Safe Bulkers, Inc.

Thank you for standing by, ladies and gentlemen, and welcome to the SafeVolkers conference call to discuss the second quarter 2023 financial results. Today, we have with us Mr. Polios Hanjianou, Chairman and Chief Executive Officer, Dr. Lucas Bamparas, President, and Mr. Constantinos Anamopoulos, Chief Financial Officer of the company. 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, please 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 expect, 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 in material 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 the operation 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 in 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 over to Dr. Bamparas. Please go ahead, sir.

Dr. Good morning. I'm Lucas Barbaris, President of SafeBuyCash. Welcome to our conference call and webcast to discuss the During the second quarter, the chartering market has weakened, which we believe is reflective of economic growth in the 70s. In this quarter, we took delivery of our first new build, while our revenues were supported by fast charter contracts. Our strong liquidity and comfortable leverage enabled us to be flexible with our capital and at the same time reward our shareholders. Our capital structure is conservative with significant cash and reward capacity. Our capex requirements are adequately covered by our contracted future revenues. Our balance sheet is strong. After reviewing the forward-looking statements language in slide 2, we will move to slide 3. There has been volatility in the cape market with capes at low levels. It's worth noting that all eight of our capes are period chatter with an average remaining chatter duration above two years at an average daily rate of $22,000, with a market currently at 14, actually today it's 15,000. On the Panamax side, the chatter market remains very weak. Moving on to slide four, we So multi-prices declined sharply over the past months, and according to the World We continue to witness the increase of interest rates, such as the one yesterday by a quarter of a percentage point by the Federal Reserve, as policymakers aim to fight global inflation, which is the result of the Russian war and the Chinese economic weakening. The July forecast of IMF raised marginally the expected growth for 2023 of global GDP to 3% from 2.8%. According to BITCO, the forecasted global drive-back demand growth stands at 2% increase in 2023 and the steep demand outlook remains positive at 2.3% for 2023. High inflation and recent financial sector turmoil exceeded soft-landing expectations of the world economy. The underlying growth inflation is projected to decline more gradually. In China, the IMF July projection growth for 2023 was stable at 5.2%, even though there are signs that the consumption-led recovery could slow. There are unresolved real estate problems with negative cross-border spillovers, as the Chinese economy seems to be losing steam, leading to weaker than expected demand. The inflation may be well below target and the central bank has cut interest rates. Nonetheless, continued weakness in the real estate sector is weighing on investment. Foreign demand remains weak and rising and elevated youth unemployment at 20.8% in May 2023 indicates future labor market weakness. India's emergence and expectations is reflected again internationally. The World Bank commodity price index declined by 2% as the World Bank July 23 projection forecast a 21% drop in commodities for the whole 2023. Let's move on to supply side as presented in slide 5. The total dry bulk order book stands at single digits. About 25% of the medium-sized cliff is older than 15 years old, as the effects of cliff aging and environmental regulations are expected to accelerate the scrapping. Japanese-built vessels like ours have more efficient designs. As we said, 80% of our fleet is We are one of the very few global companies with a Phase 3 order book ahead of our peers, signifying our intention to compete on the basis of operational and environmental performance. As seen in slide 6, the majority of global fleet is out of any phase. St. Marcus, home in today's 44 vessels, has 12 echo ships built after 2014, an order book of 12 Phase 3 new builds, seven of which will have been delivered by the end of 2023, and at the same time a major ongoing environmental upgrade program, increasing the energy efficiency of existing air fleets and thus reducing the CO2 emissions on our vessels. This program is also reflected in our increased OPEX as low friction preparation and performance by the end of 2023. Furthermore, we are raising from time to time biofuels and monitoring the development of alternative fuels. Concluding our market view in slide 7, during the first half of 2023, there has been an increased industry-wide volatility driven by geopolitical disruptions in tight monetary policies. Demand for technological efficiency creates opportunities Let me present in slide 8 certain of key characteristics which differentiate us from our peers. The key fundamentals are our strong alignment of interests with 4% management ownership, the comfortable leverage of 35%, the unbelievable and productive revenues, the creation of increasing values through our 12 Phase 3 new builds and the environmental upgrading of our existing case. We are already taking delivery of 4 Phase 3 new builds which are lower fuel consumption and environmental performance the following years. Lastly, concurrently with building the future of this company, we have considered being rewarding our shareholders with what we consider to be a meaningful dividend. Let's focus now on our liquidity, our cash flows and our capital structure as presented in slide 9. We are maintaining a comfortable level 433 million remains comparable to our fleet's cap value of 385 million, although our fleet is only 10.6 years old and will continue to be the same age in the next two years as we take delivery of new vessels in our fleet. Our weight average interest rate is slightly below 6% for We have paid 73.8 million for our capital expenditure requirements in relation to our order book of eight newbies, who have already paid this amount, and the remaining capital expenditure of 210 million in Africa. Our liquidity and capital resources stand strong at approximately 100 million, which together with the contract revenue of 232 million of allocation. Furthermore, we have additional borrowing capacity in relation to seven existing unencumbered vessels and four new builds upon their delivery. Let's move to slide 10, where we analyze the investment rationale for safe markets. We have concluded a share buyback program having repurchased about 10 million shares. We declared a dividend of 5 cents per share over the last seven consecutive orders, rewarding our shareholders while directing remaining cash flows to finance our new build new-build program that will provide us with a distinct commercial competitive advantage in terms of fuel consumption and environmental performance. The intention is to maintain a relatively comfortable leverage and a strong balance sheet. We believe that safe markets We believe that the same values with each outlook is among those companies that will navigate the environmental challenges of the energy transition under the aging dry fleet by utilizing the inherent qualities of our fleet and the efficiencies of our large-scale environmental upgrading program. Before passing the floor to our speakers, reporting guidelines and the Sustainability Accounting Standards Board, SASB, a recommendation for maritime transport alongside additional indicators that are materially important to us and our stakeholders. This report is available for download through our website and I would like to invite you to have a look on it because we are doing a very good job there and we are trying to improve our environmental and social governance footprint.

