d'Amico International Shipping S.A.

Good afternoon. This is the CORFCO conference operator. Welcome and thank you for joining the D'Amico International Shipping first quarter 2020 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Paolo D'Amico, CEO of D'Amico International Shipping. Please go ahead, sir.

Hello to everybody. Good afternoon. Thank you for being with us. Let's go straight to the executive summary. Net result, DAS posted a profit of $1.5 million on Q1 of 2020 versus a loss of $5.5 last year. As an adjusted net result, so excluding non-recurring and non-cash items from both periods, the today result for Q1 2020 is $6.3 million against $4.4 of last year. Therefore, excluding such non-recurring effect, this result on Q1 2020 would have been $10.7 million higher than the same quarter of last year. And I would like to remember that this represents for DIS the second consecutive profitable quarter. On time charter equivalent, DIS daily spot rate was 17,354. in Q1 2020 against $13,583 in Q1 2019. This is equivalent of a 27.8%, or if you prefer, $3,700 improvement one year over the other one. If we blend it with the coverage of the time charter contracts, This achieved a total daily average rate of $16,391 in Q1-20 against $14,057 in Q1-19. On leverage reduction, the net financial position, excluding IFRS-16 to fleet market value ratio, was 63.3% at the end of March 2020, versus 64% at the end of 2019, and compared to 72.9% at the end of 2018. As far as the market, at the beginning of the year, the general outlook was rather positive, as we All expected. I mean, we had strong fundamentals with the implementation of IMO 2020. We had a very limited supply growth. And so we had the sanction element, which was still on. The scrubber installation, keeping ship in shipyards. So all this was providing a very good support to the market. But unfortunately, coronavirus, as you prefer, started in China, and we had a very strong destruction, let's say, of demand and refining production in that who is still today the largest crude importing nation. So, the product tanker the rates suffered out of that. What really made change? The old scenario has been in early March, the struggle between, let's call it the war between Saudi Arabia and Russia on the price. And Saudi Arabia, as you know very well, flooded the market and put both crude oil and products in a very steep contangle, which has been pushing a lot of traders basically to heavily charter in ships for storage. And this, of course, clearly has been beneficial to the market. By the end of the second quarter, as much as 21% of the tanker fleet will be tied up in floating storage today. So this is just a few, say, starting shots. I leave the word now to Carlos for the financials and then I will be back on the market in a more detailed way.

