demand has been weakening. The continued imports coupled with lower domestic demand have led to a significant buildup of commodity inventories. Having said that, the Chinese government seems determined to support the economy via several stimulus measures. As can be seen from the graph on this slide, the 12-month time charter levels unusually peaked in Q1 this year. That being said, Q3 levels were resilient on the back of increased congestion in South America and a steady cargo flow into India and Southeast Asia. Moving to the next slide for some macroeconomic news. The IMF forecast that the global economy will grow by 3.2% in 2024 and by 3.3% in 2025. The IMF reports a weaker outlook for China, Latin America, and the EU. The Chinese economy is projected to grow by 5% in 2024, 4.5% the year after, and by 4.1% in 2026. These forecasts, however, have not considered the recently announced stimulus package in China involving the raising of debt to support the economy. For the Eurozone, growth predictions are a mere 0.8% this year and 1.2% in 2025. And the IMF prediction of GDP growth in India is 6.5% for next year, while for the U.S. the prediction is 1.9%. For a brief commodities update, according to Commodore research, global steel production, excluding China, is beginning to contract. According to Braemar, year-to-date global steel production stands at 1.25 billion tons, which is nearly 2% lower than at this time last year. Having said that, the World Steel Association is predicting a pickup of more than 1% in 2025. Regarding iron ore, Clarkson expects this trade to remain flat both in 25 and 26 at around 1.6 billion metric tons per annum. It is understood that iron ore inventories in China stand at a 10-year high around 160 million tons. Clarkson's projected coking coal volumes are also remaining steady for 25 and 26 at around 275 million tons per annum. And as regards to thermal coal, the projection is for volumes to drop to 1.037 billion tons next year, which would be around 2% compared to 2024, and to 1.025 billion tons in 2026, which would be another 1% down over 2025. The 2025 grain season is expected to grow to 552 million tons, which is an increase of 2% compared to this year. While for 26, the grain trade might reach 565 million tons, which would be another 2% increase. The biggest growth we will see, we expect to see in minor dogs. Trade in minor bulks is expected to grow by 3% in 25 and reach 2.3 billion tons, and by another 2% in 26, reaching 2.341 billion tons, supported mainly by growth in the bulk side in manganese ore trades, as well as an increase in cement, coke, pet coke volumes, as global construction activity is expected to pick up.

Moving to slide three.

Moving to slide 17, covering fleet development. The overall bulk carrier order book stood at the end of October at around 10.3% of the existing fleet. The order book for CAPEs and above continues to be the smallest of all types of bulkers with 29.5 million deadweight tons, which represents about 7.5% of the current trading fleet. The order book for Camsar Maxis is 36.7 million deadweight, which is about 14% of the current fleet. And the order book for Ultramax vessels stands at a little less than 30 million tons, about 12% of the current fleet. If you look at projected deliveries, According to statistics prepared by Braemar, the Cape size fleet is expected to grow by about 5 million deadweight tons in 2025 and 6 million in 2026. For Kamsar Maxis, the figures are 9 million deadweight tons next year and 14 million the year after. Ultra Maxis are expected to grow by 10 million in 2025 and by 7 million in 2026. All these figures are net of expected deletions from the fleet. According to Clarkson's, only 5.2 million deadweight ton worth of bulkers are expected to be sold for scrap this year. And for 2025, the figure is expected to reach 9.2 million deadweight in 2026, in excess of 14 million ton deadweight. New environmental regulations are expected to drive many shifts to the scrap yards. Ship demolition decisions are primarily driven by the state of the freight market, sentiment, and age. For capes and supramaxes, the years 2010 through 2012 were the highest delivery volume years seen for a long time, and for panamax and gamsamaxes, the peak delivery years were 2011 through 2013. This means that a considerable number of vessels will soon become 15 years old, which particularly for capes is a crucial age barrier as regards the cost of a third special survey and the ability to charter to the main players in the dry bulb market. According to Clarkson's, 24% of Handimax Ultramax tonnage is 15 years or older, as well as 26% of Panamaxes and 17% of capes. New building prices of capes, according to Clarkson's, have moved up so far this year by over 14%, whereas new building prices of smaller ships have seen rises about half of that. Recent weakness in the charter market has seen some asset values come down from the peak levels seen earlier this year. Five-year-old Camsar maxes are now around $34 million, and the 10-year-olds stand around $25 million, which is down double digits. For CAPEs, 5- and 10-year-old ship secondhand prices have eased about 2% from their peak and stand now at around $63 million and $44 million, respectively. Ultramax 5- and 10-year-old values are currently around $33 million and $24 million, respectively. Turning to slide 18 for the outlook. According to Fernies and Clarkson, positive factors for 2025 are the following, continued import growth into India and Southeast Asia, possibility of a strong Brazilian soybean season, increased congestion and slower speeds, the recent stimulus measures in China, and continuing risk for the Red Sea transit. Possible negative factors for 2025 are worldwide lower and Iron ore consumption, protectionist measures leading to trade wars, steel production outside of China falling back, bulk fleet growth outpacing demand, and the easing of tensions in the Middle East, which could result in more Red Sea transits. Considering the entire picture of headwinds and boosting factors for the dry bulk trades, Clarkson's project slight easing for bulk carriers earnings in 2025, as ton-mile demand is expected to grow by about 1.3% versus a supply growth of around 3%. However, for 2026, Clarkson's predicted a cautiously positive outlook for the bulk carrier market. Even though dry bulk demand in ton-mile is expecting to grow, again, a little over 1%, and supply projected to grow, again, by around 3%, they foresee impacts from environmental policies to remain in focus with new regulations having a range of positive impacts for supply demand. Also, slower operating speeds, longer dry dock stays, demolition of older units should help the market going forward. Bitcoin Clarkson's regard as a positive factor, the Simandou iron ore project in Guinea, which starts production in late 2025, and will gradually contribute to longer shipping distance of high-quality iron ore into 2026. And looking even further ahead, BHP Billiton states in their latest economic and commodity outlook report that population growth, urbanization, the infrastructure of decarbonization, capital stock replacement, and rising living standards are expected to drive demand for ferrous and non-ferrous metals, as well as fertilizers, for decades to come. That's it for the market. I will now pass the call back to our CEO, Simir Ispanyol, to provide the most important financial highlights and takeaway points from our quarterly earnings call.

