Mpc Container Ships As

Good afternoon and good morning, everyone. This is Konstantin Bach, CEO of MPC Containerships, and I'm joined by our co-CEO and CFO, Moritz Fuhrmann. I would like to welcome you to our Q4 2024 earnings call. Thank you for joining us to discuss MPC Containerships fourth quarter and 2024 earnings. This morning we have issued a stock market announcement covering MPCC's fourth quarter results for the period ending December 31st, 2024. The release as well as the accompanying presentation for this conference call are available on the investor and media section of our website. Please be advised that some of the material provided and our discussion today contains forward-looking statements and indicative figures. Extra results may differ materially from those stated or implied by forward-looking statements due to the risk and uncertainties associated with our business. Before we guide you through the Q4 earnings call presentation, let me share some initial reflections on the past quarter and the year 2024. We're very pleased to report another solid performance and a strong quarterly result today, despite prevailing macroeconomic and geopolitical uncertainties. Overall, Q4 2024 has been another rock-solid quarter for MPCC, both financially and operationally, rounding off a really good year 2024. During 2024, we have taken several strategic steps as we have continued to execute on our strategy of selective fleet renewal, including retrofits, buying, selling, and thereby optimizing our fleet profile, making use of market opportunities as they arise, both in terms of vessel sales and acquisitions, but also in terms of making use of attractive funding opportunities. opportunities, for example, raising our sustainability linked senior unsecured bond. And at the same time, we have maintained a strong and highly flexible balance sheet. And very importantly, we continue to reward you, our shareholders. With that said, I'm happy to hand over to Moritz.

Thank you, Konstantin. And also from my side, good morning and good afternoon to everyone. As usual, we have split the presentation in three parts. The highlights, the market section and the outlook. Kicking off with the highlights, we continue, as Konstantin has just mentioned, to post strong results, both from a financial and operational perspective. While the full year revenue was 524 million US dollars, adjusted EBITDA came in in line with the last quarter at 72 million US dollars. for the fourth quarter and US dollar 325 million on a four-year basis. The container and chartering markets remain quite favorable as we continue to take advantage of the prevailing market environment. We have further increased the employment coverage in line with our long-term chartering strategy. And as a result of that, the backlog now stands at around 1.1 US dollar billion. with 92% and 64% coverage for 25% and 26% respectively. In addition, the board of directors has declared the company's 13th consecutive dividend, bringing the total for the year to $0.42 per share. And going forward, and with the backlog and coverage that we have, we will continue to distribute dividends, emphasizing on shareholder return. Throughout 2024, we have been working continuously on our fleet optimization, and while taking delivery of our first new buildings into the fleet in the second and third quarter of 2024, we have also furthermore added seven vessels into our fleet. At the same time, we have offloaded five older and smaller vessels, of which the last one was delivered finally to its respective buyers. in the course of the fourth quarter 24, resulting in a book gain of around $11 million. To support the fleet renewal, we have leveraged sustainable financing solutions as we raised an ECA-covered green loan, as well as successfully placed an unsecured sustainability-linked bond in the Nordic bond market. Overall, we retain a very robust balance sheet with low leverage and roughly two-thirds of our fleet being completely debt-free, which obviously provides us with great balance sheet flexibility going forward. Also looking ahead into 2025, and as the market continues to be supportive, we will strongly focus on further driving our fleet optimization and retrofit program to improve the fleet composition and also enhance long-term shareholder value. Based on our backlog, we set our revenue guidance to 515 to 530 million US dollars and our EBITDA guidance to 290 to 310 million US dollars. Turning to the next slide and looking at some KPIs for the fourth quarter, revenue, EBITDA, as well as profitability are more or less in line with the previous quarter. On a full year basis, the trend shows that in 23, obviously the legacy backlog has been benefiting stronger results relative to 24. However, I think it's important to note that in the past nine months, the charter market has been very strong, increasing the backlog, the revenue backlog again for the first time since 2023. From a balance sheet perspective, the delivery of the four 3,800 TU's on long-term charter has been driving the increase in total assets. Simultaneously, we have raised 125 million US dollars in unsecured bonds and drew on a new 30 million US dollar term loan that is secured by two 35 TU's on long-term charter that we have acquired over the summer. Consequently, the leverage ratio has increased relative to the previous quarters. however, remains at low level of 28%. As mentioned before, the board has declared a dividend of $9 per share, which will be paid in March 2025, and the operational cash flow generation remains strong with 77 million US dollar. We continue to see a good fleet utilization with more than 97%, while OPEX has gone up based on some non-recurring CAPEX reclassification, meaning we don't expect to see this in the coming quarters to occur again. Looking at slide number five and reflecting on the current chart and market dynamics, it is evident by the latest fixtures that we continue