Yes, hello to everyone. Good afternoon. So we start, as usual, with a quick look at our fleet, which hasn't changed that much from 31st of December. One last vessel, it was a PC in short term that we delivered to owners. We now have 45 and a half vessels, of which just over 50% own. And we are an MR player, 32.5 MRs, with an almost equal number of LL1s and HENDIs, so six LL1s and seven HENDIs controlled. As you all know well, we have implemented an important new building program. We started ordering vessels in 2012 and started taking delivery in 2014 for 22 new buildings, of which 10 MRs and 6 LL1s. This program has terminated when we move on to the following page. We see here that we invested overall $755 million in direct payments to yards, plus new building supervision costs, cost of first supply, extras. The overall investment figure was actually much higher than that to take delivery of these 22 new buildings. And from 2020, we are much lighter in terms of CapEx commitments. We have another 10 million this year only related to maintenance of vessels, in particular dry docks and installation of water ballast tank systems. And this figure drops further in 2021 and 22 to around $4 million each year. We are not only lighter in terms of CAPEX, we are also lighter in terms of depth repayments. We finished reimbursing this facility we had within TESA, which was in addition to the traditional bank financing, and which started off at $75 million. We finished reimbursing it in December last year. And therefore, from 2020, our repayments on our loans, excluding balloons, falls from $52.5 million to $35.5 million. We have some balloons to refinance in 2020. They are around $22 million and they are linked to the vessels we own in JV with Glencore to Glenda International Shipping. And so we are working on that. One balloon has to be refinanced in September and three in December. Next year, we also have some refinancing commitments on balloons, on facilities which mature in the beginning of the year. And we will also soon be starting to look at that with $21 million to be refinanced next year. So it's not a big number this year or next year. 2022 is more important in terms of refinancing for us. Going on to the following page, our purchase options, we have now, out of the nine, say, in these five years that we closed, six are already exercisable by May this year, so now, and all of them are in the money or theoretically in the money. So this is a situation we are closely monitoring because this could be a potential use of funds for us to leverage our balance sheet to reap and lower costs of financing at the right moment. So depending also, of course, on the market developments and on the cash generation over the course of the next few months. Going on to the next page, we see that our coverage, we have a closer look at our coverage, and on a quarterly basis, we see how we actually have been quite covered in Q1 this year at 65%, at an average of around 59%. Coverage falls throughout the year, but we are still quite covered also in Q2. at an average rate of around 16.2. And for Q3, we are just over 50% covered at an average rate of 16.4. And then that drops further to 42% at an average rate of 16.6 in Q4 2020. But I think we are quite happy with this coverage, although the market is extremely strong right now, as you will see later in the presentation. There is also a lot of uncertainty regarding how long these very strong markets can last. And so if we were to experience a softening, we will be able to rely on this coverage to to protect our cash flow. Also a positive is that the percentage of ecovessels in our fleet increases over the next few years as we dispose of some of the vessels that we intend to sell and that we have classified as health for sale, some of our older vessels. Going on to the following page, we look at the fleet evolution. The fleet decreases slightly over the next few years as we deliver some of our shorter term PCN vessels and as we sell some of these older vessels that we already have declared we intend to sell. Our post-exposure nonetheless increases over the forecast period because as per previous slide, our coverage falls quite sharply in 2021 and in 2022. We know we have the sensitivity for every $1,000 per day change and $3,000 per day change to receive relevant earnings. For 2020, the $1,000 per day sensitivity is $5 million, which rises to around $10 million in 2021. A closer look at the costs, we have also worked on the costs, not only on the top line, and we achieved some savings last year relative to Q118 Q-120 is even lower than Q-119 in terms of daily operating costs for our own vessels. And they're both vessels on the GNA front. We also achieved some savings. The savings have been driven on the operating costs front, have been linked to technological development, the use of condition-based maintenance, which allows us to better assess when to replace spare parts, reducing downtime of hires but also increasing the average lifespan of spare parts. It has been linked also to the strong dollar since we also have, although most of our operating costs are in dollar, we do also have costs which are in other currencies. and therefore we have benefited in this respect from the stronger dollar. And even more so applies to the GNA where 75% of our costs are in currencies which are different from the U.S. dollar. So the strong U.S. dollar there definitely helped us as well as the reorganization of some of our activities which allowed us to obtain some savings. Of course, in Q1 2020, there are some additional savings which are linked to the COVID outbreak, which we didn't plan on, but it did affect, of course, our traveling and entertainment budgets with some significant savings in that respect. Going on to the next page. Net financial position to feed market value improved from 64% to 63%, so it's a marginal improvement since December 19, but if we look at the ratio at December 18, it was at around 73%, so we're talking about a 10% improvement in the ratio, and that is quite significant. It is the result of the stronger markets which helped us to generate cash in the last two quarters. It is the result of the increase in the vessel values and of course it is also the result of the capital increase that we pursued last year. Also important to note that we have now one vessel which is completely debt-free, the Cerro de Guanzú. We paid the balloon on this vessel in March, just at the end of the month, and now the vessel is completely debt-free. That's an older handy-sized vessel in our fleet, which is classified as health for sale. We also have another vessel in our feed, which is debt-free, and which we just announced the sale of, which is the Glenda Meredith, which we sold for around $19 million. And so the JV is on 50% by us, so generating around $9 million in cash for us. Going on to the following page. the financial results. Q1 2020, bottom line, $1.5 million, but excluding non-recurring items, it is $6.3 million, so that's a much better figure. There were a number of non-recurring items in Q1 2020. mostly linked to market-to-market of interest rate swaps, which are not deemed hedges, which had a negative effect of around $2 million in our results, but also asset impairments and results on disposal of assets, which had an impact of around another $2.2 million, and also the impact of IFRS 16, which was negative by around $0.4 million. Overall, if we look, therefore, at the non-recurring results of 2020 and 2019, we see an improvement of $10.7 million, which is quite significant, and also a very significant improvement in terms of EBITDA, which rose by 47% relative to the first quarter of last year, to $33 million. Going on to the following page, we have a closer look at the daily average results of our vessels, and we see that the spot PC equivalent rate was of 17.3, which is good, and by historical standards is in line more or less with the results we achieved in 2419. We had a quarter which was quite a lot of volatility within Q1. We had a very strong start to the quarter, but we also had some weakness around mid-February, and then rates recovered in the last part of the quarter as the Chinese economy started coming out from the coronavirus lockdown. And the big surge in rates that we have seen has actually occurred only in April. So that didn't impact the Q1 results. Also important to note that the Q1 result was impacted by a non-recurring adjustment of 0.9 million. related to voyages performed last year. So if we exclude that and we look only at the results of the voyages performed this year, we are closer to 18,000 because it had an impact of $600 per day on the spot voyages. Overall, the blended results, including the DC coverage, had an average rate of around 59, was of around 16,400. which is also a good result and higher than Q419. I leave it to Paolo now for the market section.

