Safe Bulkers, Inc.

Thank you for standing by, ladies and gentlemen, and welcome to the SafeVolkers conference call to discuss the third quarter 2020 financial results. Today we have with us from SafeVolkers Chairman and Chief Executive Officer, Mr. Paulus Hanyano, President, Dr. Lucas Bamparas. Chief Financial Officer, Mr. Constantiano Adam Pollous, and Chief Operating Officer, Mr. Ionis Vittoni. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you do wish to ask a question, you will need to press star and 1 on your telephone keypad and wait for your name to be announced. Following this conference call, or you need any further information on the conference call or on the presentation, please contact Capital Link on 212-661-7566. I must advise you the conference is being recorded today. I will now read the forward-looking statement. Before we begin, please note that this presentation contains forward-looking statements as defined by Section 27A of the Securities Act 1933 as amended and Section 21E of the Securities Exchange Act of 1934. as amended. Concerning future events, the company's growth strategy and measures to implement such strategy, including expected vessel acquisitions and entering into further time charters. Words such as expects, intends, plans, believes, anticipates, hopes, estimates and variations of such words and similar expressions are intended to identify forward-looking statements Although the company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies. many of which are beyond the control of the company. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in the demand of dry bulk vessels. Competitive factors in the market in which the company operates, risk associated with operations outside the United States, and other factors listened from time to time in the company's filings with the Securities and Exchange Commission. The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements. ...contain therein to reflect any change in the company's expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. I would now like to pass the floor to Dr. Bambaris. Please go ahead, sir.

Good morning. I'm Lucas Bambaris, President of SafeBudgets. Welcome to our conference call and webcast to discuss the financial results for the third quarter of 2020. Before I start the presentation, I would like to express our gratitude to all our seafarers, hoping that within 2021, we will reach a point that all efforts of the global community to produce treatments and vaccines will conclude and the pandemic will be controlled. There has been a negative effect from the COVID-19 pandemic on the company's results of operations and financial condition year-to-date due to lower demand, which resulted in relatively lower charter rates, as well as higher crew and related costs. We are happy to return to profitable operations the last quarter. In parallel, the company is maintaining a strong liquidity position that provides us with flexibility and is following a plan which in the first place is based on our high-quality Japanese fleet, 32 out of 42, with a big advantage over the environmental footprint compared to the global dry-bulk fleet, and further is aiming to gradually renew and deliver our fleet, targeting to be the leading quality dry-bulk company and create value for our shareholders. Management alignment due to shareholding stake And performance and trust built over the years are of paramount importance in the success of this plan. Let's move into slide four. We present here the performance of the Cape and Kamsa Machata in market for 2019 and here today as published by the Baltic Exchange. The COVID effect has been the major drive in both sizes. During the first wave of Q1, the chartering market traded at very low levels. But after Q1 and the resumption of economic activity, we evidenced healthy volumes of iron ore, coal and grain, especially on capes. The market peaked twice, reaching the levels of 35,000 USD. On time so much, the market has been trading higher than 10,000 since May. and picked during the summer months, exceeding 15,000 per day. Looking forward, we are monitoring closely the trade tensions developed between China and Australia, and we remain cautious on how a second wave of COVID may negatively affect the trade. However, recent COVID vaccine announcements brought optimism in the global markets. Turning to slide five, we provide more input in relation to the Chinese economic recovery. which remains the driving force of dry bulk. As shown in the graph, after a significant contraction in Q1 by almost 7%, the Chinese GDP has grown for two consecutive quarters. According to the National Bureau of Statistics of China, the Chinese GDP grew by 3.2% in Q2 and by 4.9% in Q3, averaging a stable recovery after controlling the pandemic. The resumption of trading activity is evidenced by the Chinese imports. There has been a substantial drop on imports during April and May. The gradual recovery of the Chinese economy during the summer months in combination with the muted trading activity of Q1 led to an aggressive import spree resulting to a year-on-year increase of 13.2% in September and 4.7% in October. Turning to slide 6, we gave more color on Chinese imports developments. September's iron ore imports increased by 8.2% month-on-month, 9.3% year-on-year, which for the period January to September, there was an actual increase of 10.6%. For thermal coal and lignite, imports have dropped by 9.6% in September, month-on-month, and 16.3% However, the total increase from January to September starts at 18.4 percent. This mixed outlook can be attributed firstly to seasonality, and secondly to the ongoing tension in the China-Australia trading relations. The lower graph represents the Chinese imports of soya beans. The September soya bean imports increased by 1.9 percent month-on-month, and by 19.4 percent year-on-year. Wheels for the period from January to September increased by 15.4% as compared to the same period in 2019. Going to slide 7, we present the current status of the order book in the two sectors where we operate, the CAPES and the Panamax to Post-Panamax. It is the first time after many years that the order book is so minimal. The contracted orders for CAPES amount for 4.6% of the total CAPES fleet, and from 2022 and onwards, the orders are minimal. Similarly, for Panamax to Post-Panamax, the orders for 2021 represent growth of the fleet of about 3.4%, and going forward, less than 1%. The aging