2020 Bulkers Ltd

Welcome everyone to the third quarter earnings conference call for 2020 Bulkers. As usual, I'm joined here today by our Chief Financial Officer, Vidar Hasun. Before we start the presentation, I'd like to remind you that we will be discussing forward-looking matters. These assumptions are based on the company's current views with regards to future events and inherently subject to risk in assumptions. with uncertainties. Actual results may differ materially. And with that, I will start with some of the highlights for the quarter. In the third quarter, we generated a net profit of $5.2 million. This figure includes $1.9 million, which is the estimated final insurance settlement for the bulk Shenzhen collision we had back in August 2021. And with these results, we safely maintain our unbroken track record of being profitable every quarter since we got our first vessel in operation. We again continue to outperform the Cape Size Index. We achieved time charter equivalent earnings of 21,000 per day gross. This compares to the Baltic Cape Size Index, which was around 13,400 per day during the quarter. For the months of July through September, we did make total cash distributions of 12 cents per share. And today we have announced another one for the month of October of 20 cents per share, which interestingly represents 2.25% of the current market cap for one month's earnings. And with that, I will leave it over to Vidar.

Thank you, Magnus. 2020 Bulkers reports a net profit of $5.2 million for the third quarter of 2023. Operating profit was $8.2 million and EBITDA was $11.1 million for the quarter. Earnings per share was $0.23. Revenues were $17 million for the third quarter and the average time charted equivalent rate was approximately $21,000 per day gross. The company recognized $1.9 million in insurance settlement as other operating income in Q3. Vessel operating expenses were $4.9 million, and the average operating expenses per ship per day was approximately $6,700 in the third quarter. G&A for the third quarter was $0.8 million. 2020 brokers charged Himalaya Shipping $0.2 million in management fee for the third quarter, which is recognized as other operating income in the financial statements. Net financial expenses was $2.8 million, including interest expense of $2.9 million in the third quarter. Shareholders' equity was $157.3 million at the end of the quarter. Interest-bearing debt was $210.2 million at the end of the third quarter, down from $213.9 million at the end of the second quarter, reflecting scheduled debt repayments. Cash flow from operations was $7.1 million for the third quarter. Cash and cash equivalents were $16.5 million at the end of the quarter. The company declared total cash distributions to shareholders of 12 cents per share for the months of July, August and September 2023. That completes the financial section. And now back to you, Magnus.

As mentioned, we continue to show strong commercial performance, not only relative to the market and Cape Sass index itself. but also relative to the results we're seeing announced by other public peers who do report and break out their earnings for the Cape and Newcastle Mac segment. Of course, this to a large extent reflects the additional earnings power that our scrubber fitted Newcastle Macs have relative to standard Cape size. Moving on, looking at the market, the market started out, as we talked about before, pretty normally this year with seasonal weakness. in Q1 before improving somewhat into Q2. We've had a year overall with quite good volumes and demand, capesized for miles are up 3.7% year to date. However, during Q3 in particular, and we'll look closer at this later on, this was to a large extent offset by a significant unwinding of congestion. We've seen the market pick up again in Q4 and rates are so far this quarter around 24,000 a day, up from 13,400 on average during Q3. Then looking at our dividend or cash distribution capabilities, as mentioned, we showed some of our operational leverage here. through the 20 cent dividend or cash distribution that was announced today based on the month of October. We currently have all our vessels open on index link charters, i.e. no fixed charter contract coverage. And I think if you look at it, It gives you an idea of the exposure we have to what we believe is an improving Cape size market. And of course, the reason why we've chosen not to have any fixed exposure for the time being. Although a poor predictor of rates actually end up historically as a reference, we can say that November to December FFA curve of this year is around 15,500 a day. And the curve for next year is around 13,900. Taking a closer look at what's been driving the trade growth this year, as mentioned, we've seen cave-sized home buyers grow by around 3.7% year-to-date. The main contributor is the increased bauxite trade, which is largely long-haul volumes from Guinea into China. That trade itself grew by 30% in ton-mile terms. We've also seen the iron ore trade grow by around 3.2%. There's growth both in Australia and Brazil. I guess Australia has grown at around 1.5% this year, whereas Brazil is at a higher run rate. So with this good demand growth, why hasn't the market been better? By all means, it's okay, but I think it's fair to say that 2.3 was a bit disappointing. And I think you see that on the graph here on the right-hand side. We had a massive unwinding of congestion. Here we measure it by the percentage of the cave-sized fleet, which is import at a seven-day moving average. Of course, everyone knows that there was a buildup of congestion during COVID. We had the first round of unwinding of that during the period after May 2022. And then we've seen a significant unwinding now again during Q3 largely. I think what we can take away from this chart, which goes back to 2027, is that we are now at levels that would be low pre-COVID, pre any of these disruptions we were witnessing for a while. Of course, everyone who follows shipping knows that from time to time you do get disruptions. And it's very rarely that machinery runs smoothly all the time. And I think now at least this represents an upside risk to us going forward. Then looking at, of course, China, I would say almost contrary to to the narrative in the press. Of course, China is struggling with its property sector. Perhaps surprising to some, iron ore imports in China are up 6% year to date. And I think it's even more interesting to see that in the context of how they are drawing inventories. Inventories are now significantly, as you can see here on the right-hand side, below the five-year averages. And I think we have to assume that that does mean there will be a restocking taking place at some point, which obviously would be supportive to the capricious markets and our markets. Looking at the steel markets, world ex-China steel output came in. around 4% higher year over year for the month of September. I see this graph has been cut a bit earlier, so we'll make sure we post an update of that one. China monthly steel output is still up year over year on an annual basis, although September as an isolated month was down 6% after growing in August. I think lastly, we are still very much encouraged by the outlook of the supply side going forward. According to Clarkson's, the Cape size order book is now down to 5%, which should be the lowest level in the history of their time series. We know, thanks to the significant ordering interest for containers and LNG, also to some extent smaller tankers that we have seen over the last years, that yards have very limited capacity, number one. And number two, I guess cape size and new cast max are a lower margin product for them. So, There are, of course, slots here and there that can be dug out, but the significant capacity available for building new Cape size or Newcastle Max vessels really comes from 2027 onwards. And that, of course, means that we have a pretty good idea of what will come out on the supply side, and it's not really much that can change that. We expect 6.8 million deadweight tons to be delivered next year, down from around 11 this year, and around 7 next year. So next two years, we'll see muted fleet growth compared to what we've seen in the previous years. We are not looking to order any new builds. But of course, we follow the market. And I think based on the input we are getting from yards and brokers, the pricing for a new CastleMax with the scrubber today is very close to $70 million. And the yards are also tightening their payment terms. So given how how cheap assets are in the second-hand market, and also the valuation of publicly listed drivable companies. It does not really make much sense for any financial investor, at least, to look at all renewables today. I think with that, we will conclude the presentation and leave it over to the operator for questions.