Thank you, Carlos. So if we look at asset value and if we start from as we did in all our presentations from where the bottom was in October 2016, we can see that the values have been recovering quite a lot, both for a five-year-old MR, they recovered plus 36%, and for a 10-year-old MR, plus 23%. And time charter rates also improved, and we are currently 66% higher than The impact of COVID-19 on our market, which has been on one side, of course, the demand destruction because everybody has been locked down and 50% of the world population has been closing at home. But in the meantime, a series of factors happened. As we said before, and as you know very well, we had this struggle between Saudis and Russians, which flooded basically the market with crude. And due to the stress that all this in the market created, which is basically end up on storage at the end of the day, A lot of clean chips, and I'm talking about LR2s mostly, switched from clean to dirty, tightening up more the clean fleet. So this was the first positive thing. The second positive thing has been that the price of Banker went down. It went extremely down. and the spread between the high sulfur and the low sulfur went so narrow that I think a lot of people are postponing their investments in scrubbers or even canceling them altogether. It started also new sort of trades because NASDAQ became extremely competitive against ETA and LPG And you know that NAFTA is a competitive RPG as a feedstock for the petrochemical industry. And so it increased the demand of NAFTA on longer distance from the Middle East or Europe to Asia and even out of the United States. And last but not least, of course, what we will say is the increase of the floating storage and a series of non-efficiencies like quarantines. I mean, if a ship was arriving in the port where quarantine is required and the ballast to that port was shorter than 14 days, the ship had to wait outside the port to consume the remaining days up to 14 days before entering. And this is something which especially in the MED, where you have very short trips, was happening all the time. As a matter of fact, the clean trade in the MED and the fewer trade in the MED has been extremely strong. Now, despite the fact that we had this big fall in refining volumes because Of course, refineries start cutting down runs when they solve this situation. But the storage element has been so strong that it's been offsetting these limitations on refining throughputs. And it's been strong enough to support the market and overtake the smaller supply. So it's clearly a situation where we have a big floating storage. We are living, let's face it, I mean, we are living this paradox of a weak final demand, a rather now more controlled supply, and a stronger demand on ships. And all this is due to one element, which is storage in between. So it's clearly up to this situation will continue. We are going to have a certain type of positive, let's say, market. How long is going to be? This has to be seen. We have this first cut now with May of 9.5, 9.5 million barrels per day. which are coming in force. But clearly the portando is getting narrower and less attractive. But in the meantime, we are still producing more than what we are consuming or storing. So the oil somewhere has to go. page 22 it was our let's say um page 32 it was uh our let's say historical slide because that was this before let's say the pandemic because the pandemic clearly changed the whole thing what we can say is still today that the refined product participation to the oil trade, oil move, actually is still very high. It's 34%, so it's more than one-third of the oil moved around. On long term, we have a potential upside on asset values because we are still very low against what either in terms of temperature rates and even in terms of five-year-old and 10-year-old vessels value against the peak, against the last peak. And then on page 24 here I think is a key point because we have this growth in refining capacity. This growth in refining capacity which has been only in 2019 of 2 million barrels per day. And we expect it's going to be 6 million barrels per day between 2020 and 2024. And this is going to be happening mostly in China and Middle East. So we are going to have this growth of refining plants which they will work and we will compete against the European and Russian plants which are more obsolete. So I think we are going to see a lot of changes in the refining world. And this is repeated basically in page 25. So certainly somebody, somewhere, but probably in Europe, has to shut down, and probably is going to happen quite soon. U.S. crude exports were the promising thing of the end of 2019. Of course, this price war put the the shale oil in distress because they cannot support this type of price. You know, in America, even if Trump said he was going to cut, he knew exactly that he was going to cut what was going to be bankrupt, basically. Because in America, the government cannot control the oil production, as in Saudi Arabia and Russia and so on and so forth. but are the producer of cell which are closing down wells because it doesn't make any more sense to produce. So the U.S. crude story for the future has to be written all together. Phase 37 is the fleet growth, and this is a very good element because There are some similarities between what happened in 2015 and 2016, if you remember, and today. In 2015, the Saudi again, they dropped the price of a barrel. Everybody's been running like hell to buy oil and to move it around. In 2016, we realized that we didn't consume that oil at all, so the whole thing collapsed. But added to that, and aggravating that, I would say, was that in 2016, the growth of MR and AR1 deliveries, so we are talking about our segment, was 4.8%. So 4.8% of new ships coming in. Today we are talking less of one percent. We are talking about 0.8. So this is a point of strength to which we still have to add slippage, which is obvious due to the total shutdown of the Chinese shipyard for at least six months. And also, not total shutdown, but big problems in the Koreans, because many Koreans are using blocks which are built in China, so the supply chain was disrupted. So here again, I say delays and scrapping can support the market, and will support the market, at least for the next two years. There are no new building orders, I mean, not exaggerating, new building orders in the pipeline. As far as I know, here is a Japanese ship and then there is a number of methanol carriers, which are product carriers, but they do not do exactly the same job that we do. And there is, let's say, owners are not so keen to run for new buildings, also for technological reasons, because Heimo has very strong ambition on reduction of CO2. And I would even say that due to the pandemic, it looks like in Heimo, the event won't be more severe in some way, if you can, in a way to take advantage of this fact. But do we like it or not? The air is cleaner today, but it's cleaner because nobody is driving, nobody is moving around, and nothing is happening. So, the tighter market is expected. We certainly think that the unwind of all this storage is going to be, let's call it an adverse situation. in my opinion is going to be by far less adverse on clean than on crude and I think we can expect still on 2030 a good year I leave it to Carlos for the last points of another evolution yes, hello again to everyone