of the fleet... The increased environmental capital expenditure requirements for complying, for example, with balance water treatment system regulations may enhance the scrapping activity, especially in an environment of low freight rates. Increased scrapping may lead to lower net growth of the fleet, as discussed above. Furthermore, the ongoing environmental discussions for emissions are beyond the ability of most of the CPIs to cope with technological advancements and produce designs which comply with them. In particular, for the Phase III of the Energy Efficiency Design Index, only very few cities can provide highly efficient designs that can comply with such emission requirements. Under these circumstances, the order book and hence the existing dryback fleet will not re-inflate anytime soon. Furthermore, the ambiguity of the future greenhouse gas measures and the lack of technological solutions in relation to new environmental friendly fuels enhance the uncertainty and put hold on new designs or new orders. At this point, let me refer to our focus on developing a plan for renewing our fleet with modern designs that adhere to the new environmental regulations and in this regard to point out our recent order of a Japanese-built drive bike, 82,000 deadweight tons, capsule class vessel, with a scheduled delivery in the first half of 2022. The vessel is designed to meet the latest requirements of Energy Efficiency Design Index to greenhouse gases and EEGI Phase 3. It will also comply with the latest NOx emissions regulations, the NOx Tier 3. Heading to next slide number eight, we make a brief presentation on the status of the fuels market. Global lockdowns and mobility restrictions have reduced the demand for fuels and distillate products. Presently, the price of 0.5% very low sulfur fuel oil, the IMO 2020 fuel, is relatively weak in comparison to high sulfur fuel oil prices, and thus their spread differential, the so-called high five, is in the region of 65 to 70 U.S. dollars. On the graphs in the left, we present the future market prices for very low-sulfur fuel oil, high-sulfur fuel oil, and high-five in Rotterdam and in Singapore. Futures market indicate recovery of the 0.5 percent very low-sulfur fuel oil, and the high-five is trading at... higher levels in the region of $80 to $90 for 2021, and further up to about $100 for 2023. The recovery of global economies, the restoration of mobility, and the recovery of crude oil prices may increase the demand of distillate products, and will likely push the High-5 differential to even higher levels. Let's now summarize in slide 9 the key takeaways for the market. We see a resumption of economic activity after lockdowns as China's GDP indicates a V-shaped recovery, witnessing healthy volumes of iron ore, coal and grain trade. At the same time, the second wave of COVID-19 remains a threat, but the recent COVID vaccine news brings optimism in global markets despite the recent trade tensions between China and Australia. The global lockdown has adversely affected demand for oil and distillate fuels. We may have a slow oil demand rebound, as global lockdowns is, with restoration of mobility, which will eventually lead to recovery of the Brent prices and to wider H5 spread differential. We have declining order book 2020 onwards, and the ongoing decarbonization discussions do not favor new orders. And finally, the aging of the fleet, the low freight rates, and the increased environmental topics may enhance the scrapping activity. Heading to slide 10, we show our fleet growth over the last years, having added a new order recently. It is important to note that our growth is gradual, The company has never entered in several orders that have distorted the supply side. At the same time, the company has kept the rate of growth even at loss-making markets and has invested always in the forefront of the technologies. Turning to slide 11, in the context of our environmental and social responsibility policies, we undertake significant environmental investments by retrofitting scrubbers and balanced water treatment systems on our fleet. We have already invested 66.7 million as of September 30, 2020, and have retrofitted all 20 of our scheduled scrubbers and 30 balanced water treatment systems so far. On the table, we provide an estimation of the expected downtime in days for Q4 2020 and Q1 2021 in order to assist analysts with their projections. Turning to slide 12, we have plotted the BPI index as market performance indicator and our stock price. The correlation historically was very strong. In 2019, the correlation decoupled due to the trade war, and during 2020, we have seen further decoupling due to COVID pandemic. Presently, our stock is trading at levels which we believe do not correspond with the market performance. This could potentially be a good entry point. Turning to slide 13, we focus on a strategic plan by gradually renewing our fleet, investing in new technologies and pressures with environmental footprints that adhere to new greenhouse gas regulations. So far, our environmental investments include balanced water treatment system, installation of scrubbers, a project that has been completed. Until now, we have invested 66.7 million, as I have already discussed. Furthermore, we saw the improvements that the new designs bring, which are related to the 500 dynamics, improved efficiency of propulsion systems, and managerial actions which focus on environmental operations. Concluding, in slide 14, let's summarize safe bucket takeaways. SB stock is at an attractive entry point. Exposure in the spot market allows quick return to profits whenever market conditions improve. Building advantage in environmental footprint due to Japanese tonnage 32 out of 42 vessels. Management with about 50% stake is aligned with shareholders. We have developed a plan over the following year which includes, in summary, lean operations, operational excellence, and technical expertise. Maintain strong liquidity, which provides for flexibility in this unstable environment, and the cushion for opportunistic moves. Gradual fleet renewal with the greenhouse gas EEDI Phase III, NOx Tier III vessels, in parallel with financing arrangements. deleveraging in parallel with other markets, targeting to be the leading quality drive-by company and create value for all our shareholders. Now I will pass the floor to our Chief Financial Officer, Konstantinos Adamopoulos, who will present our quarterly financials.

