Safe Bulkers, Inc.

Thank you for standing by, ladies and gentlemen, and welcome to the SafePolkers conference call to discuss the first quarter 2023 financial results. Today we have with us Mr. Paulus Hadjianou, Chairman and Chief Executive Officer, Dr. Lucas Fompras, President, and Mr. Konstantinos Adamopoulos, Chief Financial Officer of the company. 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 your name to be announced. Following this call, if you need any further information on the conference call or on the presentation, please contact Capital Inc. 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 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 for dry bulk vessels, competitor 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'll pass the floor to Dr. Barampas. Please go ahead, sir.

Good morning. I'm Lucas Barbaris, president of SafeBuyGas. Welcome to our conference call and the opportunity to discuss the financial gaps for the first quarter of 2023. During the first quarter of 2023, we operated in a relatively weak market compared to the previous year. Having comfortable liquidity and leverage, we terminated the APM program, which has not been in use since September 2021. We have continued our buyback program, targeting 10 million shares, our weekly repurchase, and we collect a dividend of 5 cents per share of common stock. Our balance sheet is strong with significant cuts in development capacity. Our capital requirements are substantially covered by our conducted future revenues, and our capital structure is conservative. Now, let's start with the market update in slide three. We present on the graphs the current status of the market. Capes have recovered from their recent loge and drive-back freight markets. Overall, they recovered with China's easing zero-COVID policy and limited active supply in New Zealand. Ferry congestion has declined with lower import demand and the easing of supply chain issues. In the Panamax, the prevailing commodities market is likely to provide support to the freight market throughout the second half of this year. It's worth noting that all our grapes are pre-extracted at an average daily rate of $24,000. Moving on to slide four, we present the development of our CRD commodity index reflecting the basic commodity features of future prices, for example, energy, agriculture, precious metals, and industrial metals, which represent leading indicators for shipping. Also, the index... Currently priced at high levels, commodity prices declined sharply over the past six months, following the posted record high levels of last year's historical taking in June 2022. After rising by 45% in 2022, commodity prices are projected to fall by 21% in 2023. We continue to wait for the rise in several bank interest rates as currency majors are and to fight inflation and national war consequences. The policy is expected to affect the global output. The April caucus of IMF said the expected growth of global GDP to 2.8% for 2023, as global inflation projection for 2023 stands at 7%, means that there is use of broadly priced futures and food and energy prices, and because the leading supply-demand imbalances. In this environment, the forecasted global drive-back demand growth is expected to increase only by 2% in 2023, with the forecasted growth in iron ore by 1%. Asset obstruction activity remains muted, with an expected drop in coal import demand as a result of higher connected mining in India and China. Again, the failure of this outlook for demand remains frosty. growth affected the wheat and maize harvests in major exporting countries like USA and Argentina. In China, there is less air protection growth in 2023, back at 5.2%, with nature global in dry pastures still on this. Yield to growth regarded to 4.5% year-on-year in P1-2023, compared to 9% in P4-2022. This was a serious lead recovery, as sales contributed by 3.1% to growth, whereas the industry contribution accounted for 1.2%. In March, the normal production of BMI rose to 58.2%, the highest level in other industries, and the manufacturing BMI to 51.9%. Metal prices fell by 3% in March in the search of a less metal intensive recovery in China. India's emergence The global economy is shocked and perplexed quickly on the course of the war in Ukraine, and the president preferred pandemic-related supply-side disruptions to exactly China. The World Bank Commodity Price Index declined by 32% after the World Bank's early 2023 projection, surpassing a 31% rise in commodities for the fall of 2023. On the supply side, as you can see on slide 5, the total drive-by orders have fallen a single bit. For this reason, we remain cautious about the median prospects of the trade market, because for more than 25% of the median side flip is further than 15 years, but scrapping is expected to accelerate as a combined effect of the COVID-19 and other regulations kicking in from the 1st of January 2023. It is worth noting that Japanese ships have more efficient design compared to Chinese. 80% of our fleet in Japan is built by 30% of the global fleet, which means that our fleet consists of more efficient vessels compared to the market average and can compete better in the new environment. Furthermore, we have one of the very low very few global companies, with such an extensive orderly set of ideas. However, the invention remains exactly a new athlete, and compete on the basis of operational and environmental performance. As you can see, the majority of global fleet is out of airfares. Only about 10% of the drive-by fleet is expected to come out of the EXI, without requiring modification air upgrades. So, that is only the day optical vessels have strike airships built after 2015, and the trips in order to strike the PS3 units, several of which we have been delivered by the end of 2023, and at the same time, a major ongoing environmental upgrade program, increasing the energy efficiency, and that is giving us CO2 emissions in our grid, completing our breaks in 20 vessels by the end of 2023. while the most advantage is using combined time-tied fields and monitoring the development of organic fields. Continuing our market view in slide 7, during M2023, there has been an increase in industry-wide productivity driven by geopolitical disruptions and tight monetary policy. Development-based developmental regulations and hearings become increasingly important in the data space, and as a result, the market's technological efficiency creates opportunities for those willing to invest as soon as the market has done. Such environmental-efficient fleets may affect company valuations, and you need to put your market with preferential engineering capacity for such vessels. Furthermore, the combined effect of the aging of the fleets, the low order book, and the new regulations will favor fleets with more efficient Japanese vessels and vessels delivered after 2014. limiting the benefits applied, and bettering the market even further. In this market of increased environmental-based competition, let me present slide 8, second of