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spk02: Thank you for standing by, ladies and gentlemen, and welcome to the SafeBulkers conference call to discuss the third quarter 2022 financial results. Today we have with us from SafeBulkers, Chairman and Chief Executive Officer, Mr. Paulus Hajianu, President, Dr. Lucas Barbaros, and Chief Financial Officer, Mr. Konstantinos Adamopoulos. At this time, all participants are in 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, please press star 1 on your telephone keypad and wait for the automated message advising your line is open. 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. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Forward-looking statements will be read now. 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 variation 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 that 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 will turn the floor over to Dr. Barparas. Please go ahead, sir.
spk03: Good morning. I'm Lukas Barbaris, President of SafeBuyGas. Welcome to our conference call and webcast to discuss the financial results for the third quarter of 2022. The third quarter was a good quarter. We had a satisfactory financial performance of 41 cents earnings per share and maintained a gradually weakening chapter market environment compared to the previous quarter, with increased revenues due to past contracts and earnings from scrapper fitted vessels, and higher interest expenses due to increasing interest rates. In this environment, we maintain strong balances, levels comparable to our critical value, and liquidity and capital resources providing us with the required flexibility. As we see in slide three, certain of our characteristics differentiate us from our peers. The growth of our fleet and our fleet expansion on one hand, leverage, liquidity, and contracted revenues on the other, not only rewarding our shareholders through the dividend policy, but in parallel creating increased value through an extensive fleet expansion. We would like to focus on our fleet quality and our environmental investments presented in slide four, because this is the basis on which we compete in the market against our peers. All 44 vessels in our fleet will have balanced water treatment system by the end of 2022. All eight of our capes will have straddles by the end of 2023, and 21 vessels will be environmentally upgraded more our fleet by the end of 2023 will consist of 19 vessels, 12 being echo. Out of the total fleet, 19 vessels will be 12 echo ships and seven phase III ships. In flight five, the environmental ratings, These ventures have the best environmental performance globally in the dry bark market on their deadweight tonnage, with impressive savings in fuel consumption. We intend to compete on this basis with our new big fleet, with seven such seats by the end of 2023 and ten by the end of 2024. We would like to focus on our improved capital structure in slide six. We are maintaining a comfortable leverage of $448 million compared to our free-to-skip value of $390 million, with a peak of 10.5 years of age. During 2022, we had 187 million of our 8% preferred C-shares. At the same time, our average interest rate stands at 2.91% for our consolidated debt, with a portion of 100 million euros at a 295 fixed interest rate in a secured five-year loan. Our liquidity is preserved in slide 7. Our liquidity and capital resources are maintained strong at 266 million, which together with the contract revenue of 327 million, as seen in slide 8, We are well hedged against the market volatility. Currently, the Baltic Cape Size Index ITC stands at $12,400 per day, while I see in the left graph of slide 8, 7 out of 8 of our Cape Size the 22,700 average pay separate, totaling to 185 million contracted revenue from CAIPS alone. As presented in slide 9, we have maintained a level of dividend at 5 cents per share over the last quarters, translated to an improving dividend yield, mainly reflecting prevailing conditions in the capital markets. Focal points in this uncertainty of these capital markets and the world economy is that we continue to direct a portion of our free cash flows to finance our utilities that will provide us with competitive advantage in terms of fuel consumption and environmental performance, while maintaining our leverage at relatively low levels, as we have already discussed. In addition, we have repurchased 2.8 million of FOMO shares. In slide 10, We show the relationship amongst our debt, flip-strap value, contracted revenue, cash and liquidity, and capex requirements. With a strong company balance fundamentals, ample liquidity leveraged at a comparable level to flip-strap value, secured cash flows from reliable counterparties, flip expansions with level of 2023 onwards, the government is well-positioned to react on challenges and take advantage of opportunities. Let me now summarize the takeaways in slide 11. We believe that sales back is fundamental for the financial flexibility to reflect market Each product is among those companies that will successfully navigate the environmental challenges of the energy transition and of the energy drive-back fleet, and will tackle the global uncertainties by utilizing the inherited qualities of each fleet and the efficiencies of each large-scale environmental upgrade in Europe. In parallel to the company's expansion, we believe we offer a meaningful deal. Now, let's move to the slide for the industry update. We present on the graphs the current status of the market. Changes have been, over time, driven by the commodity dynamics at levels such as The supply side, as we said in slide 14, the order book starts at 8.6%, which is a relatively low level compared to the past year, and thus we remain cautiously optimistic despite the global instability caused by war, energy crisis, and evidently inflationary pressure. We do expect scrapping to accelerate as a combined effect of fleet aging, about 25% of fleet is older than 15 years old, and environmental regulations that keep off the thick of the first