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spk05: Thank you for standing by, ladies and gentlemen, and welcome to the SafeVolkers conference call on the first quarter 2024 financial results. We have with us Mr. Paulis Hagiwano, Chairman and Chief Executive Officer, Dr. Lucas Barberis, President, and Mr. Constantinos Andopoulos, 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, April 30, 2024. The archived webcast of this conference call will soon be made available on the SafeVolkers website at www.SafeVolkers.com. Many of the remarks today contain forward-looking statements based on current expectations. Actual results may differ materially from the results projected from those forward-looking statements. Additional information concerning factors that can cause the actual results to differ materially from those in the forward-looking statements is contained in the first quarter 2024 earnings release, which is also available on the SafeVolkers website, again, www.SafeVolkers.com. I would now like to turn a conference call to one of your speakers today, the president of the company, Dr. Lucas Barberis.
spk03: Please go ahead, sir. Good morning to all. I'm Lucas Barbaris, President of Shade Buckets. In the first quarter of 2024, we operated within a more robust market in comparison to the previous year. In alignment with our environmental, social, and governance strategy, we ordered one additional Phase 3 new build. Concurrently, we continue to process of modernizing our fleet by divesting three other vessels. Moreover, we executed the pre-purchase of 4.9 million shares of our common stock, while declaring a dividend of 5 cents per share of common stock. Our strategic focus persists on fostering enduring value for our shareholders and upholding a resilient capital structure. This commitment is further evidenced by our efforts towards a young and energy-efficient fleet, thereby securing operational excellence in anticipation of forthcoming strict environmental regulations. We ensure that our capital expenditure is adequately covered by our contracted future revenues, fortifying our balance towards a trajectory of sustainable growth. Subsequent to a comprehensive review of our forward-looking statements and language presented in slide 2, our attention transitions to the market update in slide 4. Noteworthy is the volatility experienced in the cave market segment. It is pertinent to highlight that all eight of our CAPEs are presently period charted, boosting on average a remaining charted duration of exceeding two years Average daily rate of approximately $24.4,000. This provides us with an appreciable degree of cash flow visibility, notwithstanding the prevailing daily market rate today of around $19.5,000. On the Panamax front, the market is at about $17.2,000. Progressing to slide five, we present an overview of CRB commodity indexes fluctuation in basic commodities future prices. The geopolitical landscape, with tensions in regions such as the Middle East, the Red Sea, and Ukraine, underscores the heightened level of global uncertainty. The global economic recovery is slow but steady. The dryback market is expected to remain strong in 2024, with a tightening supply and demand balance attributed to increased cargo volumes, particularly in the Cape size segment, driven by higher iron ore shipments from Brazil and China. Rerooting away from the Red Sea and Panama Canal has also bolstered demand in smaller segments. There is expectation of gradual control of inflation. Despite the delay in interest rate cuts, the expectation for global economic resilience remains strong. The IMF April forecast of 3.2% expansion in global GDP for both 2024 and 2025 is accompanied by control of inflationary pressures. According to BIMCO, the forecasted global dry bulk demand growth, standard 3%, increased for 2024. In China, the IMF April projection of GDP growth for 2024 stood at 4.6%. China faces challenges, of course, in growth dynamics driven by internal factors, while the resilience of India's robust domestic demand and sustained infrastructure investments emerges as a stabilizing force amidst the prevailing economic uncertainty. Let us now proceed to examine the supply-side dynamics in slide 6. The drive-by order book remains at single-digit percentages. Our outlook remains optimistic regarding the near-to-medium-term trajectory of the freight market, underscored by the low order book. Approximately 25% of the medium-sized fleet surpasses the 15-year mark, increasing the anticipated impact of fleet aging and certain environmental regulations. Vessels constructed in Japan have superior design efficiencies. 85% of our company's fleet comprises Japanese-built vessels, surpassing the global average of 40%. The strategic advantage positions our fleet are favorable to compete within the environmental-based charter market. As one of the few drivable companies with a substantial Phase III order book, strategically positioned below prevailing market valuations, underscore our commitment to compete on the basis of operational environmental excellence. Fleets comprising our efficient Japanese vessels and vessels delivered post-2014 will be able to remain relevant and compete within the season regulatory frameworks and greenhouse gas targets. Another group of our recent developments is presented in slide 8. These include the declaration of $0.05 dividend per common share, divestment of three older vessels, the delivery of two Phase III units, alongside the initiation of orders for two additional Phase III vessels. In slide 9, we present a key attributes such as our robust management ownership alignment, comfortable leverage, ample liquidity, contracted revenues, a steady track record, and the quality and competitiveness of our fleet, strategically positioned to leverage on the regulatory landscape, remaining true in our commitment to expand by building a resilient company and reward our shareholders. Moving to slide 10, we present an insight into the advantage of our green fleet. The breakdown presented in the top right graph underscores the environmental credentials of our fleet, comprising today 46 vessels, with 20 vessels having undergone environmental upgrades, 9 being Phase III and 11 being ECO, and the remaining 6 scheduled to be upgraded within this year. The bottom graph represents our fleet renewal strategy, with a divestment of 12 older vessels, acquisition of seven second-hand vessels, a steadfast ordering comprising of seven plus one phase renewables, resulting to a stable 10-year average fleet age over the past four years, as confirmed by slide 11. This trajectory of fleet expansion serves as a technique to our commitment towards sustainability. I now pass the floor to our CEO, Focus Adinos. Ramopoulos for our quarterly financial overview.
