Safe Bulkers, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the SafeBulkers conference call on the third quarter 2024 financial results. We have with us Mr. Paulus Hajiano, Chairman and Chief Executive Officer, Dr. Lucas Bamparas, President, and Mr. Constantinos Adamopoulos, 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. The archived webcast of the 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 actual results differ materially from those in the forward-looking statements is contained in the third quarter 2024 earnings release, which is available on the SafeVolkers website, again, at www.safevolkers.com. I would now like to turn the conference call over to one of your speakers today, the chairman and CEO of the company, Mr. Paulish Pagiano. Please go ahead, sir.

Okay, I will do a presentation. Good morning to all. I am Lucas Barbaris, President of SafeValues. We had a good quarter compared to the same quarter last year. However, the chapter market is gradually softening, allowing with continuing geopolitical uncertainties. We remain focused on capital allocation towards our new builds program, on improving our operational efficiency, and on rewarding our stockholders with a dividend of $0.05 per share of common stock. Following a comprehensive review of the forward-looking statements, which is presented in slide number two, let us begin with a market update in slide number four. The CAPE market segment has been volatile throughout the quarter. All eight of our CAPEs are presently period charted, boosting an average remaining charted duration of 2.6 years, with an average daily rate of $23,600. This provides us with a considerable degree of cash flow visibility, topping $175 million in contracted revenue backlog from CAPES alone. On the Panamax front, the chatter market stands soft at low $10,000. Moving on to slide 5, we present an overview of a CRB commodity index fluctuation in basic commodity prices. Global disinflation continues, raising the prospects of further easing of interest rates, but with a decreased rate leading to higher for longer interest rates in the context of policy uncertainty. The geopolitical landscape, with continuing tensions in the Middle East, the Red Sea and Ukraine, underscores the heightened level of global uncertainty, which leads to softer global GDP growth. expectations for 2025 and 2026, as reflected in the IMF October forecast, for a growth of about 3.2 to 3.3% in the coming years, accompanied by control of inflationary pressures. The drive-by-demand outlook indicates slowing growth with significant uncertainty. According to BIMCO, the forecasted global dry bulk demand growth will have a 1% fall in 2025. China's slower growth may hinder demand for dry bulk commodities like iron ore and coal, while the impact of the recently introduced $1.4 trillion package over five years for the so-called local government's hidden debt is expected to alleviate pressure on local authorities and free up funds for supporting economic growth and sustains many investors' expectations for more direct fiscal support next year. Iron ore shipments are estimated to grow slightly, but weak Chinese demand and increased recycled steel usage are anticipated to restrict growth. Coal shipments may drop by about 3.5% due to rising renewable energy use in Asia and increased coal production in China and India. Grain shipments are predicted to rise by 1.5%, but maize supply remains tight, particularly from Ukraine. Miner bulk shipments and crude bauxite are expected to be a key growth driver as demand increases due to the energy transition. Freight rates are likely to be softer, particularly for Panamax vessels, due to the supply-demand imbalance expected from growing flip sizes and moderating demand. Chinese economy faces challenges from weak domestic demand and real estate sector crisis impacting growth rates. The IMF projects China's GDP growth to be 4.5 in 2025 and 4.1 in 2026, signaling a gradual slowdown. The limited consumer spending and high debt levels are hampering economic recovery despite the recent fiscal stimulus measures. The weakness in the steel and construction sectors is expected to reduce demand for key commodities such as iron ore. Trade barriers and external pressures could further limit China's growth potential with risks of deflation affecting domestic stability. India, on the other hand, is projected to experience the fastest growth among major economies, with a forecast of 6.5% GDP increase in 2025 and 2026. India's expanding domestic market and manufacturing sector contribute positively to the driveback demand, with infrastructure investments playing a vital role. Increased renewable energy and industrial growth will be key drivers for India's economic momentum. The agricultural productivity and favorable monsoon conditions could stabilize inflation and support growth, enhancing its food security. Let's proceed now in slide 6 to examine supply-side dynamics. A combination of increased recycling and stable delivery rates is expected to balance the fleet expansions, yet supply growth may continue to outpace demand. Accepting pressure on freight rails, the dry bulk fleet is projected to grow by about 3% on average in 2025 and 2026 due to stable new deliveries and increased recycling with Panamax vessels comprising the largest share. Recycling volumes are anticipated to rise as weaker market conditions could prompt the retirement of older vessels. New building orders have slowed as the order book now stands at about 10% of the current fleet. Supply could be marginally impacted by congestion reductions, as seen in Brazilian port congestion in 2024 due to smaller grain harvests. Asset prices, which rose in 2024, are projected to weaken over the next two years, and second-hand sheets prices may fall in line with expected lower freight rates. Chinese shipyards are expanding, but unless bulk contracting increases, new building prices are unlikely to rise significantly. Currently, about 25% of the existing global fleet is older than 15 years. Safe Bulkers Fleet now counts 11 Phase III vessels on the water, all delivered after 2022. In addition, 23 vessels have been environmentally upgraded, and 11 are eco vessels having superior design efficiencies. 80% of our fleet comprises of Japanese-built vessels, surpassing the global average of 40%, with our average fleet age being just 9.8 years. Overall, our fleet today is fundamentally upgraded and commercially more competitive than two years ago, underscoring our commitment to sustainable business. We will continue to become even more commercially competitive as we have on our order book, seven more phase three vessels placed at prices well below the prevailing market to be delivered to us within the next two years. The impact of fleet aging and region environmental regulations will position our fleet favorably to complete within the season greenhouse dust targets. Let's go now to slide eight. For our company update, we present an overview of our green fleet advantages. The fleet breakdown is presented in the top right graph, comprising of 46 vessels, with 23 having undergone environmental upgrades, 11 being phase 3, 11 being echo, and the remaining ones scheduled to be upgraded within this year. The bottom graph presents our fleet renewal strategy with the divestment of 14 older vessels, acquisition of seven second-hand vessels, delivery of 11 Phase III new builds, and an order book comprising of seven more Phase III new builds, resulting to a stable 10-year average fleet age over the past four years, as clearly presented in slide number 9, a trajectory of fleet expansion serving as a testament to our commitment towards sustainability. In slide 10, we present a bulkish debt profile for the next couple of years, which stands at very comfortable level throughout the period with adequate room for our capex spending and shareholders rewarding. As of September 30, 2024, our consolidated debt before deferred financing costs are of about 500 million, including the 100 million euro unsecured bond at 295 fixed coupon, maturing in February 2027. Our consolidated leverage stands at a comfortable 32%, and our net debt per vessel stood just below 9 million for an average age fleet of less than 10 years old. Concluding the company update, in slide 11, we present the key attributes such as our sterling 65-year track record, robust management ownership alignment, comfortable leverage of 32%, ample liquidity of 295 million, Our significant contracted backlog of $233 million, our green fleet advantage evidenced by a 7.4% decrease in fleet IR of greenhouse gas emissions and by our dry BMS standards managed system implementation in addition to forthcoming environmental regulations. We remain true in our commitment to expand by building a resilient company, owing a quality and competitive fleet strategically positioned to leverage on the regulatory landscape and reward our shareholders with a meaningful dividend payout ratio. I now pass the floor to our CFO, Konstantinos Adamopoulos, for our quarterly financial overview. Konstantinos, the floor is yours.