our two characteristics, which differentiate us from our peers. The strong alignment of interest, with 30% management and honest participation, the low leverage of 33%, the comfortable liquidity and competitive leverage, our track record, the creation of inclusive value through an extensive fleet expansion program, with four-phase 3D lubricants, and we are upgrading all of these equipment, including installation of new scrubs. All of our equipment will have scrubs by the end of 2024, and 20 of these will be environmentally upgraded by the end of this year. We are taking delivery of three-phase 3D lubricants already, which are the best-performing devices on the market globally. We intend to compete on the basis of low fuel consumption and environmental performance in the following years. Let's now focus on our liquidity, our cash flows, and our factor structure, as we will in Flight 9. By maintaining a comfortable leverage of 33%, our debt of $430.2 million is comparable to our fleet's graph value, which presently is $389.4 million, although our producer, to 10.6 U.S. shares. Our rated average interest rate stood at 4.63% for our consolidated debt, with a proportion of 100 million euros fixed at a 2.95 coupon in an instituted high-tier bank. We have paid 72.8 million for our capital exchange requirements in relation to our overdue of 9 million, and the remaining capital exchanges are 234.5 million in overdue. I will be concluding In terms of research, it starts at $359.9 million, $659.9 million, which, together with a contract revenue of $282.1 million, provides an extraordinary margin in capital allocation. First of all, we have additional bearing capacity in relation to certain existing and intended sources, and five units are going to be needed. Moving to our dividend point in slide 10, we declared a dividend of $0.05 per share over the last six consecutive quarters, rewarding our share holders. At the same time, we had an active common share buyback program. Under which, we have already repurchased 8.3 million shares as of May 2023, out of the total of 10 million shares currently authorized under the repurchased program. Furthermore, we have terminated the AT&T drop-in program. Under which, the last sale had occurred in September 2021. The focal point in this uncertainty of the capital markets and the world economy is that we continue to direct a portion of our free cash flows to current size unique among peers using the program that will provide us with competitive abundance in terms of fuel consumption and environmental performance while maintaining our leverage at relatively low levels. Now let me summarize the investment rationale of Save Bibles in slide 11. We believe that safe values from common members offer an answer that you need to reflect market challenges and their short opportunities. Safe values with each other book is among those elements that navigate environmental challenges of limited condition that they aid in dry, dry bodies and tackle the global uncertainties by utilizing the integrated qualities of its fleet and the efficiencies of its large scale environmental available programs. In part of the company's expansion, we offer a meaningful deal because we believe we are efficient for the long run with an environmental-based advantage. With our strong balances, our individuality, leverage, and comparable level of food scrap value, secure cash flows from reliable kinds of parties, we have deep-focused food expansion with 10.3 million dollars. As part of our PSF position and as part of our environmental relations, the company experienced management teams In that position, I get market scientists and funds ready to take advantage of market opportunities. Now, let me pass the floor to our CEO, Kostas Aguilar-Satanopoulos, for our financial overview. Thank you, Lucas, and good morning to all of you. On a general note, during this quarter, we operated in a gradually weakened insider market environment compared to the same period in 2022. We've decreased revenue due to lower highs, increased earnings from started field investments, increased operating expenses, and higher interest expenses due to increased interest rates. In slide 12, we present a strong chartering performance as an example of our management alignment. We had a fine chartering equivalent of $3,760 compared to $21,352 during the same period in 2032. Net income for the first quarter of 2023 is $19.3 million, compared to net income of $36.4 million during the same period in 2022. Our daily running expenses stood at $5,550, which is $5,722 last year, while our daily running expenses, excluding white documents, stood at $5,132, That is $4,923 for the Q1 of 2022. Our only NOPEX and GMA for Q1 2023, which we believe is one of the most competitive compared to our peers, is still at $7,043. And we know that this includes all our driving documents, we believe, and expenses, as well as all our director and officer's commentations. Moving on to slide 17, we have properly financed a highlight for the first quarter of 2023 compared to the same period in 2022. Our adjusted revenue for the first quarter of 2023 stood at $83.1 million, compared to $46.1 million for the same period in 2022. Our adjusted earnings per share for the first quarter of 2023 was $0.10, calculated on the weighted average number of 18.4 million shares, compared to 24 cents during the same period in 2022, calculated in a weighted average number of 121.6 million shares. The presented slide contains our quarterly operational highlights for the first quarter of 2023, compared to the same period of 2022. We operated for 43.83 percent on average earning an average time charge of $15,760, compared to 39.54 vessels, earning an average time charge of $21,350 in the same period in 2022. On slide 15, we present our low procurement points for Q1-23, which we believe is one of the lowest in England. The global economy is experiencing multiple challenges. Inflation is higher than seen in several decades. Highly financial conditions in most regions. And Russia's continued war in Ukraine weighs heavily on the market value. Russia's main focus is lean operations based on inflationary environment. Based on a satisfactory financial performance, The company is funded by a record $5 trillion per commons year. We would like to emphasize that the company is maintaining a hedged-cash position of about $90.7 million as of May 2022, another $119 million in regulatory facilities, an additional $148.2 million in unbound borrowing capacity, We have a high liquidity in capital resources of $351 million that provides us with significant credit and power. Additionally, we have contracted revenue from our non-cancelable spending period and target standards in the case of $285 million in other commissions and excluding standard revenue for certain vessels, as well as additional borrowing capacity in relation to certain and in-campus existing vessels Thank you, and we are now ready for the Q&A session. Thank you. At this time, we'll be conducting a question and answer session.

