2020 Bulkers Ltd

Welcome everyone to the first quarter 2023 earnings conference call for 2020 Bulkers. As usual, I'm also joined here today by our chief financial officer, Mr. Vidar Hasun. Before we start the presentation, we'd like to remind you that we will be discussing matters that are forward-looking in nature. These forward-looking assumptions are based on the company's current views with regards to future events, and they're subject to risk and assumptions subject to uncertainties. As such, actual results may differ materially. And with that, I'll move over to the highlights for the quarter. 2020 Bulkers generated a net profit of $0.8 million in the first quarter. Although this is not a very high number and the market certainly points to better times ahead, we're happy to maintain the unbroken track record of profitability every quarter since we got our first vessel in operations. Again, we outperformed the cave size index and achieved time chart equivalent earnings of 17,500 per day compared to the Baltic cave size index, which was approximately 9,100 per day in the quarter. We did a number of contract extensions and short-term conversions from floating rates to fixed rates during the first quarter. This to ensure that we would secure a positive cash flow during what's usually the weak season. The weak season now seems to be firmly behind us, and as this fixed charter coverage rolls off, we will have significant exposure to the improving market we're seeing for the balance of the year. For the months of January through March, we made total cash distributions of 4 cents per share. And today we announced the cash distribution of 7 cents per share for the month of April. And with that, I will leave it over to Vidar for the financial highlights.

Thank you, Magnus. 2020 Bulkers reports a net profit of 0.8 million dollars for the first quarter of 2023. Operating profit was 3.5 million dollars and EBITDA was 6.4 million dollars for the quarter. Earnings per share was 4 cents. Revenues were $12.6 million for the first quarter, and the average time charted equivalent rate was approximately $17,500 per day gross. Vessel operating expenses were $5 million, and the average operating expenses per ship per day was approximately $6,900 in the first quarter. G&A for the first quarter was $1 million. 2020 Bulkers charged Himalaya Shipping $0.4 million in management fee for the first quarter. Interest expense was $2.7 million in the first quarter. Shareholder's equity was $154.7 million at the end of the quarter. Interest bearing debt was $217.6 million at the end of the first quarter, down from $221.3 million at the end of the fourth quarter, reflecting scheduled debt repayments. Cash flow from operations was $4.4 million for the first quarter. Cash and cash equivalents were $15.9 million at the end of the quarter. The company declared total cash distributions to shareholders of $0.04 per share for the months of January, February and March 2023. That completes the financial section, and now back to you, Magnus.

Thank you, Vidar. We continue to show strong commercial performance, not only relative to the Cape size index, but also relative to the TCE results announced by our public peers who break out their separate earnings for the Cape and Newcastle Max segment. This reflects the additional earnings power of a scrubber fitted Newcastle Max relative to standard Cape size vessel. Here we take a look at our illustrative dividend capacity going forward in conjunction with our current charter coverage. As you can see, the fixed rate charter coverage we had earlier in the year is rolling off going forward, offering us good leverage to an improving market. The FFA curve for the balance of the year currently sits around $21,000 to $22,000 per day, which would imply, in theory, if we locked all our ships into fixed rates today, around 12 kroner in free cash flow per share for the eight months remaining from May till December. Taking a look at the market so far this year, it started out with the usual seasonal weakness in January and February. This, we think, was also exaggerated by the first Chinese New Year in two years without COVID restrictions, where the Chinese population was traveling and industrial productivity came down. However, since late February, we've seen a strong recovery in rates, largely driven by strong Chinese iron ore and coal imports, as well as strong bauxite volumes. Yesterday's import figures out of China showed the new all-time high import of iron ore for the year-to-date period, and the same for coal. Taking a more detailed look at the Cape size trade this year, we see that overall tonne miles sailed on Cape size vessel are up around 5% year-to-date relative to 2022. This is mainly driven by a 30% increase in tonne miles for bauxite. For iron ore, tonne miles are up 2.7%. And for the coal trade, tonne miles are up 3.9%. We also find it reassuring to see that congestion levels are back to more normalised levels after having significantly higher than normal congestion levels during COVID. Hence, this does not represent in our view a downside to the market, but rather the opposite should we get disruptions in the market. Now to have a look at the steel market. The global crude steel production for the period of January through March was up 0.5% compared to the same period in 2022. The world ex-China was down approximately 7%, while Chinese steel production increased around 7%. As I mentioned, looking at yesterday's import figures from China shows an all time high year to date import level of 385 million tonnes, which is up around 8.6% year over year. This is the highest recorded and around 7.5% above the five-year average. It's particularly interesting to view this in context of the iron ore inventories, which as you can see, have been dropping and are at levels both below last year and the five-year averages. Based on the collective guidance from the largest iron ore producers, we expect an increase in output this year compared to last year, which should be supportive for shipping volumes. We don't have a graph on coal here, but it's also worth noting that Chinese coal imports were up 90% year to day compared to 2022. This is around 45% higher than the five year average. Now looking at the supply sides, the order books keep shrinking and we're now down to 4.8% of the existing fleet on order in the Cape size segment. This in combination with Chinese yards still having very little capacity for new orders before 2026 means we have good visibility of three years ahead with historically low fleet growth. Looking at it more broken down by year, Clarkson expects deliveries of around 12 million deadweight tons this year, dropping to 7.2 next year and 3.9 in 2025. Scrapping year-to-date has also picked up compared to the same period last year, with around 1 million scrapped compared to 0.85 million deadweight tons for the same period last year. We're also seeing reported around five ships circulated for scrap for the time being that we expect to be taken out to the market. Lastly, we'll repeat the message that we have environmental regulations that's coming into the industry now that will have an effect. It's hard to quantify exactly, but on the margin, CII and EXI will be tough for all the less fuel efficient ships. Clarkson's data suggests that 67% of large broker fleets may face non-compliance by 2023. We find this a very interesting picture looking at it in context with the law workbook on the previous page. And with that, I will conclude the presentation and leave it over to the operator for questions.