Pacific Basin Shipping Limited

Welcome to today's Pacific Basin 2024 Interim Results Announcement conference call. I'm pleased to present Chief Executive Officer, Mr. Martin Froegaard 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. Froegaard, please begin.

Thank you very much. So welcome, ladies and gentlemen, and thank you for attending Pacific Basin's 2024 Interim Result Earnings Call. My name is Martin Forgo, CEO of Pacific Basin, and I'm joined by our CFO, Michael Jorgensen. Assuming you have already reviewed the presentation, we will briefly highlight some of its key points before moving on to the Q&A session. So please turn to slide three. The first half of 2024, we generated an underlying profit of 44 million US dollar and a net profit of 58 million with an EBITDA of 158 million US dollar. This resulted in a 6% analyzed return on equity with basic earnings per share of 8.7 Hong Kong cents. Our large core business generated 77 million U.S. dollar before overheads with our handy size vessels contributing 41 and our supermax vessels contributing 36 million U.S. dollar. During the period, our operating activity, which includes vessels chartered for less than 12 months, experienced significant growth in both vessel numbers and operating days with a contribution of U.S. dollar 550 per day over 14,120 days, which generated an additional $8 million for the business. We have utilized our strong cash generation to reduce debt and enhance our fleet's deadweight carrying capacity, maintaining a healthy financial position with $537 million in committed liquidity and net borrowings of just $32 million. In view of our first half financial results, the board has declared an interim dividend of 4.1 Hong Kong cents per share, amounting to US dollar 28 million, which represents 50% of our net profit for the period, excluding vessels disposal gains. Please turn to slide four. Since 2021, we have generated profits of $1.7 billion and paid out approximately $1.1 billion in dividends to shareholders, representing 65% of net profits, highlighting our ability to deliver attractive long-term returns over the shipping cycle. In addition, we have launched a share buyback program of up to $40 million to be completed by the end of 2024. Since the commencement of the program, we have repurchased and canceled approximately 42.7 million shares for consideration of approximately $14.6 million. We aim to create shareholder value through optimizing our capital structure, investing value-adding and counter-cyclical growth opportunities, and distributing profits to our shareholders in accordance with our distribution policy. Please turn to slide five. In the first half of 2024, average market spot freight rates for the Baltic Exchange Hedgesize Index and the Baltic Exchange Supermax Index were 10,970 and 13,280 NIP per day, respectively. Higher market freight rates were driven by increased demand for commodities, further supported by fleet inefficiencies related to ongoing disruptions in the Suez and Panama canals and manageable new building deliveries. Year-to-date, we have seen a notable reduction in seasonality attributed to the imbalances in tonnage between the Atlantic and Pacific regions. These imbalances are primarily due to the fleet inefficiencies caused by the continuous disruption in the Suez and Panama canals. This disruption led to an unusual large portion of the minor bulk fleet being held up in the Atlantic, resulting in a shortage of vessels available in the Pacific. This scarcity positively impacted the Pacific time charter rates, reminiscent of the peak demand conditions we saw during the height of the COVID pandemic in 2021 and 2022. During July and August, the balance of tonnage between the Atlantic and Pacific has reverted to levels observed in 2023. Please turn to slide six. Our core business generated average handy size and supermax daily TCE earnings of 11,810 and 13,690 per day, respectively the first half of 2024, which is a decrease of 9% and flat compared to first half of 2023. For the third quarter of 2024, we have covered 87% and 98% of our committed vessel days on our handy-sized and supermax vessels at 13,750 and 13,440 per day, respectively. We have covered 60% and 82% of our handy-sized and supermax vessel stays for the second half of 2024 at 12,670 and 12,640 per day, respectively. While our supermax, ultramax cover for the remaining remainder of the year will limit our potential upside if market freight rates continue to strengthen, we anticipate benefiting from an improving market in the fourth quarter of 2024 and into 2025. Nevertheless, we are maintaining sufficient levels of exposure to current spot rates in the head-to-size vessels. Current values of scrubber benefits are approximately $30 and $250 per day across our core head-to-size and supermax fleet, respectively. Current forward freight agreements, commonly referred to as FFAs, for Q3 are at 12,320 and 14,430 per day. And for Q4, 12,490 and 14,550 per day, if I had decided Supermax vessels respectively, indicating stability in the market going forward. Please turn to slide seven. In the first half of 2024, we outperformed the VHSI and VSI on both our Hattie size and Supermax vessels by 840 per day and 410 per day respectively. However, our Supermax outperformance was affected by the increased costs associated with chartering short-term core vessels in the Pacific. This was necessary due to the high year-term cargo cover. We had anticipated this high near term cargo cover would benefit our outperformance provided the market follow historical seasonal trends. Our customer and cargo focus business model require us to take in short term charter vessels to optimize and supplement our own long term chartered fleet. As always, our outperformance is negatively impacted by the upwardly moving freight rates environment due to the lack between fixing and executing voyages. However, an improving market is ultimately beneficial, as we will benefit from higher freight rates as we secure new cargo contracts over time. Our outperformance continues to benefit from the scrubber installed across our core fleet of Hattie-sized and Supermax vessels, which have contributed with 30... $30 and $720 per day respectively to our performance over the first half of 2024. As previously discussed, our operating activities have seen significant growth with the number of operating days increasing by 29% year over year. We are pleased with our ability to scale these activities efficiently, demonstrating the support we enjoy from our customers. To support this growth, we have been investing in our workforce and systems, while recent office openings in Dubai and Singapore have increased our access to customers and cargo. Our strategy continues to focus on increasing profitable operating days on a year-on-year basis and restoring our performance on our Supermax fleet. Please turn to slide eight. Our highly-sized owned vessel costs have decreased, mainly due to lower crew repatriation costs as COVID-related controls have normalized. We continue to improve our cost competitiveness with our indicative owned fleet cash break-even level reducing to $4,620 per day, which is a 6% reduction year-on-year. Please turn to slide nine. Our supermax and handy-sized owned vessels' depreciation costs increased mainly due to higher dry docking costs and investment in fuel efficiency technology, including silicon and anti-fouling things. Our blended supermax costs remain cost-competitive, and we are scheduled to relive a $5 higher cost long-term chartered vessels during 2024, which we chartered in during the higher rate environment of 2022, and we expect the last of these vessels to be re-delivered by September 2024. Our indicative owned fleet cash break-even level is 5,120 per day, which is a 1% increase year-on-year. I will now hand over to Michael, who will present the financials.