If you would like to ask a question today, please press star 1 from your telephone keypad, and the confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to withdraw 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. Let's get a star 1. Thank you. Thank you, and our first question is from the line of Chris Weatherby with Citigroup. Please proceed with your questions. Hey, thanks.

Good afternoon, guys. Maybe I can start on the fleet and curious how you guys think about fleet opportunities from here. Obviously, a pretty tight order book relative to what we've seen over the past and so on. Does secondhand make more sense, or, you know, given where vessel value is, does it make sense just kind of to stand pat and sort of see how things develop over time? I'm just kind of curious how you're thinking about that right now.

Yes. I can certainly have a... Ask about a movement, I guess, whether the transit opportunities are going to develop. Correct. Yes. Okay. Because the line is not so clear. Okay. Look, right now I think the new-build market is a little bit confusing, because we see prices rising because of demand created from other sectors. And we don't have a clear path what will be the next fuel available. for new buildings and since we have still 8 vessels 9 vessels to be delivered from our existing new building program in phase 3 low consumption new buildings we are not actually making some investment in new and current ships because simply we don't have a clear view we know We are trying to monitor the market, but we don't have a clear view. So I think like us, there are many people with the same confusion at the moment, at least in the dry bulk sector. I think for now, container ships is not clear. They have more options there. But in dry bulk, we don't have that many options. So at the moment, you will see very small orders for 2025, and the yards are almost full. And if someone wants to consider design, so the deal here, the availability is May 26 and 27. So it's very, very far away. So also for that delivery positions, you have to bear in mind the high interest cost of the delivery installments. So right now, I don't think that the market will see Okay, that's helpful.

I appreciate that color. And then, you know, I guess as you think about scrubbers in particular, I know you've highlighted some of the... and, you know, opportunities, I guess, as well in terms of emissions and

At scrubber spreads below 150, the option to invest in scrubbers is not so attractive, because you have to remember at the same time that farmers are making environmental investments and they are reducing 10% of the consumption of essence. So we will see scrubber spread going in the future above 150, then we may see more scrubbers being placed. But the current spread is heading towards 120. It's not so attractive to make new investments there. As I said, we have done, we have all the scrubbers for all our caves. By the end of the year, then they will have their scrubbers. Caves are burning around 35 to 40 tons a day. So there it's a more viable But smaller ships I don't think anymore is viable to install scrubbers. I think that the payback time is much longer than what used to be. Okay. All right. That's helpful. Thanks very much. I appreciate it. Having said that, companies have invested in scrubbers in 2019, 2018, 2019, and they've been working them. after the middle of 2020, I think they've made that money already.

Okay. Yeah, that's a fair point. Great. Well, thanks very much for the time. I appreciate it.

Thank you. As a reminder, to ask a question today, you may press star 1 from your telephone keypad. Our next question is from the line of Omar Nocta with Jefferies. Please proceed with your questions.