to experience very strong demand by the lander companies supporting rates and duration levels we have already seen over the past nine to 12 months. And since our last reporting, we have concluded four new fixtures, predominantly on smaller vessels in our fleet, however, still showing durations of mostly two years. And we also continue to have very encouraging discussions with our customers also on forward positions for early extensions. For the remainder of 2025, we only have nine vessels open for rechartering, basically shielding our P&L to a large extent from any adverse market movements. On the asset side, as mentioned before, we have taken delivery of four 3800TUs, as well as the first green box new build, which is a 1300TU methanol dual fuel vessel on a 15-year time charter. In addition to the delivery of Ars Paola to her respective buyers, we have sold with Ars Venia another vessel and already delivered here in January 2025 for a total consideration of 8.6 million. As the fleet optimization continues, we have now three methanol geofuel vessels in our fleet, of which two are yet to be delivered from their respective yards. We have 11 ecovessels following the delivery of to 5,500 to use, and we have 29 vessels that have been or will be retrofitted significantly, enhancing the vessel's efficiency. This is obviously a result of an extensive investment program in the amount of around US dollar 600 million, helping us substantially to renew the fleet and also align with our ESG targets. Turning to the next slide. And looking at the recent balance sheet development, it is obvious that 2024 has been a very busy year on the financing fronts. We have arranged and drawn under a number of facilities to support the fleet optimization efforts. Most notably are the drawdown under our first ECA covered loan, the arrangement of our ECA covered green loan and the US dollar 125 million unsecured sustainability link bond. By reshuffling of some of our financing arrangements over the past 12 months, we have no debt maturity before the second half of 2027. In general, we follow a very strict financing principle, trying obviously to align leverage and cash flow visibility, while at the same time keeping a substantial part of the fleet unencumbered or debt-free. Our financing silos, which you can see at the bottom of the slide, clearly outline the comfortable employment coverage that we have against the heightened financing breakeven, while the debt-free silos feature both a comfortable breakeven level as well as sufficient headroom between those breakevens and the current employment cover. In MPCC, we eventually intend to carefully manage residual risk and position our assets best for the volatile shipping markets that we operate in. Looking at slide number seven, this quarter marks our 13th consecutive dividend, bringing the total number of distributions to $977 million, or 22.35 NOX, which basically equates at 120% of the current market cap. which is, I think, a very strong testament of our commitment to returning capital to our shareholders. For the full year 2024, the dividend yield is 36% if the share would have been acquired in January of the same year. However, most importantly, and with the great earnings visibility going forward, we will continue to walk the talk. And we'll stick to our distribution policy, paying 75% of our adjusted net profit, continuing to emphasize on shareholder return. Turning to slide number eight, the last slide of the highlight section, we can see the strong operational cash flow as well as the investment into the four 3800s that we took delivery of in Q4-24. um this is being offset by the corresponding debt drawdowns under the unsecured bond and the secured facility from from first citizen bank in connection with the two 3500 use following the cash payment of the q3 24 dividend cash overall slightly decreased by um us dollar 9 million however in addition we retain roughly 80 million in undrawn rcf capacity basically being further implied liquidity and all in all we in mpcc remain very disciplined on the capital allocation side of things and on that note i hand back over to constantine for the market update and the outlook section thank you moritz um as just mentioned by modes i would like to continue with the next agenda point and provide an update

On the market, starting with the charter market and asset values, so please turn to slide 10, where you can see the developments of charter rates as per the HAPEX index, which is the blue line, as well as Clarkson's second-hand price index being the red line. Basically, since the start of the year, both have increased steadily with charter rates being up around 150% and second-hand prices up a shade above 40% compared to the beginning of 2024. The fourth quarter in particular has been characterized by elevated asset values and time charter rates. And if you look at the fourth quarter, we have seen 61 second-hand transactions with around 175,000 TU being executed, which is a reflection of that part mainly being feeder vessels. The time charter market has plateaued in Q4 2024 with strong rates, certainly due to low vessel availability and also positive sentiment. And also during the first couple of months of 2025, where we have initially seen a slower start to the year until Chinese New Year. But over the past few weeks, the charter market and the S&P market has been fairly active with rates, periods, and also asset prices rather increasing than decreasing. In terms of secondhand activity, again, 2024, looking at that year, has been the third strongest year on record in terms of secondhand sales recorded. with a total of 290 vessels and 1 million TU changing hands. And despite the seasonal slowdown, there's continued buying interest in the market, as I've alluded to a minute ago. Looking at the... Time charter index and as far as that is concerned, it has recently moved sideways, but it has been gaining strength for, amongst