Thank you, Dave. But before concluding today's presentation, I'd like to highlight our ongoing ESG&S initiatives. DynaShipping Inc. is committed to promoting eco-friendly technologies and modernizing our fleet. It's committed to transparently sharing emission data to ensure accountability, to build on partnerships and collaborations to advance our sustainability goals, to develop an equity, diversity, and inclusion program while continuously investing in our people. Moving on to slide 20, to summarize, Diana Shipping Inc. stands on a strong foundation built on over 50 years of industry expertise and nearly 20 years on the New York Stock Exchange. A seasoned management team adapts at addressing industry challenges. Strong stakeholder relationship and a disciplined strategy approach. A solid balance sheet. with a strong cash position and a counter-cyclical mindset. Ongoing fleet modernization efforts, a robust ESG strategy, and a focus on rewarding our shareholders when possible. And with that, thank you for joining us today. We now look forward to addressing your questions during the Q&A session.

Thank you. We're now conducting your question and answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. 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 star one. One moment, please, while we poll for questions. Once again, if you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 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 1. One moment, please, while we poll for questions. Our first question today is coming from Clement Mullins from Value Investors Edge. Your line is now live.

Good afternoon. Thank you for taking my questions. I wanted to start by asking about your minority investment in four CSOBs. Could you provide an update on when the vessels are expected to be delivered and whether you expect any additional for these vessels? And secondly, could you talk a bit about how these vessels will be employed, be it on term contracts or in the spot market?

Okay. This is Yannis speaking. Our total commitment on those vessels is 50 million euros. And there is another... We have already paid around 33 of those, 35, and we expect to pay the other 15 soon. The delivery of those vessels are scheduled to be the first one by September 2025 and a vessel after... And a vessel after every three months, we are supposed to have a delivery of the next three vessels every three months. Now, as regards the employment, we have not secured any employment yet. But if we were to say a preference, we prefer to enter long-term employment.

That's helpful, thank you. I also wanted to ask about your capital allocation priorities. Could you talk a bit further about how you plan to balance fleet renewal, deliberation and shareholder returns going forward? And secondly, is there any appetite to potentially repurchase shares given the discount you're trading at?

Now, being listed since 2005, We have shown to everybody how disciplined we are as regards the questions that you have asked. Be certain that we will do what we have to do at the right time in the cycle. But being more specific as regards to your questioning, unfortunately we cannot be more specific. Renewal of the fleet will happen at the appropriate time. And of course, we have shown in the past that again at the appropriate time, share repurchase can happen. The bigger picture for everyone is to look at our balance sheet and see that all of your questions, we have prepared the company to have the option to be able to do these things, but it has to happen at the appropriate time. So to cut the long story short, the answer to your question is indirect, and it is that we have the means of doing what you have asked. As regards to asset allocation, we are not in a position to respond.

All right. Makes sense. That's all from me. Thank you for taking my questions.

Thank you very much for all the questions. Thank you. We reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.

So once again, thank you for joining us today, and we look forward to speaking to you again at one of our next financial results calls. 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.