Yes, we now will look at this last slide, the NAV evolution. So the positive aspects is that, you know, after bottoming the leaching trough in December 2016, the NAV started rising. Not necessarily the NAV per share, but the absolute number. We had capital increases in 2017 and 19, of course, which affected the per share figure. But the per share figure also started improving from June 19. And so the overall NAB is now at $320 million around, and on a per share basis, it is of $0.26 per share after reaching a drop of $0.23 per share in June 2019. So it has been slowly increasing, I would say, but nonetheless increasing. So our share price is currently at a very big discount to NAV. It was at a discount of 64%. On the 31st of March, for consistency purposes, since our NAV is measured on the 31st of March, we use the share price at the same base to measure the discounts as of today. This discount is still very significant, but slightly smaller, around 55%, which we feel is not justified by the market developments we are currently experiencing with the very strong spot market. by the forward coverage we have, which guarantees quite a lot of visibility on profitable cash flows in the future, and also by the general long-term fundamentals of the sector that we already mentioned, although there is quite a lot of uncertainty on the near term, and a correction could be on its way because of the overhang of stocks that is building up as we experienced from 2016 to early 2019. This time around this correction when it arrives is likely to be shorter because as Paolo previously mentioned the order book is extremely limited its historical laws and that was not the case in 2015. And so we already entered the last eight years with very positive prospects. We expected the market to be strong but for completely different reasons. and we believe those prospects remain intact. If anything, actually there have been many less vessels ordered than there would otherwise have been because of this virus and which further dented the appetite for new buildings. So as we demand recovers and we are likely to see these stocks going down quite fast and the adjustment not lasting too long, possibly. The following page, why investing in this, I would spare it to you. It's the same key points that we usually highlight, so nothing that much has changed. And so I thank you very much for your time, and yeah, pass it over to the Q&A session.

