Pacific Basin Shipping Limited

and thank you for attending Pacific Basin's 2024 Annual Result Earnings Call. My name is Martin Forgo, CEO of Pacific Basin. 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. In 2024, we generated an EBITDA of $333 million an underlying profit of $114 million and a net profit of $132 million. This resulted in a 7% return on equity and incurring a share of 19.9 Hong Kong cents. We have a strong balance sheet with net cash, about US$20 million, and an April committed liquidity of $548 million. Our core business generated $178 million market while our operating activity contributed 70 billion dollars having generated a margin of 630 dollars per day over 27 610 days if you have a sound cash generation the board recommends a final dividend of 5.1 hundred cents per share combined with the interim dividend distributed this amounts to 61 which represents 50% of our net profit for the full year, excluding vessels, disposal gains, consistent with our distribution policy. The board has also approved another share buyback program of up to $40 million in 2025, as our shares continue to trade substantially below the current market value of our assets. Please turn to the slide. In 2024, we completed the announced $40 million share buyback program, buying back and canceling a total of 138 million shares, which reduced our issued share capital by 2% after our convertible bond conversion in June 2024, resolving the issue of 30 million shares. This combined with the recommended final dividend means we are committed to distributing about $101 million or 83% of our 2024 net profit, excluding vessels and social gains. Since 2021, we have generated approximately $1.75 billion in profits and are distributing around $1.17 billion or 67% of total net profits We believe that buying back our own shares at a significant discount to A to B is a strategy that enhances shareholder value more efficiently than acquiring second-hand vessels at current prices. Please turn to slide five. In 2024, average market spot freight rates for Hattie Size and Supermax increased 24% and 21% year-on-year, to US dollar 11,120 and 12,920 net per day, respectively. Thermal drywall demand growth, especially Chinese demand for coal, iron or bauxite, supported the trade market in 2024, while disruptions in the Panama Canal and the Red Sea ironed out seasonality and drought on wild demand. However, the market weakened in the fourth quarter as transit through the Permacanal normalized along with weaker than expected trades exports. Current forward trade agreements, or FFAs, indicate steady improvements in the remainder of the first quarter of 2025, despite hovering below the overall level in 2024. As trade rates corrected in the fourth quarter in 2024, we anticipated a weaker start to 2025, and actually took cover for the first quarter at rates higher than the current spot market rates. Drywall market activity has picked up since the early New Year holiday at the end of January. Please turn to slide six. Drywall loading volumes grew approximately 2% year-on-year driven by robust Chinese demand. Miner body load is increased 3% in 2024 due to increased loading of bauxite, active bulk, steel, and forest products. Bauxite continued to drive miner bulk loading mainly from Gilea and mainly carried by large bond carriers. China's big property market dampened the demand for construction material, including cement and steel. The excess steel produced was exported, leading to a 26-year-and-a-year grain loadings increased by 4% year-on-year due to increased loadings from Argentina and the US, which had recovered from drought in 2023, while Ukraine grain loadings increased 84% year-on-year with the success of its own corridor despite ongoing conflicts. Brazil's strong soybean export at the start of the year was eroded by delay in corn exports and limited for 2024. Coal loadings decreased 1% year-on-year as demand declined in European countries and some East Asian countries under the renewable energy transition agenda. Chinese coal demand remained robust in 2024 due to no domestic production and hydroelectric output in the first half of 2024. And finally, iron ore loadings increased 4% year-on-year driven by increased production from key exporters, Australia and Brazil, along with strong Chinese demand due to its steady steel production, which benefited from improved steel margins, giving favorable iron ore prices and robust steel demand, especially in Southeast Asia. Please turn to slide seven. For first quarter 2025, We have covered 92% and 100% of our committed vessel days for our Hattie-sized and Supermax core fleet at 10,770 and 12,680 per day, respectively. These rates are higher than the current market spot rates, as well as the FFA rates, which are about 8,230 for handy size and 8,480 for Supermax in the first quarter. We had more open days left this year, having covered 40% and 56% of our committed days compared to same time last year. In 2024, our core business achieved average handy size and Supermax daily TC earnings of 12,840. and 13,630, which represents a 5% increase and a 1% decrease compared to 2023, respectively. In the fourth quarter of 2024, we reversed rate tax provisions from prior periods, which positively impacted our handy-sized Supermax TCE earnings by 1,208 and 1,920 per day, respectively. This resulted in a full year increase in our handy size and supermax TCE earnings by 320 per day and 470 per day respectively. We do not anticipate any further prior period freight tax adjustments affecting our future TCE calculations. Please turn to slide eight. In 2024, our anti-size and our supermax vessels outperformed the indices by $1,720 and $710 per day, respectively. If we exclude the positive impact from the reversal of trade tax provision, the outperformance would have been $1,400 and $240 per day, respectively. Anti-size outperforms continued to improve over the year, driven by well-timed cargo coverage. and our ability to optimize through triangulated trading. On the other hand, our supermax outperformance was limited by a high cargo cover, as we anticipated the usual seasonal decline in the trade market, which unseasonally only materialized in the fourth quarter of 2024. In the fourth quarter of 2024, our supermax