others, the reason of limited supply because vessel availability is becoming less and less pronounced. And that is actually a good transition to the next slide. So please turn to Slide 11, when talking about vessel availability. On slide 11, you can see the developments of forward availability of vessels, which has significantly dropped in 2024. And the substantial drawdown of open positions has helped charge rates to remain healthy, as mentioned on the previous slide. And even after the election of US President Trump, Belarus tried to secure vessels in advance. And as a result, forward rig fixing has increased in Q4 2024, but also after Chinese New Year in 2025. As you can see on the right hand side, charter periods have also become longer. Moritz has commented on some of our recent fixtures earlier in the presentation. And the average durations of fixtures below 5,000 EU increased to an average of more than 16 months. The actual figures are actually above that as the index is lagging behind. So, in terms of utilization, the non-operating owner's fleet can still be deemed fully deployed based on a very low count of idle vessels in today's market. Now, let me continue with a view on the order book. Going forward, the market, in our opinion, will be driven by three key topics and we'll allude to some of these key topics in the next two slides. The first topic is discussed on slide 12. Here we show the existing fleet on the water, including age profile next to the actual order book by vessel size. And you can see there's a box around the segment, which is the MPCC focus. Nothing new, but the fleet is very much skewed towards the large units. As we have stated before, we are of the opinion that the fleet, and particularly vessels of 8,000 TU and below, are developing an age problem. The global fleet in that size bracket is getting older and older. and emission reduction demands from environmental stakeholders are getting tougher by the year, including regulation. Some more facts on the order book. As of, you know, February 2025, the order book to fleet ratio of the fully cellular fleet stood at around 27%, which is the result of continuous and considerable new building contracting during the second half of 2024, including Q4. However, by comparison, MPCC's segments feature a significantly lower order book to fleet ratio of around 3% only. On top of that, we need to consider the fleet renewal potential, which is indeed mainly present in the smaller ship sizes with around 26 to 28% of the feeder in Panamax vessels being our core segment, being more than 20 years of age. Consequently, going forward, we expect we will see more ordering also in our size bracket, and we consider it beneficial to own modern vessels in the sub-8000 TU segment. In addition to the order book dynamics just mentioned, and hence supply side pressure, we have listed a few key topics for the market outlook 2025 on slide 13. In that respect, I would like to highlight two key topics. The likely most important topic for container shipping demand relates to the Red Sea crisis. It has obviously boosted the charter market and freight market in 2024, and it is continuing to provide tailwinds to charter rates as it stands today. So a return to the Red Sea would see average transport distances declining by around 12% compared to last year. So the shortened supply chains could trigger a domino effect with reduced weekly cargo demand while networks are being rearranged. Additionally, vessels would be sorted out of affected trades and need to look for new employment. However, a continuous bypassing of the Red Sea would leave the 2-mile booster of 12% in place and keep the operator's vessel in high demand. So that is a key topic. It has been key for 2024. It will be highly relevant for 2025. And the jury is out to see how the development will continue. Another key topic refers to U.S. tariffs. With the new US administration at work, the trade tensions between the US and China and other countries have already intensified, including Canada and Mexico. On the one hand, tariffs and other regulatory measures create uncertainties among market participants, in particular shippers. potentially dampening investment and future trade growth. So that is certainly an uncertainty that remains to be observed carefully in the month and quarters ahead. However, ultimately, they render the international exchange of goods and products more expensive for producers and consumers alike. And all these measures will, in our view, not stop container trade, as it is just another way that the US has identified to generate cash from the immense amount of US foreign trade at the expense of producers and consumers. So there are also a few reasons to remain optimistic. Again, the Red Sea situation is still uncertain. However, there are certainly some wildcard events coming our way in 2025. Now let me continue with the company outlook section of the presentation. Let's move to the next slide, slide 15, where I would like to start with our charter backlog on the left-hand side. You can find some details there on our forward coverage in a commonly used format. So by year, including the overall backlog of 1.1 billion euros, the respective contracted forward revenues by year in the dark blue boxes and in the columns you can see the open days and fixed days on an operational basis for the years ahead. As explained by Moritz in detail, we have strategically utilized the strong charter market during Q4 2024 and throughout the year, locking in solid period charters at very healthy rates for the existing fleet and also for some of our modern ecovessels that we acquired earlier this year. Hence, on the back of this, we have added a substantial volume to our backlog, and we are looking at 1.1 billion per end of the year. In terms of coverage for the remainder of the year, we have 92% of all operating days covered, and even for 2026, we already have around 64% of the operating