d'Amico International Shipping S.A.

Good afternoon, this is the Chorus Call Conference Operator. Welcome, and thank you for joining the D'Amico International Shipping 3rd Quarter and 9 Month 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. Please go ahead, sir.

Thank you. And good afternoon to everybody. Thank you for joining us to our call. And I suggest going to a presentation, I suggest to jump the executive summary because we are going to repeat afterwards exactly all points that they are in there. And if you don't mind, I, at this point, leave the floor to Carlos for the overview and key financials. Carlos, please.

Yes, good afternoon to everyone and thank you, Paolo. So, as usual, we start with a quick look at our fleet, a snapshot as of 30th of September. We control the 38 vessels. As usual, the overwhelming majority MRs, 26 and 601s and 6 Handys. Since the 30th of September, as you know, we announced the sale of one of our older MR vessels, which will allow us to generate around $8 million in cash and therefore a fleet of decrease slightly because, will decrease slightly because of that when the vessel will be delivered to the new buyers. The fleet is still a young fleet, an average age of 7.2 years and mostly echo and IMO class, 75% of own and bear boat vessels are echo. As you know well, The reason we have such a young and efficient fleet is because we ordered 22 new buildings since 2012, which were delivered to us between 14 and 19. Going on to the following page, our CapEx commitments. Not much change since our last meeting. quarterly results presentation. We don't have any commitments now left for the last quarter of 2021 and the commitments, CapEx commitments for 2022, which are, once again, only maintenance commitments related to maintenance CapEx for quite significantly relative to 2021 to around $3 million and then stay at around that same level in 2023. So we are very light in terms of CapEx commitments going forward. The same applies to our bank debt repayments. We are making very good progress with regards to the refinancing of our 2022 balloons. which are of around $65 million. And we expect to finalize this process by the end of this year. And then we will start working soon thereafter on refinancing the 2023 balloons. But we are seeing good appetite for the banks to work on these projects on these transactions. Our loan repayments, scheduled loan repayments fall over the course of the next few years. This is a trend that started in 2020 and it's expected to continue over the course of the next few years. And so once again, this is good for our cash flow generation going forward. On the purchase options, not much changed since last time. In February this year, we exercised the purchase option high priority, as you know. Of the eight remaining vessels on which we have purchase options, the news is that now they are all in the money, and I would say well in the money. At LTVs, mostly around... 80%, meaning that the purchase option price today is around, for most of these vessels, around 80% of their market value. In some cases, for two vessels, we're actually slightly below 80%, and on the remaining vessels, slightly above 80%. But that is good news. and hopefully a window will open up in 2022, allowing us to refinance these vessels with traditional bank debt at a lower cost, further reducing our financial breakeven without possibly having to invest too much equity to do so. And we are monitoring the situation closely as market values, if market values continue improving and if freight rates and TC rates also move in the same direction and we feel confident that the recovery is sustainable, we will definitely look forward to exercising some of these options. Going on to the following page, this graph changed slightly since Our last presentation, we now have this blue line which we introduced, which we call the daily average TCA equivalent covered rate. It includes also the earnings on the bearable charter contract. As you know, because we announced it, because of its significance, because it's a very long contract we signed, a very profitable contract with an important industrial player for five years plus two optional years for the charterer. And this contract is a bare boat out contract, which is a first such contract for us. We usually charter in vessels on a bare boat basis, but we don't charter out vessels on a bare boat basis. So, but in this case, this opportunity was, uh, uh, was very attractive. And, uh, also a plus is that the management of the vessel stays with the Damico group, the technical management. Uh, so, uh, so we have better control on the fact that the vessel is being kept to our usual high standards. Uh, and, uh, So the blue line was calculated by adding to the bearable charter hire an assumption as to the daily operating costs for these vessels, which we would have incurred if the vessel had been employed through a time charter contract so that we can then compare apples with apples. and therefore transform the bearable charter rate into a TC equivalent rate. As you see, the inclusion of this contract in our coverage raised our average rates significantly. As we go forward, of course, this one contract weighs more in the overall average, and therefore the delta between the yellow and the blue line increases as we move forward. Our coverage, we also now show here in this page the detail of our quarterly coverage in 2022 before we only had the annual figure. As we now approach 2022, this becomes a more relevant information, we thought. and it shows that, of course, as is to be expected, our coverage falls throughout the year, but it's still at quite a decent level in the first quarter of 2022. Until not long ago, there was not much appetite for taking vessels on time charter, and especially not at rates which we deem attractive. this opportunity we had for this bearable charter out was quite unique. And so, of course, we took advantage. But what we have been seeing in the last few weeks is that there is much more positive sentiment, which has also translated into more interest for period contract at also more