spk01: Thank you, Lucas, and good morning to everyone. As a general note, during the first quarter of 2024, we operated in a stronger charter market environment compared to the same period in 2023, with increased revenues due to higher Let us focus now on our liquidity, our cash flows, and our capital structure, as presented in slide 13. We are maintaining a comfortable leverage of 34%. Our debt of $534 million remains comparable to our fleet's value of $338 million, although our fleet is about 10 years old. Our weighted average in the States with a portion of €100 million being fixed at 2.95% coupon in an unsecured five-year bond. We have paid €79 million of our capital expenditure requirement in relation to our existing order book, and the remaining capital expenditure at €201 million. Our liquidity and capital resources stand strong at approximately $215 million, which together with the contracted revenue $76 million provides flexibility to our management in capital allocation. Furthermore, we have additional boarding capacity in relation to seven existing unencumbered vessels and eight new builds upon their delivery. Moving on to slide 14. Our adjusted EBITDA for the first quarter of this year stood at $46.8 million, compared to $33.1 million for the same period in 2023. Our adjusted earnings per share for the first quarter of 2024 was 20 cents, calculated on a weighted average number of 100.4 million shares, compared to 10 cents during the same period in 2023, calculated on a weighted average number of 118.4 million shares. In slide 15, we present our quarterly operational highlights for the first quarter of 2024 in comparison to the same period of 2023. During the first quarter of this year, we operated 47.08 vessels on average, earning a TCE of on average of $18,158, compared to 43.3% earning on average of $18,760 during the same period in 2023. The company's net income for the first quarter of 2024 was $25.3 million, compared to net income of $19.3 million during the same period in 2023. Concluding in slide 16, we present a list of our phase 3 vessels already in our fleet. The global economy is experiencing multiple challenges. Persistent inflation, tight financial conditions, Russian invasion in Ukraine, Middle East crisis all weigh on the market output. Based on financial performance, the company's board of directors declared a 5 cent dividend per common share. We'd like to emphasize that the company is maintaining a healthy cash position of about $82 million as of April 19, 2024. Another $164 million available in the volume credit facilities. Overall, a combined liquidity and capital resources of $246 million. Furthermore, we have contracted non-fasciable spot and period time charter contracts of $274 million. net of commissions, and before scrubbed revenue, as well as additional foreign capacity in relation to seven unencumbered existing ships and eight new builds upon their delivery. We believe our strong liquidity and our comfortable leverage will enable us to expand further and treat while still rewarding our shareholders. This concludes our presentation. We are now ready for the Q&A session.
spk05: Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. 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 key. Our first question comes from the line of Omar Nafta with Jefferies. Please proceed with your question.
spk04: Hi, guys. Thank you. Good afternoon. A couple questions for me. Maybe just first off, perhaps on charter market. Notice you fixed the Maria for four to five years at just under $26,000. You know, that ship, say, looks like a standard Cape, 10 years old. The rate's pretty high relative to, you know, clearly market averages in recent years, and also even just forward assessments, whether it's the FFAs or the one-year, three-year, five-year charter market assessments. Is there something specific on the charter or is there anything specific on the ship that gives us this type of premium or is this simply the going rate now for a four to five year contract?
spk02: Yes, this vessel was with a specific charter on index link. And as the market was rising in Q1, the charter wanted to change it into long-term period charter of fixed rate. So the company took advantage of that requirement and converted this to four-year charter, which, as you said, is above the current. created with various fixtures that have improved recently their consumption. So we managed to achieve for four years, minimum four years, of 25,950 per day, which is a very healthy rate. And the company locked in at that time. Also at the same time, we had another vessel, 2012 build, which we fixed forward for delivery in September of this year for 18 to 24 months at $26,000 a day, which is also a very healthy rate given that the fixture is this spot of opportunity and we had the right vessels at the right time available and we managed to secure these long charters which usually typically are available in hot markets of Cape size vessels.
spk04: Yeah, and obviously the market's eased a bit. It's still obviously very solid, generally speaking. How would you characterize the liquidity now in the term market? Would you be able to repeat that type of duration, you know, going out 12 to 18 months or four years? Could you do that? Obviously the rate may have come down, but is there enough liquidity still to be able to secure that type of visibility?