Thank you, Lucas, and good morning to all of you. General note, during the third quarter of 2024, we operated in a stronger charter market environment compared to the same period in 2023, with increased revenues due to higher charter hires, increased earnings from scrubbed and heated vessels and higher interest expenses due to increased interest rate environment. Let's now focus on our liquidity, our cash flows and our capital structure as presented in slide 13. We are maintaining a comfortable leverage of 32%. Our debt of $499 million It remains comparable to our fleet's scrap value of $330 million, although our fleet is young at just 9.9 years old. Our weighted average interest rate stood at 6.35%, inclusive of margin for our consolidated debt, with a portion of $100 million in euros fixed at 2.95% coupon for the unsecured five-year bonds. We have already paid $94.6 million, or 29% of our commitments for our CAPEX in relation to our outstanding order book. Our liquidity and capital resources stand strong at approximately $318 million, which together with the contracted revenue of about $250 million gives a total of almost $570 million. This is more than double our outstanding CAPEX of $232 million. and this provides flexibility to our management in capital allocation. Furthermore, we have additional boiling capacity in relation to two existing unencumbered vessels and seven new builds upon their delivery. We ensure that the capital expenditure is adequately covered by our contracted future revenues, fortifying our balance sheet towards a trajectory of sustainable growth. Moving to slide 14, with our quarterly financial highlights, for the fourth quarter of 2024 in comparison to the same period of last year. Our adjusted EBITDA for the third quarter of 2024 stood at $41.3 million. This compares to $30.9 million for the same period in 2023. Our adjusted EPS for the third quarter of 2024 was 16 cents. and this is calculated on a weighted average number of 106.8 million shares. In comparison to 8 cents during the same period in 2023, that was calculated on a weighted average number of 111.6 million shares. In slide 15, we present an overview of our quarterly operational highlights for the third quarter of 2024, again in comparison to the same period of 2023. During the third quarter of 2024, we operated 45.27 vessels on average, those earning an average TCE of $17,108, compared to 44.13 vessels earning an average TCE of $14,861. The company's net income for the third quarter of 2024 was $25.1 million, compared to net income of $15 million during the same period in 2023. In conclusion to our presentation, we would like to point out that based on our financial performance, the company's Board of Directors has declared a $0.05 dividend per common share. We would like to emphasize that the company is maintaining a healthy cash position of about $90 million as of November 1, 2024, Another $205 million in committed and available revolving crane facilities. Thus, a combined liquidity of $295 million. Furthermore, we have contracted revenue for our non-cancellable sport and period time charter contracts of $232 million. This is net of commissions and before scalable revenue and additional borrowing capacity in relation to our two unencumbered vessels, and seven new builds. We believe our strong liquidity and our comfortable leverage will enable us to expand the fleet while still rewarding our shareholders. We are now ready for the Q&A section.