days covered. When you compare that with previous years in 2024, you know, on our annual earnings call wrapping up the year 2023, the backlog was more in the vicinity of 78% for that year and 36% for the year thereafter. So we actually have the best coverage that we ever had going into 2025. with high visibility and a very strong book of counterparties that you can see on the right-hand side. When looking at the counterparties, as you can see, we have more than 90% of our charter contracts with top 10 liner companies or backed by long-term cargo commitments. The next slide now shows the upcoming and fixed charter positions for our fleet in 2025 and 2026. We have 13 positions open until the end of, potentially open, I should say, until the end of the year 2025, of which four vessels highlighted in gray here have a more flexible re-delivery window based on the present rate environment. We expect that these are more likely 2026 positions, in fact, And therefore, we'll roll over into the next year, meaning we will probably have nine to 13 positions open for this year. For 2026, we have 28 charter positions open. The distribution particular of the 25 positions by quarter are shown on the very left hand side of this overview. On a number of 2025 positions, we are presently already in discussions with some of our charter clients regarding early extensions, and we also see quite some buying interest in some of the vessels. And as we always do, we are comparing the achievable sales price with the value in use for an asset, i.e. we compare the option to possibly sell, provided the sale can be developed, with the option to charter out the vessel. And taking rational decisions And prudent decisions in that respect has been the backbone of how we have navigated MPCC in the market. And we will continue to do so in the best interest of both our customers and also our shareholders. Now, let me continue with a slide setting out our value proposition. And I would very much like to run you through this little bridge here on slide 17, as we firmly believe MPCC has a very strong value proposition, including significant upside going forward. And let me tell you why I think that is the case. Going from left to right here, we have looked at the net interest bearing debt as per the end of the quarter. The current market cap based on current share price to arrive at an enterprise value of around 953 million. We have then compared that with the projected EBITDA backlog that we have on our fleet today and then added the market value of the vessels. And it is worth noting that the current enterprise value is fully covered by the projected EBITDA backlog and the recycling value of our fleet. meaning no value being attributed to our fleet above and beyond the existing contracts and the recycling value of the fleet, providing firstly a very solid protection, but secondly and very importantly also a very significant upside potential from the existing fleet of 61 vessels and also further earnings capacity. So we see both a very good downside risk protection And we see a significant upside when looking at MPCC and certainly looking at some of the, you know, charter concentrations that we're currently discussing with some of our customers, which would immediately add value, but also at what price levels one could potentially dispose individual assets. Now let me take a step back and let me reflect on some of our strategic developments over the past years and how we will continue to navigate and build MPCC going forward in order to create value regardless of market environment on slide 18. as you can see and we have used the slide in the past but it is a good reflection of the transition and of where we are today and also our path going forward looking at the left-hand side q3 2021 we have looked at a revenue backlog of 1.1 billion we had not commenced our distribution and executing our distribution plan We had only three debt-free vessels and a leverage ratio of 35%, while at the same time, 100% of our fleet were conventional vessels. Today, we have, again, a revenue backlog of 1.1 billion that we have been able to strategically build up over the past quarters and years. And at the same time, we have followed a clear capital allocation strategy that addresses all key areas of our business. Firstly, we have returned significant capital to our shareholders in form of dividends, as we have declared close to 1 billion US dollars in dividends over the last 13 quarters. Secondly, we have strengthened our balance sheet by reducing our leverage and freeing up collateral. And we are now looking at 39 debt-free vessels, which represents around two-thirds of our vessel portfolio. Hence, we have a very robust balance sheet, including significant investment capacity going forward. And finally, as explained by Moritz earlier in the presentation, we have also optimized and renewed our fleet. And we have been disciplined, but we have also made use of market opportunities to create additional value for MPCC and our shareholders. Now, before we open the floor for questions, let me summarize some of the key takeaways from today's call. Firstly, we have seen a very solid performance in Q4 2024. Very importantly, also going into 2026. on the back of which we have communicated our guidance for 2025 of 515 to 530 million in revenues and 290 to 310 million in EBITDA. On the basis of a rock-solid balance sheet with significant investment capacity to carry out accretive transactions, we believe we are in a very good position to support our fleet renewal strategy going forward. And finally, and going forward, we will continue to follow this path with a very transparent and clear set of principles to be a reliable partner to our stakeholders, to our charter customers, to our shareholders and to our employees onshore and on board of our ships. And with that said, I would like to open the floor for questions and thank you for the interest so far.