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.

We will now begin our question and answer session. If you have a question for today's speaker, please join the Zoom link via the blue Ask a Question button. Press the raise hand button and you will enter a queue. After you're announced, please unmute yourself, state your name and company, and ask your question. If you find that your question has been answered before it is your turn to speak, please press the red lower hand button to leave the queue. You may also type your questions in the Q&A box.

One online question coming from the Q&A.

regarding with your proposal sorry the u.s potential actions in charge on your chinese vessels yeah now the regulation is of course uh of course we've seen it and then we have evaluated consequences for uh for for us um i had to remember that majority of our ships are actually japanese built we have we have 75 build ships. And when you look at how much we call the US, I think it's about 7% of our ports are in the US. So if the rules are being implemented as they look at the moment, then of course it will have an impact, especially if we call the US. But I think when we look at what will happen, this will really disrupt our market. And it's again one of those disruptions that overall we believe is good for our market, because suddenly it will be longer and people will of course have to position the right chips and do the right things when they call the US. So it will have an impact on our trading pattern. We will have to adjust that part. decide exactly what to do on that part. But it's one of those examples that people have an impact on the market because this is not the one again that will create volatility and also lower term buying.

Our next question comes from Cathy Huang on the webinar. Please unmute your line and ask your question, Cathy.

Hi, Martin. This is Kathy from HSBC. So we would like to check your outlook on the dividend. And this is the first question. And the second question is that Trump announced 10% more tariffs on Chinese imports overnight. So can you assess the impact on Pacific Basin's operation?

Yeah. So as we announced earlier here, the board has recommended that a total 50% dividend for 2024. And on top of that, a $40 million share buyback program that we will execute this year, similar to what we did last year. And in respect to the tariffs coming in, I think because there's a lot of things on the tariff side at the moment coming from the US. U.S. is not a huge importer of dry cotton. They're probably more the exporter. They're not in a global scale, not small, but they're not that big. The thing we probably shouldn't look at is how are others going to retaliate to the U.S. tariffs? So mainly probably China. What's China going to do in return for these increased taxes implemented by the U.S.? ? And we don't know that yet. And of course, we are following that path. In general, we would say, again, these trades, again, it will create these disruptors that actually sort of creates longer time. It will make sort of not very optimized supply chains because you have many different things. So in that sense, it's quite positive for us. I think we always fear a little bit when we start talking about these things. it will have an impact on the global economy, because we are actually also driven by the global economy for the benefit of people. But all these disruptors, of course, acts on top of global growth. So short-term, definitely an advantage. We have such issues, but in the long run, we fear it might also impact the global growth.

I hope that replied to your question.

There are currently no questions on the webinar, but I would like to remind people that if you have a question for today's speaker, please join the Zoom link via the blue ask a question button and press the raised hand button and you will enter a queue. You can also type your questions in the Q&A box. Thank you. Okay, our next question comes from Sandeep Varma. Sandeep, please unmute your line and ask your question. Thank you.

Thanks. Congratulations, Martin, on decent set of numbers. I wanted to understand what percentage of your own fleet is Chinese built? And I have a follow-up after that.

What's the second question, Sandeep?

No, no. So I wanted to understand in case if it is less than 25%, then would you be using this opportunity to buy some of the Chinese, I mean, would you be using this opportunity to kind of contact some of the Chinese shipyards for some of the ships? because these may be available at a bargain price. I'm talking about a scenario if these proposals by USTR goes through. Thank you.

The first question, it's about 25% of our heat is built in China, and the remaining 75% is Japanese-built vessels. And we also know that how many calls we actually had in the US last year, and that was 7%. I think it's about 600 more calls actually. We have a lot of calls actually in that time, but percentage-wise, it's actually only 7%. I think on what opportunities it will bring in the asset space, that remains to be seen. China. And of course, if these rumors are being implemented in how the program is today, there's also some opportunities for us because we are mainly Japanese ships. There might be some opportunities on that side. I think we are always following all opportunities to buy vessels in the market. And, you know, we actually like these, you know, the volatility in the market, also the asset prices, because it from the cyclical investments or at least the investments were good timing. So of course we follow this very carefully, but we have so far not seen that the Chinese bill of ships are very discounted. I do actually think maybe there's not so much trading going on or so much sale going on of Chinese ships at the moment. So people are probably holding back and waiting for, to see how they move to bring nation. But I agree with you, it might give some opportunities one way or another.

