Safe Bulkers, Inc.

Thank you for standing by, ladies and gentlemen, and welcome to the SafeBulkers conference call to discuss the fourth quarter 2020 financial results. Today we have with us from SafeBulkers, Chairman and Chief Executive Officer, Mr. Paulus Hajiwano, President, Dr. Lucas Bambaris, and Chief Financial Officer, Mr. Konstantinos Adamopoulos. 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 wish to ask a question, you will need to press star 1 on your telephone keypad and wait for your name to be announced. Following this conference call, if you need any further information on the conference call or on the presentation, please contact Capital Link at 212-661-7566. I must advise you that this conference is being recorded today. Before we begin, please note that this presentation contains forward-looking statements, as defined in Section 27A of the Securities Act of 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 estimations 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 for dry bulk vessels, competitive factors in the market in which the company operates, risks associated with operations outside the United States, and other factors listed 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 contained herein 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. And now I pass the floor to Dr. Barbaris. Please go ahead, sir.

Good morning. I'm Lucas Barbaris, president of SafeBarkers. Welcome to our conference call and webcast to discuss the financial results for the fourth quarter of 2020. Starting our presentation in slide three, I would like to express our gratitude to all our CFRS, hoping that within 2021, we will reach a point that all efforts of the global community in the shipping industry to share initiatives and actions combating the crude change crisis and repatriation of our seafarers. We are committed to the safety and well-being of our seafarers while ensuring a stronger maritime supply chain and the uninterrupted flow of commerce around the world. As a general comment for 2020, despite the negative effect of COVID-19, the company is maintaining strong liquidity position that provides us with flexibility and is following a plan which, in the first place, is based on our high-voltage Japanese fleet, 32 out of 42 vessels, with built-in advantage of environmental footprint compared to the global dry-buck fleet, and further, is aiming to upgrade and gradually renew our fleet with a view of forthcoming environmental changes and sensibly leverage our balances targeting to create value for our shareholders and be the leading quality drive-by company. Management alignment with shareholding and performance and trust built over the years are of paramount importance in the success of this plan. Moving on to slide five in the industry section, let us analyze the market conditions Recent COVID vaccine announcements brought optimism in the global trade market, together with the underlying demand. The graphs present the development of the charter rates for CAPES and Tamsa Maxis, as published by Board of Exchange. Both CAPES and Tamsa Maxis have recovered after the low first half of 2020, which was mainly due to the COVID-19 outbreak. For capital markets, the market is trading above USD 10,000 since June 2020, and more impressively, is presently trading in the region of 17,000 or more, which is exceptionally strong given the seasonality low market during the first quarter of each year. Similarly for CAPES, the market peaked three times after June 2020, with the most risk in January 2021, when it reached 25,000 per day. Presently, the market is lower and is trading at about 11,000 for capes. However, the cap of FFAs sets the market levels closer to 20,000 for the remaining of the year. The resumption of economic activity and the healthy volumes of iron ore, coal, grain are the major drivers of this surge on rates. COVID-19 is still a concern, although acceleration of vaccination will likely control this pandemic. Turning to slide number six, we present certain aspects of Chinese activity which are indicators of the charter market conditions. The iron ore imports of China have been the driving force of the CAPE market, and during the course of 2020 were up 9.3% year on year, despite finishing lower towards the end of the year. Regarding the thermal coal imports, as shown in the middle graph, we saw a big surge of imports during the end of year, with an overall increase of 1.4% for the whole calendar year of 2020. The high demand for thermal coal, especially towards the winter months, has been reflected in the Panamax and Kamsaramax chatter markets. It is important to analyze the drivers of this big surge in demand for the thermal coal. As presented at the bottom graph, we see that the power generation in mainland China in December 2020 jumped by 13.4% month-on-month and by 11.2% year-on-year. Most importantly, the total China power generation was up 4% year-on-year, reflecting the overall economic development. The demand for Panamax and Kamsamax is expected to remain firm as we are entering towards the grain season of Expo, ex-East Coast South America. The grain harvest of this year is expected to be remarkably high, and hence the demand for Panamax and Kamsamax vessels is also expected to be high. Having analyzed a few important drivers of the demand, let's turn now into Flight 7, Presently, the order for both capes and Panamaxes is the lowest since 2002, in combination with the 20% of world fleets being over 15 years old of age. Moving on to slide 8, we see that the remainder of 2021, the new orders are above 3% of the existing fleets of capes and 3.7% for Panamax and Kamsar Maxis. After 2021, the orders remain minimal. Taking into account the aging of the fleet, it is highly possible that scrapping activity will increase. It is also important to note that the shipyard's capacity is presently covered with orders from other sectors, such as container ships and tankers. On top of that, the ongoing environmental discussions for emissions and decarbonization certainly do not encourage new orders. Turning to slide 9, we present the latest developments on the fuel markets. During 2020, due to the pandemic and the worldwide lockdowns, the demand for distillate products dropped dramatically. Towards