Pacific Basin Shipping Limited

Welcome to today's Pacific Basin 2023 Interim Results Announcement Call. I'm pleased to present Chief Executive Officer, Mr. Martin Furigard, and Chief Financial Officer, Mr. Michael Jorgensen. For the first part of this call, all participants will be in listen-only mode, and afterwards, there will be a question and answer session. Mr. Furigard, please begin.

Thank you. Welcome, ladies and gentlemen, and thank you for attending Pacific Basin's 2023 interim results earnings call. My name is Martin Forgo, CEO of Pacific Basin, and I'm pleased to have our new CFO, Michael Jorgensen, with me today, who will speak later on the call. Assuming that you have already gone through the presentation, we will briefly highlight some of the key points discussed in it before we proceed with the Q&A session. Please turn to slide three. I'm pleased to report that in the first half of 2023, we generated underlying profit of 76 million, a net profit of 85 million and EBITDA of 189 million US dollar. We yielded a return of equity of 9% analyzed with basic earnings per share of Hong Kong dollar 12.9 cents. Our large core business generated 96 million before overheads, despite the weak freight market, while our operating activity, which includes vessels chartered in for less than 12 months, contributed 17 million, having generated a margin of 1,550 net per day over 11,000 operating days. We continue to maintain a healthy financial position with available committed liquidity of US$375 million and net gearing of 7% as we continue to expand our own fleet over the period. Additionally, we have increased our list of unencumbered vessels with 65 currently unmortgaged. The board has declared an interim dividend of HK$6.5 per share amounting to a total of US dollar 43.7 million, which represents 51% of our net profit for the period. This decision is consistent with our distribution policy and reflect our confidence in our strong balance sheet, despite the current uncertainties surrounding global dryball demand and freight rates, which continue to impact our industry. Please turn to slide four. In the first half of the year, average market spot freight rates for handy size and supermaxes were 8,640 and 9,930 net per day, respectively. Despite increased dry ball demand overall in the first half, freight rates were under considerable pressure due to the unwinding of congestion that increased effective supply. Looking ahead, we expect great activity to increase with the onset of the East Coast, South America and US Gulf rain seasons. While China's reopening has helped dry bulk demand, additional stimulus would be needed to boost demand further. Please turn to slide five. Global dry bulk loading volumes grew approximately 2% year-on-year, mainly due to China reopening, which increased demand for both coal and iron ore. Minor bulk loadings decreased 0.1% in the period, due to reduced loading of cement and clinkers, forest products and aluminium. However, there was an 8% increase in bauxite loadings, primarily from Malia, and despite an export ban in Indonesia starting from June 2023. Grain loadings decreased by 3% year-on-year, primarily due to reduced grain export from Argentina caused by drought. In the US states, adverse weather conditions and logistical problems led to a higher cost for transporting grain on the Mississippi River, which made US grain prices uncompetitive, reducing grain export during the first half of 2023. Despite delays in the harvest and export process, Brazil was able to export a record amount of grain. On the other hand, coal loadings increased 6% year-on-year, largely because of the low base created by the temporary Indonesian coal export ban in January 2022 and record China imports. Iron ore loading increased 3% year-on-year due to beneficial weather conditions in both Australia and Brazil, as well as increased demand in China as economic activity increased post-COVID. Please turn to slide six. Our core business generated average handy size and supermax daily TCE earnings of 13,030 and 13,700 net per day, respectively, in the first half of 2023, which is a decrease of 51% and 60% compared to the very strong first half of 2022. For the third quarter, we have covered 82 and 92% of our committed vessel stays for handy size and supermaxes at $9,800 and $12,700 net per day, respectively. For the second half of 2023, we currently have cover for 57% and 72% of our core vessel stays for handy size and supermax at $10,000 and $12,770 net per day, respectively. Current forward freight agreements, commonly referred to as FFAs, for Q4, they are at 9,180 and 10,710 per day for Handisize and Supermax, respectively. Please turn to slide seven. In the first half, both our Handisize and our Supermax delivered an exceptional performance, and we outperformed the indices by 4,390, per day and 3,717 per day, respectively. Handy-sized and Supermax vessels have outperformed the index over the last seven and eight quarters, respectively. The Supermax outperformance benefited from 33 scrubbers installed across our core-owned fleet, with scrubbers contributing about $1,000.50 per day to our outperformance over the period. The current value of Supermax Grover's benefits is approximately $610 per day. Operating activity generated a positive margin of 1,550 net per day over 11,000 operating days. Operating days increased 20% compared to the same period last year. Operating activity margins benefited from the re-delivery of more expensive short-term time charter in vessels from previous periods. Please turn to slide eight. Our hand-designed owned vessel costs have decreased, mainly due to lower crew repatriation costs as COVID-related controls have been relaxed. We continue to improve our cost competitiveness with our indicative owned fleet cash break-even level reduced to $4,920 per day. Please turn to slide nine. Despite the increase in cost on a small number of long-term charter vessels, our blended supermax costs remain cost competitive. We continue to maintain our cost competitiveness with our indicative own fleet cash break-even level reduced to 5,010 per day. Please turn to slide 10. During the period, we continued to grow and renew our fleet, Specifically, at the beginning of the year, we capitalized on supermax vessel values, which softened due to market weakness, allowing us to make counter-cyclical purchases. Meanwhile, we continued to also focus on selling smaller, older, handy-sized vessels during the period. We acquired five ultramax vessels, one supermax vessel, and one handy-sized vessel, with all vessels delivered into our core fleet. We sold two handy-sized vessels over the period with both now being delivered. We received the first of three Japanese-built 40,000 deadweight ton handy-sized new buildings to our core fleet through long-term time charters and expect the remaining two to be delivered in the second half. Including all currently agreed sales and purchases, our fleet consists of 120 old Hattie size and Supermax vessels, and including chartered ships, we have over 280 vessels on the water. We continue to progress with the design of methanol-fueled zero-emission vessels in collaboration with our two Japanese partners. We expect to be ready to contract our first-generation dual-fueled zero-emission new buildings by the end of 2024, with delivery expected to be well ahead of our original 2030 target. I will now hand over to Michael, who will present the financials, and I'll be back afterwards with outlook and strategic summaries.