Konstantinos, the floor is yours. Thank you, Lucas, and good morning to everyone. As a general note, during the second quarter of 2023, we operated in a gradually weakening market environment compared to the same period in 2020. reduced due to lower hires, decreased earnings from scattered feed addresses, increased operating expenses and higher interest expenses due to increased interest rates. Slide 11 with our quarterly financial highlights for the second quarter of 2023 compared to the same period of 2022. Our adjusted EBITDA for the second quarter of this year is $233.3 million compared to $66.5 million for the same period last year. Our adjusted earnings per share for the second quarter of 23 was 12 cents, calculated in the weighted average number of 113 million shares, compared to 40 cents during the same period in 2022, calculated in the weighted average number of 122 million shares. In slide 12, we present our quarterly operational highlights for the second quarter of 23, compared to the same period of 2022. During the second quarter of 2023, we operated 44.01 vessels on average, earning an average time target equivalent of $17,271, compared to 41.04 vessels, earning an average time target equivalent of $25,050 during the same period of 2022. Concluding on slide 13, we present our break-even point The global economy is experiencing multiple challenges. Inflation higher than seen in several decades. Tightening financial conditions in most regions with interest rates being at historical highs. Ignatius invasion of Ukraine all weigh heavily on the market outlook. Based on financial performance, the company board of directors declared a 5% dividend per common share. We would like to highlight and emphasize that the company is maintaining a healthy cash position of about $96.7 million as of July 21st, and another $152.5 million in available RCF facilities and $80.7 million in unblown borrowing capacity. The combined liquidity and capital resources of $330 million provide us with significant Contracted revenue from a non-cancellable spot in a period of time chartered contract in total about $212 million net of commissions excluding scrapped revenue and we also have additional borrowing capacity on relation to seven debt-free existing vessels and four new builds upon their delivery. We believe that a strong liquidity and a comfortable leverage will enable us to be flexible with our capital Once again, let us remind that you may download our 2022 Sustainability Report from our website, which was just published. And now we are ready for the Q&A session.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, 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 would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, if you would like to ask a question, press star 1 on your telephone keypad. One moment please while we poll for questions. Thank you. Our first question comes from the line of Omar Nocta with Jefferies. Please proceed with your question.

Thank you. Hey, guys, good afternoon. Just have a couple of questions as a follow-up, just in relation to the liquidity that you were just highlighting. But just maybe first, on the share buyback, you've been very active for much of the past year buying back shares. You put it on pause for now, at least just based off of the way the press release was reading. I guess the reasoning is probably the softer freight market that's developed here in recent months, but just wanted to ask, you know, what drove the suspension of the buyback, and what are you looking for to give you confidence to restart it?