I understood. Very, very helpful. I'm just thinking of a possibility. For example, if your company has 20% of its fleet with a Chinese build, then probably you'd like to take it to 25% to take the advantage of probably a cheap I mean, probably cheaper ships available at Chinese yards than it would be otherwise. And one clarification I'm looking for, when you say that 25% of your fleet is Chinese built, you're talking about your operating fleet or owned ships?

than 12 ships plus, and then we also have four new buildings, but out of the 112 ships, 25% are built in China. I think there's a lot of things, you know, it's still a little bit early, but we of course have seen, I'm sure the Japanese yachts and maybe the Koreans see more activity or more inquiries in respect to new buildings. different others, not necessarily dry cargo, but for all segments, for some who might want to get a little bit more balance in the fleet. I think if you look at the total fleet, how many ships are built in China, it's a lot. And I think in the dry cargo space, there's very, very few owners who have a much higher percentage And we have historically, and still are, also because we normally keep the ships, but I have had some preference for the Japanese ships, who also often actually also trade better on the speed and consumption. So we have always had a preference for the Japanese built ships.

Understood. If I can ask one more follow-up, which is what is the ratio of Chinese-built ships in your operating fleet? Because if this regulation goes through, that will be applicable for the operating fleet, not just for the owned ships. And if you have higher proportion of Chinese-built ship, higher than 25% of your operating fleet is Chinese-built, then you may be looking for exiting some of the charters or chartering more Japanese-built ships to benefit from this regulation.

You know, our charter fleet, we have 17 long-term charter ships, and they are all Japanese-built ships. When you talk about 100, I think it's 148 short-term charter ships we have on at the moment. I actually don't have right now that number. But all these ships are very short period, right? They are all, you know, on voyage, maybe five to seven months. So they are all very short commitments. in that part. So our big commitment is the 17 long-term new buildings, charters that we have in Japan, plus our own 112 ships that we trade at the moment, plus our own new buildings from Japan. And I'm sure you're right that if these rules are implemented, then of course you will see, maybe not call it a two-tier market, but you'll definitely see you know, things will change and people will look for different kinds of ships to do it. But I think it's also important to remember that the majority of the dry cargo trade on our ships is outside the U.S. The U.S. is not unimportant, but for the container or for the dry cargo space, our trade is much more outside U.S. than to U.S. But I'm sure, you know, you will see ships that is not Chinese built and only different structures will start calling more to U.S. And what's going to happen in the container space in other states, that's going to be interesting to see. But this will have quite a disruption in the market because rules are being accepted and implemented.

Understood. Thank you so much. One clarification for this proposed rules. So your company will be falling under Chinese rules

shipping company i mean uh will it qualify as a chinese shipping company or uh or uh non-chinese shipping company because your incorporation is in is not in china now we so we are hong kong uh listed so i guess that depends a little bit on how others see hong kong uh and we don't know we'll have to see how how that you know

Thank you so much.

Thank you very much, Danny.

For our next question, we'll be heading back to Cathy Wang. Cathy, please could you unmute your line and ask your next question? Thank you.

Hi, Martin. I have another question. So we noticed that the cover ratio and rates in this year, in the first quarter of 2025, are lower versus the same last year. So is it in anticipation of fry rates to improve? How does this position Pacific Basin if there are more head swings to demand? And as you mentioned, there will be oversupply.

Yeah, I didn't say there would be oversupply. I was just saying there's a place that... at least according to Jackson's and others, there's more should be delivered than what they expected the value to be. But so we have to see how the disruptors actually impacted that market going forward. I think when you look at our cover, you said first quarter, actually our cover for first quarter, we are basically 100% covered of supers and ultras. And I'm glad we are because the market actually saw some of the normal seasonal dip in January. So I think we're in very good position for first quarter. But it's true that if you look for the full year, our cover this year is lower than we had at the same time last year. And I think we've been talking also at previous calls, the challenges we had last year, we simply had too much cover, especially on the supers that actually hit us in the sense that it was very tough for us to sort of optimize, do the triangle trading and do the things we normally do so well because we had too much cover. that side. So this year we have reduced that a little bit and the reason we've done that is also to make sure we have the space and the room to operate and position our ships in the right positions and maximize the earnings and the margins on our business. We have to see how the market is moving. We We normally try quite well when we have the volatility in the market. We have the seasonality in these things. That's actually where we often perform the best. So we have to see how this year is going. I have to say that when we entered last year, we were also a bit worried about the market. But again, multiple disruptors last year changed the market totally. Not to the bad. It was actually quite good. And we also outperformed the market. But we didn't get the margin we wanted on the supers. And this year we try to position our different different to make sure that we can we can gain on the on the OPS and then we'll see in the market, of course, I'm quite happy with the car we have a little bit of flexibility that is needed.

Yes, thank you. That's very clear.

Okay, so there are currently no raised hands on the webinar, but I would like to remind you that if you would like to ask a question, then please use the Zoom link via the blue ask a question button, and then please use the raised hand button and you will enter a queue. I'll just give it a moment to see if we get any final hands. Okay, there are no further questions. And as there are no further questions, we will begin our closing remarks. So please go ahead, Mr. Martin Fruergaard. Thank you.

I'd like to thank you again for joining us today and for your continued support of the City of Gleeson. If you have any further questions, please contact Cameron Hill from our Investor Relations Department. Goodbye.