attractive levels. So hopefully this will allow us to then renew some of our time charters as they approach termination at attractive and hopefully also profitable levels. The percentage of our fleet, of course, as we have seen, several times in the past has risen significantly over the last few years and is expected to continue rising as we dispose of our older non-echo vessels. Here we are going on to the following page. Our fleet evolution, the average number of vessels controlled falls slightly over the course of the next two years, but nonetheless our spot exposure increases and Our spot exposure increases since the average number of vessels exposed, the proportion of the fleet exposed to the spot market increases. So the sensitivity for every $1,000 per day change in DTC equivalent rate rises to $10 million in 2020 and $12 million in 2021. Going on to the following page, we see that the daily operating costs have fallen significantly since 2018. They also have fallen this year relative to last year. And last year, Because of COVID, crew rotations were very complicated. And unfortunately, that meant we could perform less crew rotations. And that led to some savings, which we would rather not have benefited from. But this year, the situation in this respect is better, but it's still complicated. which means that we are doing more rotations, but we're also doing more expensive rotations. And despite this, we managed to obtain some savings in our direct operating costs. And furthermore, of course, we have benefited over the course of the last few years from managing a more homogeneous fleet with a more modern fleet. So that, of course, also has contributed to the savings achieved, as well as the strong U.S. dollar, which after a period of relative weakness at the beginning of this year now is, again, very strong. Also on the GNA front, we achieved some significant savings, at least relative to 2018. the dynamics has been at least a bit less positive in 2021, but we still have a 15% savings in the first nine months of 21 relative to the same period of 18. Going on to the following page. the cash and cash equivalent position is still a comfortable one of $42 million, so well above our minimum liquidity covenant of $25 million in our bank loans. And the ratio of our net financial position to fleet market value is just below 61%. and has improved significantly since the end of December 2020 and also since the 30th of June. That is because asset values have been rising over the last two quarters, driven by the increase in steel price, which led to increase in demolition prices and increasing new building costs. and also driven by the strong fundamentals, perceived strong fundamentals of the market, which means that there is an increasing interest and increasing liquidity in the S&P market for the acquisition of second-hand vessels. And we have seen this firsthand in the moment we wanted to dispose of some of our older vessels, as the high venture which we recently announced the sale of. And towards the beginning of this year, it was very, very difficult to find interested buyers. There were a few people fishing around, but they would come with completely unacceptable offers. And instead, we have seen a much more competitive and dynamic market over the course of the last few weeks with a lot of interested buyers and wanting to inspect our vessels and offering much more reasonable and firm prices. Going on to the following page, the results for the third quarter, as can be expected by following the public rates announced, published by brokers and has not been spectacular to the country. Of course, there are that there is a loss of 13.8 million. And this loss, however, has been quite significantly impacted by non-recurring items, in particular, the disposal of the vessel we just discussed, which led to an asset impairment of 5.8 million. The vessel was classified as held for sale at the end of the quarter. and was valued at its disposal price, actual disposal price. So excluding these non-recurring items, which the result for the third quarter would have been of a loss of $8.2 million, which is still a significant loss, but definitely better than $13.8 million loss. For the first nine months, the loss was of almost $29 million and excluding recurring items of $22.6 million. Going on to the following page, we look at here at the daily results of our vessels employed on the spot market and through time charters. And not surprising, we get what was just said, the results of the vessels employed on the spot market was very, very weak and even weaker than the results achieved in the first quarter of this year. The good news, once again, is that we, it seems that we have turned the corner here. Q3 is always a weak quarter, it's almost always a Not always, but almost always a big quarter for us. And there is usually quite a lot of refinery maintenance going on. In this year, there was also the Hurricane Ida, which led to important shutdowns of refinery activity in the U.S. Gulf. And, of course, there was the effects relating to the pandemic, which, although diminishing, was still weighing on the market for part of the quarter. In particular, the U.S. Gulf market was extremely, and the Atlantic market and European market was extremely weak during the third quarter. But as I mentioned, it seems that we have turned the court and we are seeing a much more dynamic market, much more activity, increasing refining margins, increasing refining exports out of the U.S. Gulf. And Paolo will be telling more about that in the in the next few slides. So, I mean, just quickly on the, you know, the overall result, the average DC earnings is, was $12,100 per day in the third quarter. That includes the coverage of almost 48% at 15,160. And... If we look at the nine-month results, the average earnings was of 12,900, benefiting from a coverage of 48% of our available days at 15.4 and an average on the spot market of 10,600. So as previously mentioned, I pass it over to Paolo, which will now give you much more color about what happened in the markets and what is our future view for the markets.