Excuse me. This is the Costco conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and one at this time. The first question is from Matteo Bonizzoni of Kepler. Please go ahead.

Thanks and good afternoon. I have some questions, quick questions. The first one is related to the pattern of the rates on the product tank. So we have seen a very strong April with spot rates rising. exceeding 70,000 per day. Now we are seeing some correction, but I think we are still at satisfactory level around 30,000. So if we have understood correctly, your framework is that there should be further strength in the next weeks and then a normalization as soon as the floating storage is over, basically, or is gradually down. So compared to 2015-16, I mean, what are the key differences? Should we expect in the second alpha rates to keep a relatively satisfactory level, or could we expect a steep correction from this level? This is the first question. The second one is on the seed coverage. So we have seen that on slide 18, you projected the one-year time charter is now close to 20,000 per day. So my question is the coverage for the Q2, Q4 is currently 63% and only 2021. I think that you have to increase .

Mattel, can you repeat the last part of your question? We couldn't understand. The line was not very clear.

Yeah, so the question is on the fleet coverage. You showed that the one-year time charter is close to 20,000 per day. The coverage for the second quarter to fourth quarter of the year is 53% for you, and 2021 is only 20%. So my question is, do you have the opportunity to to increase the level of coverage over the next month, given the satisfactory one-year time charter level. The third question is on the financial charges. So the financial charges in Q1 were quite high, $12.3 million. There were some extraordinary issues that penalized the financial charges. Ken, a little bit comment about that. and what is the level of interest charges which we should expect in the next quarter. Final question is in general related to the current crisis. Are you observing or do you expect a more limited availability of banks to finance your business?

Thanks.

I'll try to answer the first one and then I'll leave it to Carlos. As far as the rates, our coverage for 2020 is good enough to face, of course, a correction of the market. And I would like to say that we keep looking to increase such a coverage. moving it in 2021 so we are not only looking to increase the coverage for the remaining part of 2020 but increase also the 21 and maybe even not maybe on certain cases even the 22 because we are looking at a few medium-term deals so if these deals are coming in the scenario would be changed quite positively. I would say the time charter market itself, it didn't correct for the moment that much, so we are not losing elements because it was already, let's say, discounted against the spot rate. Let's assume that spot rate was paying you $35,000, $40,000 a day, the time charter was paying $20,000, $25,000. even if from 40 is coming down, from 25, 20 is staying there. And we are trying to take opportunity out of that in way, I repeat, to cover more the 2020 and increase the cover of 2021. How deep is going to be the correction due to the unwinding of the storage This is very difficult to say. I think also because clean products, they have a deterioration element, so they cannot stay on the ship forever. They have to be used against crude, which it can be sitting in a ship for years. I think the unwind of the storage for clean cargos, excluding diesel, which is not really the case, but most of the cases gasoline and jet fuel, will be as fast as possible. Because I repeat, you have a commodity problem, a commodity quality problem. So you cannot keep the stuff on your ship forever.