the end of 2020 and year to date, there has been gradual reopening of the economies, which in turn has stimulated the demand for oil and distillate products, leading to higher prices. Features market of bankers indicate a sustainable spread differential between the IMO 2020 compliant fuel, the very low self-fuel oil, and the 3.5% high self-fuel oil, the so-called high-five. As shown in the graph and according to ICE reports, for the high five is in the region of $130 per metric ton, which for the remaining of calendar 21, 22, and 23 is trading above $120. This spread differential of about 120 per metric ton for a post-Panamax vessel, which on average burns about 7,500 metric tons per year, that is scrubber-fitted, could be translated to a good gain of about $900,000 per year, or about $2,500 a day. Let me remind you that our company invested on scrubbers and has already retrofitted scrubbers to half of our fleet. The recovery of global economies The restoration of mobility and the recovery of crude oil prices may push this high-five differential to pre-COVID-19 levels. Let me summarize certain key market takeaways in slide 10. We have experienced an exceptionally strong start of 2021 with healthy volumes of iron ore, coal and grain trade as the recent COVID vaccine use brought optimism in global markets despite the trade tensions between China and Australia. The global lockdown has adversely affected demand for oil and diesel fuels. We may have a slow oil demand rebound, as global lockdowns is, with the creation of mobility, which will eventually may lead to the recovery of brand prices and to even wider high-five spread differentials. We have the lowest order book since 2002, as the ongoing decarbonisation discussions do not favour new orders. The aging of fleet and the increased environmental restrictions for emissions may enhance the scrapping activity. And lastly, only few shipyards have developed new environmental-efficient vessels. In slide 11, we present our fleet growth over the last years. In the context of our fleet renewal strategy, we have entered into agreements to acquire two Japanese-built top-designed ships which are designed to comply with the Energy Efficiency Design Index Phase 3 and Tier 3 in relation to NOx emissions, with scheduled delivery days first half of 2022 and third quarter of 2022. Presently, only a few CPUs have developed this environmental-efficient designs. At the same time, we have agreed to sell two of our older vessels, 2003 and 2004 built, replacing the one immediately with a 2011-built Japanese Panamax at a modest price differential. The company had never entered into several orders that have distorted the supply side. At the same time, the company has kept a rate of growth even at loss-making markets and has invested always in the forefront of the technologies ahead of the competition. Turning to slide 12, I would like to focus on our fleet mix and point out that 75% of our fleet is Japanese versus 46% of the world fleet. providing us with a lower environmental footprint overall, lean operations and cost built-in advantage. Furthermore, as seen in slide 13, currently only a small number of vessels compared to the world's high bulk fleet is built with EDI index. We believe that we can identify less efficient vessels on those that are not built in Japan and on other designs before 2010. restrictions and additional costs or carbon emission taxes, making them less attractive As presented in slide 14, SafeVargas, in the context of its environmental and social responsibility policies, has invested ahead of competition and undertook significant environmental investments in new technologies and modern design and energy-efficient vessels to an aggregate amount of 67.2 million as of December 31, 2020. We have already retrofitted all 20 of our scheduled scrapper installations with an additional scrapper order placed in 2021. And 30 of our vessels are already equipped with balanced water treatment systems. At the same time, unfolding our fleet renewal strategy, we have placed two orders for a greenhouse gas EDI phase 3 new bridge for 2022. Now let's move to slide 15, where we have plotted the BPI index as a market performance in our stock price. The correlation historic has been very strong. In 2019, the correlation of the capital due to trade war. And during 2020, we have seen further decoupling due to COVID pandemic. At present, we believe that our stock is trading at levels relatively lower than the charted market performance. And now let's summarize our key points for safe markets. We are a pure drive-back player. We, without predecessors, we have a history of 60 years plus of uninterrupted presence in the drive-back markets. Our management team has more than 30 years of experience and continuous presence in the drive-back industry. We are here for the long run. We preserve our liquidity, which provides financial flexibility, security in turbulence, and opportunistic asset acquisitions. Our spot market exposure allows expansion of profits in bull charter market conditions. We have locked a good 30%. time charters, 68 percent of which are index-linked, and join the improving charter market conditions. About 75 percent of our fleet is Japanese-built, providing us with lower environmental footprint, lean operation and cost-building advantage from scrub-fitted vessels based on increased fuel spread differential. We have actively centered the environmental preservation in the heart of our competitive strategy by investing more than $65 million in 2019 and 2020, feeding 50% of our feed with exhaust gas cleaning devices, the scrubbers, which provide us with extra income capability in rising oil price environment. Management team has seen the game that offers full alignment with shareholders. we have demonstrated our two-fold fleet renewal strategy. On the one hand, looking towards 2030 with ordering Greenhouse Dash EDI Phase 3 NOX CF3 Japanese New Bridge, and on the other hand, capturing the present market by opportunistic second-hand acquisitions replacing older vessels at a modest price differential. At the same time, we continue the gradual deliverance of the company. Now, I will pass the floor to our CFO, Konstantinos Adamopoulos, for the analysis of our financial results.