Thank you. Hey, guys. Good afternoon. Just wanted to maybe touch a little bit on capital allocation. Obviously, your strategy there has been fairly balanced. You've got the dividend, the buyback, which is fairly active recently, acquisitions with the new buildings, and focusing on the balance sheet and making sure that debt is getting paid down. Just wanted to ask about how you are thinking about the fleet as it is going forward. You're You have the 44 vessels, of which 12 are eco-designed, built after 14, and you have the three very modern ones, the Phase 3s. You've also got the nine new buildings that are coming on. How should we think about those new buildings as they deliver and what the plan is for sort of that existing fleet today that isn't mentioned as being in that eco portion of the business? So basically we call it 20, 25 vessels. fleet. What's your plan with those, especially as you start taking delivery of the new building?

Okay. First of all, I will say a few things about our capital allocation. So, basically, at the early stage, when we decided about the dividend, we thought of a meaningful dividend policy, but also a today, but a reasonable precautionary approach towards the investment in new deals. So, our level of value will not be bad in the following years. So, we want to see something like the age of 35% also long to value. This will feel very comfortable. The second point of our policy is that we have a substantially contracted revenue, so we have visibility in order to support our dividend. And we also have a substantial liquidity in order to be able to take in the actual returns that may arise in the market. Now, in terms of our fleet, you can see that by the end of 2025, half of the fleet basically will be either at the ship show or a few vessels. It will be, I think, a very impressive figure. The other cup, which is probably consists of 25 vessels, 20 of them will be updated within... 2023, which means that an efficiency in the range of 10% increased efficiency in the range of 20% will be there. And also the other part is that our ships, Japanese-built, which are inherently more efficient than the other, I mean, the most, the remaining global fleet, which is by about 50% Chinese, and there is no change. So I think that the company will very comfortably participate be able to compete on the basis of pure performance, having about half of the fleet new builds, Phase 3 and Echo, and the other half upgraded fleets, which are basically a version of those Japanese builds.

Okay, that's a very good overview. I appreciate that. I think earlier in the... I think it was in response to Chris's question about new buildings, and you highlighted the... You'd have to go out to 26 or 27 to take delivery, and again, there's uncertainty on propulsion. Earlier this year, you had added to your CancerMax, I believe, tally with the 25 delivery. If I remember, it was the first half of 25... If you guys were to place an order, is that achievable, again, to be able to get something in the first half of 2025, or is it basically now the window has passed and we're looking at 2026, 2027?

No, in Japan, it's very hard to find new builds in 2025. It's 2026 onwards. If you go also to see if there are any dual-QL possibilities, At the moment, we have to go to May 26, early 27. And even there, we don't know if the designs are viable. And if the designs, the shipyards are really worked well by the yards and they are at the very primary stage. But in ship owners in general, are very skeptical in which path to follow. For us, we are pleased that we have an ongoing program of nine ships to be delivered, so we don't have a real anxiety to do some early moves on something. Very simply, because we can renew our fleet with the addition of the new ships training the fleet, which also were ordered at a very good price, no price before during the start of COVID. So from our point of view, we can afford to wait another six to 12 months before we may make a move. Of course, if we find the right opportunity earlier, and we have a clear sign that what may be coming, we will consider it. some more change. But I don't see really us with the interest rate of dollar at 5%, like the margin of the banks another 2%, 7%. I don't see actual conditions for 20.7%. You know, it's too far away and the interest rate is too much. So we prefer to wait for later on. Now, we will be selectively sending out all the sheets, or sheets built over 15 years old, or around 15 years old, since we already have the replacement coming in. And we wait and see how the market develops. The interesting thing is, despite the trade market has been underperforming the first four months of, five months of this year, in the country. So, we have a see that prices are increasing. So, prices are increasing. So, either the market has to go up or prices will have to come down. So, there will be plenty of opportunity to gain one way or another. So, we don't need to make more moves at the moment simply because we are very well-placed. We have to wait a little bit to see if the market going to firm up this year or it's going to be next year. Our prices, if the market doesn't firm up in the second half of this year, maybe prices will correct. Second half prices will correct. So we'll be in the investment opportunity. We'll come to invest in existing modern ships under seven, eight years range. So we have to be a little bit, you know, take our time and see how things move.

Yeah, actually, that was just going to be a follow-up on that topic.

At the same time, if I may add, at the same time, we have seen that our NAV is trading at 50% of the value of the clip. If prices continue to go up and our NAV is topic, it's much healthier to invest shareholder money by part of our stock, which lately we have, as you have seen, we have stepped up a bit on that front. So this program may continue. We'll see how things develop. If we don't see appreciation of our share price, we will continue. And as the price is keeping building, we will continue investing in our shares.

That's it for me. Thank you.

Thank you. Thank you. At this time, there are no additional questions. I'll turn the floor back to management for closing remarks.

Okay. Thank you very much for attending this conference call for our first quarter of financial results. And we're looking forward to discussing again with you in the next quarter. Thank you to all.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.