Good morning to you. As you have seen, the market the last quarter was not performing as per expectation. And we have many quarters in front of us to continue the buyback program. We emphasize our strategy now on the environmental improvement of our 10-year-old ships combined with the delivery of our new buildings as they come in the following couple of quarters. We have around five new buildings to get delivered in the next two quarters. So we decided to suspend it temporarily, but not withdraw it, to suspend it for the second quarter of the low-performing market. I think the market may start improving soon. And as soon as we see better freight rates, this program will be reinstated. I don't think that stock markets will react immediately on improving markets, but ourselves we can... revitalize this program earlier. It's more important, I consider, at this point, to continue the environmental investments, even if the market is low, because the regulations are changing very fast. No one is doing anything on this front from many competing owners. Very few owners are doing these investments. The order book is very low. Yards are increasing their prices. You have to remember that our 12... Ships order book, eight ships order book and four ships deliver were ordered in the low 30s, whilst yards in Japan are up in over 40 for Kamsomax now, still despite that last quarter the market not performing. S&P prices, which have dropped 20 percent, 700 ships, everyone is after to find more than ships. But they cannot find in the market. So there is heavy competition for ships around 15 years old at the moment. And any ship that's coming in the market, like Capeside Valkyrie, that they dropped their prices by 20% from the beginning of the year, you have 20 or more buyers competing for this simply because many, many... or other type of vessels make good money and still making good money in tankers and in the past years in container ships. And they are now investing heavily on bulkheads. So we will have the phenomenon that even if the market is slowing for this quarter or next, prices will not drop a lot. We are approaching the bottom of XMP prices. So the best thing we can do right now He's invested on environmental efficiency of our owners, which is giving us real returns and savings in fuel, because no one expects the fuel oil price of $600 per metric ton to come lower. Actually, the buyback program has been canceled for the time being, but this is a program that can be reinstated at any given point.

Thanks for that. Very helpful and detailed discussion on the market and also just on the buyback. Maybe just as a simple follow-up and getting maybe a little deeper into the weeds, not too much, but just want to make sure we have it correct. You outlined having plenty of liquidity. I think it was 300-plus you had just highlighted. In terms of the new buildings, you have eight that are due to and a half and then into 25. The total capex is expected at $210 million. What's the amount that you have secured right now in terms of financing and what do you expect to finalize ahead of deliveries of the remainder that's not financed?

Yes, the guys will give you the details, but we have cash, 88 million, as we said. We have RCF facility of 170-something. So only the cash on the RCF, so on the existing fleet. is enough to pay for that program without adding debt on the remaining eight ships. So we are in a comfortable position. We don't want to increase a lot our leverage from the current levels. But, of course, we will put some financing on these new ships. Remember that there are many owners, especially in Asia, that they have a preferential interest rate situation. situation that they can do the so-called sale and lease back without cabinets and without other things that they are eager to finance some of our new buildings. So we are very comfortable on this front. I think the most important is to engage in this program of upgrading the 10-year-old ships and be more competitive, because I sincerely believe that heavy consumption vessels in the environment of global warming and the environment of new regulations from EU and other regions are going to hit us very soon. people will get a big surprise of how fast things will be changing towards environmentally friendly vessels. So for the time being, most of the owners are pretending that this is not going to happen, but I'm sure that events that are unfolding in front of us, especially in USA, Canada, and Europe the last few weeks with the overheating of the Temperatures, you know, in Mediterranean, in southern countries, in Greece, we have 46, 47 degrees temperature, which we haven't had for the last, I don't know how many decades. So all these things we're pushing to faster implementation by European Union. And we have wildfires in Greece the last couple of weeks. So all these things will expedite what is happening now in Europe. And I think owners who are investing on all these things, ahead of the economic recovery that will come hopefully in the early part of next year when interest rates start easing off, If you have the proper ships in that market, I think you will make the biggest returns for your shareholders. This is our policy for the time being.

In the slide number 9, you can look, I mean, a good summary of what Polis has just mentioned just before. which is also gas and drone capacity is about 297. And also, we need to point out that contract revenues is 232. So, if we add them together, you can see that we have the flexibility. And we are in a good position to have low leverage, 35%, and be able to allocate it in the most advantageous way for the future of the company, which, as Paul said before, is the environmental adaptation, because things will change very quickly. But I believe if you have a look on page 9, I think all the numbers are there.

Yeah, thank you. No, that's helpful. Great. Well, I appreciate that. Nice to see the liquidity where it's at, and obviously you guys are one step ahead of the regulation. I'll turn it over. Thank you. Thank you.

As a reminder, if you would like to ask a question, press star 1 on your telephone keypad. One moment, please, while we re-poll for any additional questions. Thank you. It appears we have no further questions at this time. I would now like to turn the floor back over to management for closing comments.

Thank you very much for attending our conference call. I would like to emphasize once more on the new regulations, the QLEU and the EUETS, which oil has come and also the regulations that will be adopted gradually by IMO that will be implemented worldwide and which will change the environment and the environmental impact of the shipping industry. We would like to thank you all for attending our conference call and we're looking forward to discussing again with you in our next conference call

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.