of January 2023. Moving on to slide 15, we present the development of the CRB commodity index, which currently stands at a five-year high. The index reflects basic commodity future prices, for example, energy, agriculture, precious metals, and industrial metals, which represent leading indicators for shipping. Normalization of monetary and fiscal policies that deliver support during the pandemic is fully in demand, as policy makers aim to lower inflation back to target. The October forecast of IMF as well as lingering supply-demand imbalances, and is anticipated to reach 8.8% this year and 6.5% for 2023. In 2023, this inflationary monetary policy is expected to affect global output, with a projected increase by just 2.7%. and are also hemorrhage for the macro outlook. In China, the deepening of real estate crisis have led growth to be revised downward, with major global and drive-back stillovers. as global investments in renewable electricity capacity will continue to rise. An increasing share of economies are in a growth slowdown or outright contraction. The global economy's future rests critically on the successful calibration of monetary policy, the course of the war in Ukraine, and the possibility of further pandemic-related supply disruptions, for example, in China. Turning to slide 16, We focus on increasing value creation as a result of our investment in scrappers technology currently installed on 18 of our vessels. The very low-circuit fuel oil versus heavy-circuit fuel oil price differential is translated to increase revenues for the scrapper-fitted vessels. Presently, high-five in Singapore starts at about 270 per ton and at about 250 At this astute price for 2023, the implied scrubber gain potential is about 23 million per annum for our 18 scrubber field measures. And as we said already, we are in the process of installing additional scrubbers in our field measures. Concluding our market view in slide 17, during 2032, there has been an increased industry-wide volatility driven by geopolitical disruptions. The ESG framework and Paris Agreement adherence becomes increasingly important in dry bark trade, and as a result, demand for technological efficiency creates opportunities for those willing to invest, as Shade Barkers has done. Such environmentally efficient fleets may affect company valuations and lead to toothier markets with differentiation in earnings capacity of such assets. Furthermore, there might be spillovers in the transition towards green energy and the global inflationary environment. Now let me pass the floor to our CEO for our financial overview.
spk00: Thank you, Lucas, and good morning to everyone. On a general note, during the quarter, this quarter, we operated in a gradually weakening we present our quarterly net revenues and adjusted debita both standing at satisfactory levels. Slide 20 will present a strong charting performance and example of our management alignment. We achieved a daily time charting equivalent of $23,403 compared to $24,427 during the same period in 2021. The net income for the third quarter net income of $55.4 million during the same period in 2021. Our daily OPEX stood at $4,949 versus $4,608 last year. Our daily OPEX excluding dry docking pre-delivery expenses stood at $4,571, almost unchanged from last year's figure of $450. $309, which we believe is one of the most competitive compared to our peers. This number includes all our dry docking and pre-delivery expenses, as well as all our director and officers' compensation. We will try to do the right thing. For example, we have 0% commission of chartering management for our managers, and through our managers, Moving to slide 21, we present our fleet contracted employment percentage, noting that we have contracted revenue of approximately 314 million net of commission. always in the industry and the cash flow bridge in millions for the same period. The global economy is experiencing a number of turbulent challenges. Inflation higher than what was seen in several decades, tightening financial conditions in most regions, a racist invasion of Ukraine and the lingering COVID-19 pandemic all weigh heavily on the market outlook. Of course, our main focus is lean operations in Flight 24 will present our own balance sheet analysis. compared to $67.7 million for the same period in 2021. Our adjusted earnings per share for the third quarter of 2022 was $0.39, calculated on a weighted average number of 120.4 million shares, compared to $0.40 during the same period in 2021, calculated on a weighted average number of 119.9 million shares. In conclusion, in slide 26, we saw our quarterly operational highlights for the third quarter of 2022 compared to the same period last year. Based on a satisfactory financial performance, the company's board of directors declared a 5 cent dividend per common share. We would like to emphasize that the company is maintaining a healthy cap position of about $130 another $144.3 million in available revolving-grade facilities, as well as $51 million in undrawn-boring capacity available at other two loan facilities in relation to two new vessels. That's a combined liquidity of over $330 million that provides us with significant firepower. Furthermore, and in addition to our contracted liquidity, and additional borrowing capacity in relation to seven dead-free existing vessels and seven new builds upon their delivery. We believe that a strong liquidity and relatively low leverage will enable us to be flexible with our capital structure, expand the fleet, while still rewarding our shareholders. Our basic list presents in more detail our financial and operational results, and we
spk02: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 from your telephone keypad, and the confirmation tone will indicate your line is in the question queue. We ask that you please wait for your name to be announced. You may press star 2 if you'd like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, that's star 1. Thank you. First question is from the line of Chris Weatherby. Please proceed with your question.