On the financial part, I believe it was mentioned already during the call that we had a number of non-recurring items. In particular, I mentioned that there were some interest rate swaps, the mark-to-market on some interest rate swaps which are not deemed hedges, effective hedges. which passed through our P&L and, of course, the movement in the forward curve of the U.S. dollar library had a big impact on this mark-to-market in this first quarter. And, therefore, we had a non-returning effect of around $2.3 million because of that. and otherwise our expenses for the recurring financial expenses for the first quarter would have been around $10 million. And that is the figure more or less which I expect going forward. Of course, you know, as we amortize that, the interest expenses fall, and also the U.S. dollar library came down during the quarter, so we are also expecting to benefit from that to a certain extent because our coverage through swaps is of around 75% of our indebtedness, so the rest is exposed to floating rates. So although we had this negative market to market, we actually met, we have a benefit from the reduction in the US dollar library going forward. And in terms of the financing, the availability of bank financing, it is true that generally banks' appetite for shipping has been falling. It has a lot to do with the greater attention by regulators to shipping exposure because of the big losses that some banks had on their portfolios during the last financial crisis in particular, and then that extended over the following years for some of these banks. There were, of course, some big excesses at the time. Vessels were being financed at crazy valuations and at very high LTVs and with very low margins. So it was a recipe for disaster. and a lot of, especially German banks, had very big losses in shipping. A lot of them exited shipping altogether, sold all their portfolios. Other banks in Northern Europe reduced, in any case, their portfolios quite significantly, and generally shipping exposures today are more penalized. And in addition, the leading banks that finance the sector recently signed these Poseidon Principles, which they commit to reduce the CO2 footprint of the vessels they finance. So they will be looking to finance younger tonnage and older tonnage will be penalized. And so these are all trends which we have seen. It is also true, however, that the situation is different in China. There is a very vibrant market there. The Chinese leasing houses, some of them are extremely big, have been moving into the sector and feeling part of this gap. And also there are banks in Japan which have been quite active. on a very selective basis. We are lucky to have good relationship in Japan, so we have benefited from this. Nonetheless, we also have very strong relationships with the European banks, so we believe we are amongst the fortunate ship owners that will be able to find bank financing still at attractive conditions. But there is, let's say, a two-tier market that developed and for the smaller, less structured owners, the more speculative owners, the financial owners, they will have to pay more for their bank debts. There are alternative funds which are financing the sector. There are some smaller banks which have moved in. but the margins they ask are significantly higher.

The next question is from Massimo Bonisoli of Equita. Please go ahead.

Good afternoon, Paolo and Carlos. I have three questions. The first, if you can give us an indication of the spot rates realized on average in April? And the second, how many of your vessels have been employed as a storage facility rather than transportation services over the past couple of months? And the third, what are the implications for your economics of the very recent route changes in the sense that Asian refiners are ramping up again their runs, whereas the route Europe to U.S.

for gasoline is clearly declining because of the drop in demand.

Yes, hello. In terms of our results for the second quarter on the spot ratios, We have an approximate idea based on the current fixtures. We already mentioned we have 62% of our total employment days for the quarter, which are on period contracts at the rate of 16.2%. And of the remaining spot days, we have 21%, so 55% of the total spot days available in Q2, which are at a rate of around 25,000 so far. So this is a very strong result, I would say. We have still around 50% or 45% of our spot days still to be fixed. The markets after peaking at very, very high levels have been softening a bit, but they're still at very strong rates, especially in the Middle East and Asia. So we expect that if they stay at these levels, we should be able to confirm at least these results for the full quarter. But there's a lot of uncertainty. There's a lot of volatility out there. In terms of vessels which are being used for floating storage, we have two currently, which have been charted with the option of using it as floating storage.

I can add a thing. There is also some not official storage. Let's put it this way. I mean, we fix the ship for a trip. This is happening to everybody. We arrive at this charge port. We enter in demarrage rates, and they keep us there for months. So at the end of the day, it is a month's storage, but it's not officially a storage, but it's on demarrage rate. And it is a storage, anyhow. So... There is an official one and a concrete one.

They are both very remunerative anyhow.

Regarding the implication on the change in the route?

If Europe is going to move, I think Certainly, the states will take care of South America as they did up to now. The game changer can be Europe in terms of refining capacity in Europe. I read a lot of articles where oil companies are rethinking their refining positions. As you know, to close the refinery in Europe is not an easy game, because there are many factors, from environmental to social and trade union facts. But certainly, let's face it, Europe is the loser here in the refining game, and let's say former Russia, former Soviet Union. So if that is going to happen, who is going to substitute them? That would be Middle East and China. And they said that China certainly started as an idea of producing for herself. And, of course, they exaggerated the capacity. And they started exporting to the close countries like Singapore, Indonesia, Philippines, and so on and so forth. And then they understood that they could start selling to the United States, even the United States, because the west coast of the United States is totally... insulated from the refining centers in the U.S. Gulf. So, in some cases, it's cheaper for California to buy out of Korea and China than to buy from Houston. And, of course, Europe is in the path. Because Europe, even with all these projects of decarbonization of cars and so on and so forth is the biggest diesel market in the world. It will still be the biggest diesel market for quite a long time, I think.