Thank you very much, Martin, and good evening, ladies and gentlemen. Please turn to slide 11 for an overview of our P&L statement and financial performance. As you can see from the slide, despite the rise in our daily TT earnings, both our underlying profit and EBITDA have declined. This decline is primarily due to a significant increase in charter vessel costs, along with higher expenses related to bunkers, port disbursements, and other wage costs, all driven by increased business activities. Below underlying profit, our net profit was further improved by gains on vessel disposals, our hedging portfolio, and the right back of a provision related to a settlement in the period. Please turn to slide 12. As you will see, our cash position remains unchanged at $261 million. and we end the period with $537 million in available liquidity. Looking at the details, our operating cash inflow for the period was $103 million, and that is inclusive of all long and short-term charter hire payments. This compares with $150 million in the first half of 23. We had $8 million in proceeds from the sale of one small hand-sized vessel, which we delivered in the period. CAPEX spending remains well controlled, and for the first half of 2024, totaled $48 million, of which we paid approximately $25 million for the remaining balance of one second-hand Ultramax vessel, and around $23 million for dry dockings and investments in fuel efficiency technology, which Martin discussed earlier. We expect CAPEX for 2024 to be approximately $65 million, predominantly relating to dry doggings and investments in fuel efficiency technology and excluding any vessel purchases. We have paid out $38 million in dividends, which relates to the 2023 final basic and special dividend of 5.7 Hong Kong cents per share, which we paid in May 2024. As mentioned earlier, since the commencement of our share buyback program, we have repurchased and canceled approximately 42.7 million shares for consideration of approximately 14.6 million U.S. dollars. However, only 14 million U.S. dollars was concluded by the end period 13th of June. Over the period, repayments following the normal amortization profile of our loans amounted to 32 million U.S. dollars, while our borrowings only decreased by $4 million, as we extended and increased an existing term loan by an additional $29 million. Please turn to slide 13. Despite significant shareholder distribution through our dividend and share buyback program, we continue to maintain a healthy financial position with $537 million of available committed liquidity which includes 261 million US dollars of cash and deposits. Our net borrowings are unchanged at 2% of our own vessel net book value, and we currently have 61 on-mortgage vessels as of 30th June. We continue to maintain optionality in our long-term charter portfolio with purchase and extension options, allowing us to exercise if we see value. Our goal going forward is to ensure that we maintain a robust, safe, and flexible capital structure. Our distribution policy is to pay out dividends of at least 50% of our annual net profit, exclude investment disposal gains, and whereby any additional distributions can be in the form of either special dividends and or share buybacks. I will now hand you back to Martin for his outlook and strategy slides.