spk01: Hi, good morning. Yes, so if we could just dig in a little bit more into, you know, the Chinese COVID lockdowns, you know, softening demand over there in China and, you know, how that's really impacting bulk shipments, you know, into year end as well as the first half of 2023. I didn't know if there was some additional color that you could shed on the situation and what you're hearing out of there. And if you have an anticipation of where that's going to be headed, both near term and into the first half of next year, that'd be great.
spk03: Yes, the situation with COVID in most countries is... is back to normal and the take is very normalized, including major hubs like Singapore has opened up where ships can do group changes and take supplies and all the necessary. In China, the situation is still a bit uncertain. view the no vaccine restoration of Chinese population. So there's still this question mark of how the winter will develop. And if there will be lockdowns or zero COVID policy will be maintained. For the time being, it's under control. We don't see something extraordinary happening there. And business is as usual as it was over the summer. We see some lockdowns there. Then this will create congestion, and this in the previous round was not necessarily a bad thing to have in the freight market. For the time being, it looks okay, but it's still early in the winter.
spk01: That's very helpful. Thanks for that additional color. Moving on to fleet sizing, it looks like you guys... reported 44 vessels within your fleet within this quarter in comparison to 42 in 2Q and 40 in 1Q. So just looking forward at the cadence of the fleet additions and new builds, what are you expecting in terms of fleet sizing moving forward, both into 4Q and again into the first half of next year?
spk03: Yes, look, the addition of the new ships that they start coming to already deliver and five more will be delivered in 2023, they are happening at a very good time as far as the contribution of that part of the fleet to the revenue of the company, simply because The ships are the latest technology, very economical on fuel oil consumption at a time when fuel oil prices are around $700 per metric ton. So these ships, when we ordered them back in 2020, we were estimating that the fuel oil price would have been around $400 or $500. So at present levels, These ships could easily perform $5,000 per day better than other modern ships in the market. So it's a very welcome contribution to the company at what it looks to be a challenging year ahead of us, mainly for non-shipping reasons, for reasons related to transportation. to the world and reasons related to economies falling into recession because of high interest rates and efforts to curb the inflation created because of energy prices and the work. So, for the time being, we consider this addition very good, and they are very welcome coming into the clip in 2023. At the same time, we are taking advantage of... of the high fuel oil prices to install the scrappers on the remaining capes in our fleet in order to work in spreads of around $200 for 2023, which give a very quick payback of two and a half years for those ships. I believe that 2023 is a year also to concentrate on environmental investments on the fleet. So we are planning to increase the dry dockings. in the year of 2023 from the normal 8 or 9 we have every year to possibly 15 or 16 dry tokens, taking advantage of the lower freight market and at the same time to invest in environmental improvements of the fleet to even be more competitive in the years to come. Because I believe that the last couple of years shipping hasn't done much towards decarbonization. But now with the low-freight market, people will be more concentrated on how to invest surplus liquidity into environmental upgrading of their fields. We are doing it in two forms. and the second fault is upgrading our existing ships earlier than scheduled with the improvements on environmental devices like ducts and other things and low-friction paints and other things that today's technology provides. You see, I mean, if you consider that area, or Phase 3 vessels. This means something for the ability of the company and the timing of the orders and everything. On the other hand, if you consider a 21 auto, I mean, of the other vessels, what we have created environmentally, someone could understand that we have held substantially for the revenue, for our revenue in 2020, in 2020, to the average in the market based on the consumption. And not only that, this is one part of our benefits, but also another indication of how well we are prepared is that for cage, for example, we have expanded the fleet during 2022 and earlier. And now it happens that while the market is 12,000 So this shows how proactive our management has been and what we are trying to achieve by increasing our revenues and being always on time and trying to reach the market as quickly
spk01: That's certainly very helpful. So, you know, in terms of the five editions, you know, you're expecting to take on in 2023. I mean, is that going to be, do you have any indicator of, you know, is that going to be in the first half, the second half, or, you know, any additional color around that?