outperformed the index by 3,620 per day, or 1,700 per day, In 2024, operating activity generated a margin of 630 US dollars per day. Operating activity margin was impacted by unforeseen weather related disruptions and congestion in the fourth quarter of 2024, especially related to Chinese demand. Our operating activity days increased 80% year-on-year to 27,610 days in 2024, we will continue to expand our operating business, allowing us to capitalize on market volatility. Please turn to slide nine. Our heavy-sized daily core vessel costs have increased marginally. Although OPEX decreased with normalized crew costs, high depreciation costs from dry docking and fuel efficiency investments, along with a slight increase in long-term charter vessel costs due to delivery of long-term charter building vessels, increased the blended cost, core vessel costs by 2% to 8,750 per day. They continue to remain cost-competitive with our indicative old cash break-even level further reducing to 4,710 per day before GMA, representing a 4% decrease year-on-year. Please turn to slide 10. Supermax for vessels depreciated costs also increased due to higher product costs and investments in human efficiency technologies, including silicon paint. After the delivery of higher cost long-term chartering vessels, Our long-term charter basis days decreased, and daily costs reduced 10% year-on-year to 16,310. As a result, populated supermax costs, daily core vessel costs also dropped 5% to 9,650. Our indicative owned fleet cash break-even level increased slightly by 1% year-on-year to 5,130 per day before GMA. Please turn to slide 12. Revenue in TCE earnings increased due to high activity level and higher freight rates, but higher chartered cost of business required to fulfill cargo commitments, especially on a supermax result in a slightly lower EBITDA in 2024. Our G&A has increased slightly, predominantly due to increased cloud costs related mainly to our digitalization and optimization efforts. Our net profit was $132 million, further improved by gains on vessel disposal for the five boulder-headed-sized vessels. Please turn to slide 13. We continue to maintain a robust financial position with $548 million of vacant or committed liquidity, which includes $282 million of cash and deposits. Our operating cash inflow from the period was $259 million, inclusive of all a long and short-term chart higher payments compared to $286 million in 2023. We realized $44 million from the sale of five older anti-size vessels, which has an average age of 20 years. Our capex amounted to $128 million, which included $46 million for dry doping, about $40 million initial payment for four new building ultra, maxed low-emission vessels, and about $43 million for true vessels delivered into our fleet in 2024. We paid a total of $66 million in dividends, which included 2023 final basic and special dividends of 5.7 Hong Kong cents per share, and the 2024 interim dividend of 4.1 Hong Kong cents per share we paid in August 2024. We spent $40 million to buy back shares under the 2024 share buyback program. And our net cash outflow from borrowing was $36 million in 2024. Please turn to slide 14. Our balance sheet remains strong. We returned to a net cash possession of $20 million in 2024 from a net borrowing of $39 million in 2023. Our owned business totaled market value was estimated to be higher at $2 billion, according to composite broker evaluation. As per 31 December 2024, we had 59 vessels that remained on mortgage. Our goal is to optimize our capital allocation and ensure a robust, safe, and flexible capital structure, which will enable us to make strategic and counter-cyclical investments, pursue growth initiatives, and deliver value to our shareholders going forward. Please turn to slide 16. Miner bulk tonne miles are expected to grow 2.3% in 2025, supported by a broad-based trade demand and global economy. This is estimated to grow by 3.3% according to latest IMF forecasts. An increased trade volumes for miner bulk, such as cement and clinker, or also concentrates, fertiliser and steel. The demand for iron ore was expected to moderate due to reduced Chinese domestic housing construction and rising steel trade protectionism. Similar coal demand is anticipated to decline, giving ample stocks in China, increased domestic production in India, and transition to renewable energy in Europe, European countries, and some East Asian countries. On the other hand, climate change is expected to continue affecting domestic crop output This may lead to increasing grain import volumes, improvements in crush margins and hog prices in China may also support grain demand. Please turn to slide 17. The minor ball fleet is forecast to grow by 4.4% due to more deliveries in 2025. from orders placed during the strong market in 2021 and 2022, while scrapping is forecasted to remain muted at about a half percent of the fleet. The combined order book is currently at about 10.9% of the total fleet, which is considered manageable compared to historical figures. Additionally, the scrapping pool continues to increase with approximately 14 and 11% of handy size and supermax capacity being over 20 years old. Going forward, we believe emission regulations will likely further reduce effective drive-on supply to slower speeds, accelerate the scrapping, and increase downtime for retrofitting energy-saving technology. Therefore, we are confident in our sector's long-term prospects despite the short-term supply increase. Please turn to slide 18. Transit through Padua Canal normalized after an increase in rainfall since the rainy season began in May 2024. As for the Suez Canal, the Houthis have suspended attacks on the non-Israeli shipping in the Red Sea under the Gaza ceasefire agreement. However, transit has yet to recover as shipping companies maintain caution and insurance costs remain high. A small proportion of drywall fleets transit to Suez Canal compared to other shipping segments, particularly container ships. Ship brokers estimate a 1-3% drop in drywall to mile if Suez Canal transits. Please turn to slide 19. Local commodity demand is expected to remain steady in 2025, despite easing demand for iron ore and coal. measures from China to meet growth targets, with a focus on expanding domestic