Thank you, Lucas, and good morning to all. Let me start with our chartering performance in slide 18, where we present our quarterly time chartering equivalent rate, which stood at $12,319, versus our quarterly office for the same period, which stood at $3,978. Moving on to slide 19, we present our quarterly daily OPEX versus our quarterly daily GNA, which stood at $1,469. The aggregate figure for both OPEX and GNA for the last quarter of 2020 was $5,447, demonstrating our focus on lean operations. We believe that this number for both OPEX apple to apple, is one of the industry's lowest. If not the lowest, given the fact that we included in this figure all our dry talking and pre-delivery expenses, and also in our GNA, our management fees, and directors and officers' compensation, and all expenses related to the administration of our company as a public entity. Moving on to our debt profile, as seen in slide 20, we present our repayment schedule Our liquidity at the end of the year stood at $171.2 million, consisting of cash and bank time deposits, restricted cash, contracted and drawn borrowing capacity under a revolving credit facility, and secured commitments, including sale and leaseback financing. In slide 21, focusing on our liquidity versus our CapEx commitments, as of February 12, we had liquidity of $184.3 million, which included cash and cash equivalents, time deposits, restricted cash, funds available under the sale and lease back agreements, new term loan agreement, and the revolving credit facility. Our aggregate remaining capex for the acquisition of the two new builds as well as of the second-hand vessel was $64 million, of which 12.6 million is due in 2021, and the remaining 51.4 million in 2022. In slide 22, we present our debt amortization schedule versus the scrap value of our fleet. We have a smooth debt repayment profile for the next two years, gradually deleveraging our company. Let's now move to slide 23, with our quarterly financial highlights for the fourth quarter of 2020, compared to the same period of 2019. As a general note, during the fourth quarter of 2020, we operated in a relatively weaker charter market environment with lower operating and interest expenses compared to the same period in 2019. While our revenues were partly supported by the additional earnings from scattered fitted vessels, the operation of one additional vessel, which we took delivery back in April of 2020, and also from reduced mortgage expenses. The net effect is reflected in our reduced TCE of $12,319 for the fourth quarter of 2020 compared to $13,770 during the same period in 2019. Net revenues decreased by 2% from $53.2 million to $52.2 million mainly due to the reduced TCE because of a weaker market, partially offset by the additional revenues earned by our scrapper-fitted vessels and the additional vessels delivered in 2020. Daily vessels' running expenses decreased by 22% to $3,978 compared to $5,103 for the same period in 2019. This decrease is associated with reduced dry dockings and provision of technical services and increased crowd repatriation expenses due to the COVID pandemic. Daily running expenses, excluding dry docking and free delivery expenses, also decreased by 13% to $3,955 for the fourth quarter of 2020, compared to $4,540 for the same period in 2019. Our adjusted EBITDA for the fourth quarter of 2020 increased to 26.3 million, compared to 23.1 million for the same period in 2019. Our adjusted earnings per share for the fourth quarter of 2020 was 4 cents, calculated on a weighted average of 100.2 million shares, compared to 1 cent in 2019, calculated on a weighted average number of 102.6 million shares. On the table of slide 24, we provide an estimation of the expected downtime in Q4 2020 and Q1 2021 in order to assist analysts with their projections. Closing our presentation in slide 25, we present our quarterly flip 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 concluded the order of two Japanese modern design and technologically advanced new builds with delivery in February. with limited impact on our liquidity by agreeing 90% financing through Shale and Eastbark agreement for one and by committing term loan facility for the other one. We have sold two of our oldest vessels, built 2003 and 2004, at attractive prices and immediately agreed the acquisition of 2011 Japanese built vessel, sister ship to two of our We have a strong balance sheet with comfortable leverage, a smooth debt profile for this and the next year, and liquidity position of 184.3 million as of February 12. And finally, we took measures to protect our seafarers and shore 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 throughout this tough period, It drives the industry's attention to efforts in relieving and preserving the well-being of our seamen. Our press release presents in more detail our financial and operational results, and we are now open to take your questions.