spk02: Look, these sort of charters come at spots when you have a very hot spot market. So if the spot market is $40,000 or going even higher than $40,000, charters can book contracts, can cover in the futures market their exposure. such deals are available so long you have the right vessel available at the right moment most of our cave size almost all of them they are on period charges you know some of them they expire in 25 some in 26 but in the hot market let's assume we have a hot market in the in the second half of the year could be opportunity once other wants to extend one year ahead of time one of the other vessels and could switch an existing charter into something longer and bigger. So all these scenarios, you know, we are very hands-on on what is going on in the freight market as we are working in-house all our chartering activities. And when the opportunity arises, we try to take the advantage of such requirements. On the Kamsa Max vessels, of course, the charter durations are much shorter, because the forward curve is not moving usually that fast, as with the cave-sized rates. And on those ones, the charters are more like one year or one-and-a-half year duration.
spk04: Just wanted to ask what you're thinking in terms of the buyback going forward. You bought a good amount of stock, obviously, under the $5 million share authorization from late last year. You did cancel it just before finishing the full $5 million. You effectively got close to it, but you didn't do all of it. But you went ahead and terminated it. Just wanted to get a sense, any reason why you canceled it with a little bit left to go? Any thoughts on a new one? And then also, is it just simply the stock performance being so strong as why you backed off from the buyback recently?
spk03: About capital allocation, as you are aware, we push our earnings from operations towards new investments because it's in the following years because the new regulations will create substantial problems to ships that cannot perform. We don't want to over-leverage the cavalry, so I want to point out that the leverage today in this quarter was 34%. In terms of the buyback program, the buyback program almost but we all believe in the company that the price of our stock, repeating it's our belief, is quite low compared to the asset values. So from time to time we may take the advantage of the opportunity to initiate an additional buyback program, although this has not been yet decided. And the other point is that at the same time we reward our shareholders with a steady dividend until now, 5 cents per share, which is also, I think, reasonable on the basis also of the capital... because we expect that the price of our stock, the increasing price of our stock, will increase as the new regulations will come and play a major role in the charter market.
spk04: Thank you. That makes sense. Appreciate it. That's it for me. Thank you.
spk05: Our next question comes from the line of Clement Mullins with Value Investors Edge.
spk00: Please proceed with your questions. Good afternoon. Thank you for taking my questions. Following up on Omar's question on the repurchases, could you provide some commentary on the average price paid per share and on the amount that was spent post-quarter end?
spk03: Yes. We don't declare the exact prices, but what we can say is that we have almost exhausted the the existing buy-back program. And any decision in the future will depend on the capital allocation that we think is better. So we can, for example, I could say that we moved towards an acquisition of a new commercial, as you are aware. So this played an important role. So we are targeting also the... market. And of course, I think we believe that our price is quite low compared to the net asset value of our fleet.
spk02: Of course, if I may add, you may see the last quarter, the stock price So you have a low part, a low price on the bottom part and then the upper part. So it was in that range, the purchases was in the market range. What I may add more, what's happening right now in the market, and it's the most important thing to take note of. first quarter of this year with a strong freight market, and we see this on all type of vessels, on all the spectrum, from Ultramax, Kamsa Max, KHIs, all of second-hand price vessels are rising by $3 and $4 million the last quarter or so. And the company is also using some of its older ships, as you have noticed, as cash on those older ships to finance new acquisitions, namely on new technology Phase III, IMO Phase III vessels. On the other hand, we have to say that the opportunity for fleet renewal quoting births in second half of 27 or even first half of 28. So the opportunities are becoming less and fewer and fewer. So you may find the odd birth if you have good relations with yards in Japan, the odd birth every now and then, and this is the opportunity one should not be losing when such an to take advantage and book the birth. That's why we need liquidity, not only for share repurchase, but also to take advantage of those opportunities when they arise. And I don't think in the next six to nine months something will change. To the contrary, we believe that we are entering into a tighter market. We know that the latest data from Suez Canal is that... lower now than they were in the end of November when the crisis strikes on merchant shipping by the Yemen rebels is continuing. So we don't expect this to change anytime soon, which will add fuel to the present trade market. So the company must be ready to make use of its liquidity, not only on share retention, but on other opportunities as they arise before all these opportunities are gone. Because we cannot order a new build for 2028 delivery, you can understand, it's four years forward, it's too far away, and the cost of pre-delivery installments is very high. So when the opportunity arrives for early births, we should be able to move quickly.
spk00: Thanks for the color. I also wanted to ask about operating expenses, which increased quarter over quarter, although from a very low starting point. Could you provide some commentary on the forecasts you have for operating expenses for the remainder of the year? Usually the operating expenses that we see
spk03: In the first quarter, a little bit more, a little bit increased. And the reason is that because there are substantial supplies of stairs that will be used for the dry dockings. And so you may see, if you compare the last quarter of the year and the first quarter of this year, you will see that it's a substantial increase. However, we don't expect annually to have a substantially different figure.
spk00: Makes sense. That's all from me. Thank you for taking my questions, and congratulations for the quarter. Thank you.
spk05: If there are no further questions in the queue, I'd like to hand the call back to management for closing remarks.
spk03: Thank you very much for attending this quarter, our quarter results webcast, and we're looking forward to discussing again with you in the next quarter.
spk05: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.
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