d'Amico International Shipping S.A.

Good afternoon. This is the Coruscant Conference Operator. Welcome and thank you for joining the D'Amico International Shipping Second Quarter and First Half 2021 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, Chairman and CEO of D'Amico International Shipping. Please go ahead, sir.

Thank you, and good afternoon to everybody. Welcome to our conf call, and let's go straight to the presentation. If you don't mind, I would skip the executive summary in the way of not doubling things. And I leave for starting to the floor to Carlos Balestra for the overview and the key financials. Carlos, it's your turn.

Thank you, Paolo. Good afternoon, everyone. So, as usual, we start just a quick glance of our fleet. we control the 38 vessels as at 30th of June. We are mainly an MR player. We have, however, a small presence also in the L01 and Handy size segments with six vessels in each of these segments. Mostly owned vessels, 20 out of 38, eight on Beryl Chartered, which is We consider it as owned vessels because they either have purchase obligations or purchase options at very attractive prices, in one case only. And then we have the time-chartered-in vessels, which are mostly long-term, nine out of the ten time-chartered-in vessels. The fleet is 76% IMO class, and it is still a young fleet, 6.9 years average age relative to an average for the industry, which is closer to 12 years in the sectors we operate in. Also, mostly by now, an echo fleet, 75% of the own and wearable vessels and 74% of the entire fleet. And, well, these results were achieved thanks to an important new building program, as we already talked about several times in the recent past. We ordered 22 new buildings since 2012, and they have all been delivered to us, the last one in Q419. APEX program, not much changed since our last presentation. relating to the CapEx that was planned for 2021, the large majority was already invested, 4.2 million, only 2 million left. 2022, we only have planned investments for such purposes of 3.1 million, so around half as much as in 2021. And this figure has been declining since 2020. And, yeah, of course, we only have a maintenance capex left for now. And because our priority, as we have mentioned several times in the past, currently is to continue on the leveraging process of our balance sheet. In terms of also cash flow commitments, well, we are also lighter in terms of bank debt repayments. We have no balloons due in the second half of this year, and we have a 65 million due in 2022. And we are already working on the refinancing of these and Quite a few of them we expect to be able to refinance before the end of 2021. The first balloon due here is in April, and all the other ones are in the second half of 2022 in any case. So they're still quite distant. We are also lighter in terms of bank debt repayments. This is also positive, not only in terms of CapEx repayments. It has declined quite sharply between 2019 and 2020. after we terminated reimbursing the $75 million facility with Intesa, which had to be reimbursed over five years, and it will continue declining more gradually going forward. So that will also help us from a cash flow perspective. On the purchase options front, yes, As we announced in the past, in the recent past, we have exercised the purchase option, the high priority. We did so because this vessel, in any case, had quite a short lease, which was going to mature in October 22. And therefore, since we had a very comfortable cash position and we still do at the end of the year, we decided that it was a good idea to exercise this option to save on quite a substantial amount in interest expense, because this was also by far the most expensive bare boat inn we had. And the other ones are at a much cheaper cost, and they have much longer tenors. So we are not in a hurry to exercise these, but... If the circumstances are right, because we see the market moving in the right direction and our balance sheet allows us to do so, we look forward also to exercising some of these other options and saving some money on interest expense also in this respect. Of the remaining options we have, eight, seven, either in the money or theoretically in the money. Only one is slightly out of the money, the high trader. And yeah, seven of them are already excitable. Only the cello, the hues, we have to wait until 2024 to be able to exercise. Going on to our TC coverage, We have been working on this throughout the second quarter, increasing the forward coverage by fixing vessels on time charter. And therefore, we have 48% coverage now for Q3, which is not a bad figure at around $15,000 per day. So that allows us to weather quite comfortably the current weak markets. And this coverage declines in Q4 to 36% at an average rate of 14.8% around. So if we look at the second half, we are at around 42% at just below 15,000, which is pretty much aligned with our break-even. We have much more exposure, of course, in 22% and 23%. But we are having exposure in two years because we expect the market to be much stronger by then. As previously mentioned, the percentage of eco fleet has been rising and it's expected to continue rising as we dispose of some of our older non-eco vessels over the course of the next few years. Here we show the fleet evolution. We are not assuming any vessel sales here, but as we re-deliver some of our TC and vessels, this fleet declines only very slightly over the course of the next two years. However, of course, because of the declining TC coverage, our overall spot exposure increases, and so does our sensitivity for every $1,000 per day change. in the TC equivalent earnings, which is of 4 million in the second half of 2021 and rises to 11 million in 2022. On the cost side, we have also been working very hard and we achieved very significant savings between 18 and 20 with a slight uptick in 2021, both on the direct operating costs and on the general and administrative costs. On the direct operating costs, of course, we benefited also from the fleet renewal program. We have all of our new buildings where the 22 vessels were built at the same group, either in Vietnam or Korea. Having modern vessels, of course, also helps in terms of cost savings. And also we invested in technology for condition-based maintenance, which allows us to increase the average lifespans of our spare parts and also reduce off-hires by preventing failures. On the GNA front and on the OPEX front, well, on the OPEX front, we We benefited in 2020. Unfortunately, of course, from the fact that we could perform less crew rotations, but it did lead to some cost savings. In 2021, fortunately, we can perform more crew rotations, and that did have an impact on our costs. There were also some currency effects, which affected both the operating costs, but more significantly the GNA, because especially in the first half of 2020, the US dollar was very strong. Going on to the following page, our financial structure. We are quite happy to highlights that our ratio of net financial position to fleet market value has improved relative to December 2020, despite the losses that we recorded this year. And this is mainly due to the increase in asset values in Q2. The market, the asset values started moving up in Q2 also I would say because of the increase in steel prices which was very significant that we have been experiencing this year which led to a sharp increase in new building costs and so that pushed up also the prices of the younger vessels in our fleet but of course also demolition prices have been moving up quite significantly, and that provided support for the vessel values of the more middle-aged vessels and all the slightly older vessels in our fleet. Going forward to the following page, of course, the increase in asset values also reflects the positive fundamentals and the fact that there is an expectation that the current wheat markets won't last that long and that we will soon be operating in a much stronger market. In terms of financial results, quick look at the mainline items of the P&L. We lost 5.4 million in Q2. And in the first half, it is 15.2. Quarter on quarter, it is a big improvement relative to the 9.8 million we lost in Q1 this year. Excluding no recurring items, we lost $5 million in the second quarter of this year and $14.4 million in the first half of this year. Despite the weak markets, we did generate a good level of EBITDA, 30T million in the first half of this year. Going on to a quick look at the daily TCA equivalent results for both the spot and the time-charted vessels. Spot vessels in Q2, 12,720. I believe we did very well here relative to the market. Our vessels were properly positioned, a bit skill, a bit luck, I would say. I believe even if we look at H1, the result for the upper spot vessels of 11.3 is quite strong relative to the weak markets we experienced. We did underperform a bit in Q1, 21, but we more than compensated for that in Q2. In terms of spot employment, of course, if we then included a time charter coverage that we had, that allows us to, which was at about $15,000 per day, $15,800 in Q1 and $15,200 in Q2 this year. This allowed us to achieve a blended rate of 39 in Q2 2021 and of almost 13.4 in the first half of the year, which I believe is actually quite a good result given the circumstances. And also, I would say, relative to many of our peers, which are more exposed to the spot market than we are. and I pass it over to Paolo for the market overview.