If I may ask another question regarding more on the strategy, given the increase in the value of the older vessels, Does it change anything on your strategy? You very recently divested the vessel with Glencore on JV. Do you expect more divestment going forward given the higher value of those vessels?

We are certainly sellers on our older ship. I can tell you we have also a lot of interest on them. The problem is that due to flight restrictions, they are impossible to be inspected and really to sell a ship today is a problem. Not only because she needs to be inspected by the buyer and the inspector cannot get there, but we even have to find, once we sell her, a place where we can deliver the ship to the buyer and change the crew, and changing the crew is a real disaster. For instance, we have many Indians, and we cannot change Indians in Singapore because India doesn't want any more people coming in from everywhere, including Indians. The only place where we can change our Indian people is in an Indian port itself. Otherwise, we should park them somewhere and wait to see what to do. And it's extremely aggravating, not too much for us, certainly, but certainly for them, because we have people who did already the time on board, and I have to say we have fantastic crew because they didn't create any problem, but they are really looking forward to go home and they cannot do it.

Very clear. Thank you.

The next question is from Daniele Aliberandi of Main First. Please go ahead.

Yes. Good afternoon, everybody. I have just one question, as the other two have been answered. Given the extraordinary dynamics we're seeing at the beginning of this year and lower oil prices likely increasing, to be here, to stay, and this gives you a benefit on rates. And also considering that you are in a strong leverage mode, I was wondering which would be the safe level of leverage that you could bring you to make some consideration on returns measured to shareholders. Or saying in other ways, I'm just wondering if you maybe can highlight your dividend policy that you have in place.

Thank you. Yeah, we are navigating, let's say, you know, looking at the weather on a day-to-day basis and deciding then what is the best course to take because, as mentioned several times in the call, there is a lot of volatility, a lot of uncertainty. Our priority now is 2D leverage, but we also realize that for some investors, dividends are important. For us, the most important thing, and when we say that, we believe we are saying that also in the interest of all the investors, is that the company first has a solid balance sheet and then we can start also thinking about the dividends. That is because it would be in no one's interest for us in a few years' time to come back to the market doing another capital increase and diluting investors again. So we want to be on the safe side before. We have a balanced commercial strategy to help us in this respect, but also we need slightly lower gearing ratios for what we have now. 63%, it's okay. We are, let's say, in terms of best providers, I would say we are in mid-cycle. TC rates are well above mid-cycle. and even one-year period rates, but the vessel values haven't moved as much over the last few months. Therefore, I would say they are still around mid-cycle. We would like to bring this average ratio probably around 50% before we start thinking of dividends. but we will also take other factors into consideration as how our forward coverage has changed, what are the prospects for the market when we take the decision to pay dividends or not when the time comes.

If I could add something, it's also very much related to the previous question, because if we are capable, if we can, If we are in position to be more aggressive on the sale of the older vessels and creating more liquidity, of course, creating more liquidity, many things could start being easier, let's put it this way.

And if you build one of five vessels under... I mean, I should say... as asset for disposal. So, I mean, sorry for cracking again. Do you think that, I mean, we can expect something within this year, given that, I mean, one out of five have been disposed?

Yes, certainly, yes. I think one out of five certainly has to go.

The Meredith was one of the five that already went. We would say at least another one we expect to be able to sell this year, if not two, maybe.

Okay. Thanks very much. Very clear.

Gentlemen, there are no more questions registered at this time. Back to you for any closing remarks you may have.

Let me thank you all for following us. Not too much I can say. Difficult times, even, thanks God, are difficult times in cash positive positions. But there's still uncertainty out there. But I think we are very well equipped to navigate them and overtake them. So I'm not here with Carlos to make easy promises because it's not our case. And thank you again and to the next conference. Thank you.