Thank you, Lucas, and good morning, everyone. Let me start with our chartering performance in slide 16, where we present our quarterly time charter equivalent, which was $12,575, versus our quarterly OPEX, which stood at $4,896. Moving on to our debt profile, as seen in slide 17, we present a repayment schedule as of September 30, 2020. As of November 6, 2020, our liquidity stood at $136 million, consisting of cash and bank-time deposits, restricted cash, funds available under our unsecured revolving credit facility, as well as the sale and leaseback arrangement for the new-built Kamsar Max-class vessel. Let me continue to slide 18 and focus on our debt amortization schedule versus the scrap value of our fleet. We have a smooth debt repayment profile for the coming two years, gradually deleveraging our company. Moving on to slide 19, we present our quarterly daily offers, which stood at $4,896, versus our quarterly daily G&A, which stood at $1,418. The aggregate figure for both OPEX and GNA for the third quarter of 2020 was $6,314, demonstrating our focus on lean operations. We believe that this amount for both OPEX and GNA, when comparing apples to apples, is one of the industry's lowest, if not the lowest. We include in this figure all our dry docking expenses and in our GNA our executive officer's compensation and all expenses related to the administration of our company. Let's now move to slide 20 with our quarterly financial highlights for the third quarter of 2020 compared to the same period of last year. Net revenues increased by 2% to $51.9 million from $50.7 million. During the third quarter of 2020, our time charted equivalent was $12,575 for the third quarter of 2020, compared to $13,311 during the same period in 2019. Net revenues were supported by the benefit from scrap refitted vessels, despite the reduced price differential between heavy fuel oil and compliant fuel, which was caused by the oil price war. and also by revenue contributed by our new building delivery. We took delivery back in April. Worker's expenses increased due to increased vessel repositioning expenses, higher loss on banker's sales, again due to the oil price war, and consumption costs for scrapped fitted vessels. Daily vessel operating expenses increased by 10%, to $4,896, compared to $4,448 for the same period in 2019. Daily vessel running expenses, excluding light docking and free delivery expenses, also increased by 10% to $4,459 for the third quarter of 2020, compared to $4,053 for the same period last year. Unadjusted EBITDA for the third quarter of 2020 decreased by 22.3 million dollars compared to 25.1 million dollars for the Q3 of 2019. Unadjusted Earnings Per Share for the third quarter of 2020 was almost zero cents calculated on a weighted average number of 102.2 million shares compared to three cents during the same period in 2019 calculated on a weighted average number of 101.3 million shares. Closing our presentation in slide 21, we saw our quarterly fleet data and average daily indicators compared to the same period last year. We would like to emphasize that in this period we have worked extensively, despite the tough market conditions, and we have completed the installation of all 20 scrappers, We have concluded the order of a Japanese modern design and technologically advanced vessel with delivery in the first half of 2022 with limited impact on our liquidity as we agreed at the same time 90% finance through a sale in this bulk arrangement. We have a strong balance sheet with comfortable leverage, a smooth trade profile for the next two years and a liquidity position of $136 million. And finally, we took measures to protect our seafarers and show employees health and well-being, and kept all of our vessels sailing continuously, servicing our charters. Once again, we would like to thank our seafarers for their commitment and dedication and efforts throughout this tough period. Our press release presents in more detail our financial operational results. We are now ready to take your questions.