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. One moment please while we poll for questions. Thank you. Our first question comes from the line of Emily Harkins with Jefferies. Please proceed with your question.

Hi, this is Emily on for Omar. Thank you for taking our question. First, you outlined that consolidated leverage is 32% at the end of the quarter. We wanted to know, are you comfortable at this level? Are you striving to lower your debt? Is the goal to be debt-free? Why or why not?

Could you please speak a little bit slower because the sound is not very clear?

Yeah, of course. I wanted to ask, you outlined that consolidated leverage is 32% at the end of the quarter. And we wanted to know, are you comfortable at this level? Are you striving to lower your debt? And is the goal to be debt-free?

Yes, good morning to you. No, this is a very comfortable level. We don't plan to reduce it much further. You know, we take new building deliveries in the next three years. So this ratio, anything below 40%, is good enough. Even if it raises to 45 or 50% in later years, it's still a very comfortable ratio given the age of the fleet.

Thank you. And as a follow-up, Panamax spot rates have lagged in comparison to other dry bulk classes, such as the capes and supermaxes. Could you please provide some color as to why there might be a discrepancy there?

Look, the company owns Panamaxis and Kamsamaxis, Post Panamaxis and CAIS. So basically on the medium to large dry bulk assets. And we don't own any Ultramaxis or any Handis. You know, there is not one category that you can decide to expand on. It's up opportunistic if you will expand, the company will expand in Kamsar Max or Capes in future. It remains to be seen according to opportunities that appear. Cape size vessels are not that many and their market is even in periods of low market they have been doing well in recent years because of demand from China. And, of course, in the future, if there's opportunity to expand in that sector of the market, we will do so. But we need to see lower prices to do that.

Thank you. I'll turn it over. 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.

Okay. Thank you for just a quick remark also in terms of how comfortable we feel with the 32 percent consolidated leverage. I mean, you can see slide 13, the leverage in comparison with the scrap value of the vessels when they are 25 years old. You understand that we feel extremely comfortable because we're just about less than $200 million from that price. Now, thank you for attending this conference call, and we're looking forward to discuss again with you in our next quarter for the next quarter and year-end financial results. Thank you very much.

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.