spk03: Yes, two are in the first half and three are in the second half. So we start in Q1 and Q2, and then we have three more in the second half. So they are pretty much evenly spread throughout the year. So those ships will be active. Then we have three more in 2024 and one more in beginning 2025. So by that time, we expect that the company will be able to assess better what new technologies, other than the IMO phase 3, tier 3 vessels, what new technologies will be offered by shipyards and what type of new engines will be offered by shipyards before considering the next move. I am recalling that in the past we were considering Two years ago, ships with dual engine powered by LNG. Later on, other things, other proposals, other ideas came around with vessels burning ammonia. Later came methanol. Now is coming hydrogen. So there are so many things that are appearing and disappearing in the last 12 months. But it's good that ship owners did not dive into these stories before. matters becoming more clear. But I believe by the time we complete our new building program in the next year or year and a half, we will have more concrete evidence on what the company's future investment would be. And to that extent, I mean the program we are doing here as a company, you have seen on slide number 10, The liquidity we have in the company right now is more than the capex to receive the nine new buildings, nine remaining new buildings from the yachts. So we are planning the future debt on those new buildings that we will be receiving in to be wholly invested on new technologies. So from our part as a company, we are doing what we have to do and what we can do to stay sustainable in the future and to be able to be competitive in the future. This is the planning we have done, and for this reason we are happy today that we are getting delivery of these ships without the additional burden of any finances. So we are very well prepared when the yachts develop the next technologies to be able to participate on those discussions.
spk01: Thank you very much for that additional caller.
spk02: Thank you. Thank you. As a reminder, you may press star 1 to ask a question and please wait for your name to be announced. Our next question is from the line of Gabriel Morante with SafeVolkers. Please proceed with your questions.
spk04: Hey, I just wanted to get a little bit of insight into, I know you guys provided some insight into your fleet and how you're looking to upgrade it, but my question kind of relates to the retiring of the previous vessels and how those either losses or gains are being reported. Is that being reported as part of your normal operations, or is that being charged against the retainers?
spk03: If I got the question, what do we do with the rest of the fleet, the older ships or something else you ask?
spk04: Yeah, so what I'm asking kind of is, you know, the proceeds, whether it's a gain or a loss on the old fleet, if that's being reported against your operating income.
spk03: Look, the old part of our fleet is all ships we constructed as new buildings 15 years ago or 10 years ago at very healthy prices. So we don't have... expensive new buildings in our fleet. And maybe you saw a month ago that we sold one 2006 big vessel for $16 million. And the planning was to continue and is to continue, maybe selling selectively, if the market allows, a couple of more older ships and create more liquidity for new technology. But even if we don't sell those older ships, we plan to trade them until their economic life, at the end of their economic lives. All right. Thank you so much. I appreciate the, uh, the reply.
spk02: Thank you. At this time, there are no additional questions. I will now hand the floor back to management for closing remarks. So, there's no other questions? No, there is not, sir. If you'd like to make some additional comments, please go ahead.
spk03: We are fine. Thank you very much for attending this hour of webcast for the Q3 results of 2022. And we are looking forward to discuss again with you next quarter. Thank you again, and have a nice day.
spk02: Thank you to everyone that participated in today's call. You may now disconnect your lines at this time. Have a wonderful day.
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