Thank you very much, Martin, and good evening, ladies and gentlemen. I'm very delighted to join Pacific Basin as its new CFO and I'm eager to engage with the investor and media community. Without further ado, let's dive into the next slide. Please turn to slide 12 for an overview of our P&L performance. As you can see, given our lower TTE earnings, both our underlying profit and EBITDA were lower, despite decreased owned vessel and chartered costs. Our G&A has decreased, mainly due to lower discretionary remuneration provisions given our result for the period. Below underlying profit, our net profit was further improved by gains on vessel disposals and our hedging portfolio. Please turn to slide 13. Our operating cash inflow for the period was $150 million, and that is inclusive of all long and short-term charter hire payments. This compares with $486 million in the first half of 2022. We had $43 million in proceeds from the sale of three smaller handy-sized vessels and one Ultramax vessel, which we delivered in the period. Cabin spending remains well controlled, and for the first half of 2023, total US dollar $210 million, of which we paid approximately $187 million, for one second-hand handy-sized vessel, two second-hand supermarket vessels, six second-hand Ultimax vessels, and around $22 million for dry dockings and ballast water treatment systems. We expect CapEx for 2023 to be approximately 60 million, predominantly related to dry dockings and ballast water treatment systems and excluding any vessel purchases. We paid 174 million US dollars in dividends related to the 2022 final basic and special dividend of 26 Hong Kong cents per share, which were paid in May 2023. Our borrowings decreased due to net repayments of 38 million. Please turn to slide 14. Despite significant shareholder distribution, we continue to maintain a healthy financial position with 375 million of available committee liquidity and reduce debt while expanding our fleet. Our net borrowings now represent 7% of the net book value of our old vessels. And as Martin previously mentioned, we have increased our list of unencumbered vessels with 65 currently unmortgaged. Our goal going forward is to ensure that we maintain our strong available liquidity position for potential growth investments while still providing returns to our shareholders through payment of dividends. We have a distribution policy of paying out at least 50% of annual net profits. I will now hand you back to Martin for his outlook and stretch slides. Thank you, Michael.