demand and supporting consumption. Further disruptions arising from geopolitical tensions, trade tariffs, and extreme weather conditions could potentially increase tonnage demand. The current dry oil feed order book is around 10.4%, and net feed growth in 2025 is estimated to remain steady at 3% per year. Rising protectionism would negatively impact the local economy and trade, while tariffs and widening deficit in the U.S. could drive domestic inflation, impacting interest rate cuts. The complete unbinding of Red Sea disruption would result in decrease to a mild advantage. although the impact is relatively limited in our sector. Additionally, the anticipated weak active size and supermax vessel delivery in 2025, with an estimated net fleet growth of 4.4%, is expected to outpace the 2.3% growth in minor bulk tonne mild demand. But scrapping is forecast to remain limited under the IMO, until the IMO formalizes its next decarbonization regulations. We remain cautiously optimistic about the year ahead and are prepared to seize any opportunities arising from increased volatility in 2025. Please turn to slide 21. We maintain our disciplined approach to the growth and renewal of our fleet by acquiring modern secondhand vessels counter cyclical and less efficient vessels to unlock values. With LEV orders and long-term charters of new building vessels that comes with purchase options, we aim to maximize our growth optionality with the ambition to reduce emissions and transition to net zero by 2050. 2024, we exercise the purchase option on 158,000 deadweight tons supermax vessel built in 2016, and we sold five boulder-handed-sized vessels with an average age of 20 years for a net proceed of about $44 million. Since 2021, we have been increasing our carrying capacity and feed efficiency by selling 25 boulder vessels with a total capacity of 0.8 million deadweight tons including 23 heavy-sized vessels, one supermax and one ultramax vessel, and we have acquired 20 second-hand vessels with a total capacity of 1.1 million deadweight tons, including six heavy-sized vessels and four supermax and ultramax vessels. As vessel value softened in recent months following the decline in trade rates, we will continue to assess strategic and counter-cyclical investment opportunities when they arise in the markets. Please turn to slide 22. In November 2024, we contracted 64,000 deadweight dual-fuel methanol Ultramax new buildings from our Japanese partners for consideration of $46.5 billion each. We had expected delivery in 28 and 29. Given the current order book and age profile of minor bulk fleet, as well as with tightening regulations and limited shipyard capacity, we believe we are making the right move at the right time. The deal is based on various considerations and expected benefits. These include added financial values from purely EU, emission cooling, and selling over compliance credits, which can accelerate payback. as well as saving from using renewable fuel compared to the cost of carbon tax and penalties associated with conventional fuels, which are expected to rise with more emission regulations from, among others, the EIO. The move aligns with our long-term initiative to transition to net zero emission by 2050. Please turn to slide 23. Our long-term chartered new building investments provide us with the opportunities to grow and improve efficiency without initial cash outlay. In 2024, three 40,000-debit-tonne anti-size new buildings and 164,000-debit-tonne ultramax new buildings were delivered to our fleet. After re-deliverance of long-term charter vessels, we had 70 vessels at the end of 2024 that had extension and purchase options. In 2025, We retain purchase options on four anti-size vessels and one on-trip accessible, and we will evaluate whether to exercise these options. By maximizing optionality, we can better navigate market volatility and remain agile and competitive in different stages of the shipping cycle. Please turn to slide 24. We are well prepared to navigate the short-term uncertainties anticipated in 2025, as we plan for long-term growth. Our market position remains strong, and we continue to be fully customer and cargo-driven. We aim to grow our position as both an owner and operator in the minor policy segment. By maintaining a long, open position, we can leverage market cycles as we optimize our short-term position to capture market volatility. In view of the market developments, we are committed to further improving our costs and striving for sector-leading cost base. We are enhancing our performance management approach and continue to invest in performance, digitalization, and data use to continuously improve our productivity and profit margins. We aim to grow the company by implementing a disciplined and counter-cyclical strategy for fleet growth and renewal. This involves acquiring modern secondhand vessels by selling older and less efficient vessels. We maintain a prudent approach and continuously evaluate vessel price development to maximize value creation through timely investment and divestments in our fleet. For capital allocation, we aim to maintain a robust and flexible capital structure with high liquidity, enabling countercyclical investments. We have limited committee capex, mainly relating to our neutral dry droppings and investment in feed optimization, excluding any vessel purchases. We remain positive about the long-term fundamentals and prospects for drywall shipping. Finally, following a search that presented us with a number of Hector and candidates, we today announced that Jimmy Ng will join us 12th of May, 2025 as our new Chief Financial Officer. Please see our announcement dated today for a summary of his professional experience with U.S. and European investment banks and since 2008 with Hutchinson Port Holdings. I look forward to welcoming Jimmy to the team shortly, and I'm confident that he will be a valuable addition to our leadership team and contribute well to the continued growth and success of the civic base. Here, I would like to conclude our 2024 Annual Result Presentation by thanking our colleagues at CEE, at the show, for their contribution to our result. I will now hand over the call to the operator for Q&A.

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