Q3 2019 Earnings Call

October 24, 2019

Half with Us Mr., Gregory Siegel, Chief Financial Officer of the company.

The third quarter of thank you the company can live with profitable results as was the case in the previous quarter net income and an expression more than doubled what sort of I agree you started today to the additional fuel shapes [noise].

Turning now to this slide presentation.

Over the past quarter was helpful looked at that you find that she wants to 9000 through your Containerships.

The older walk us father declined to 10% well the existing fleet.

[noise] on slide five you can see if somebody up our recent shopping activity. Once was my something here is that it is increasing the charter rates for the larger vessels compared to last Oh.

18, Containerships about 5005 cavity use which our view for re chartering, which provides us with significant upside should imagine continue.

During the third quarter of this year the company generates a definition funded 24 million and not drop and then think about 31 million.

Yes, which other everything else.

[noise] slide eight we're showing that had been contribution put out a fleet.

The other day, it's moved up during the first three quarters Oh, the year by an average of 34%.

The idle fleet is showing up 2.9% adjusting however for the vessels are there going scrubber installation it drops to about 2%.

The order book.

Steadily decreased to 10%.

This concludes our presentation and we can now take questions. Thank you operator, we can take questions now.

Thank you as a reminder, if you would like to ask a question. Please press Star then one on your telephone keypad.

So, it's mainly supply and demand pick up into with a their fiscal condition of the vessel, which are a which were found to be satisfactory no scrap prices. They have what kind of more upbeat, but yeah I thought around $400 per dollar. So historically speaking, although they have come over the 450 at Fort 80 there.

Also seen doing okay maintenance cost and that and you know potential drydocking cost in the short there didnt make that particular asset atopic.

What kind of engines to put in their ships do they want LNG they want not.

And obviously on a long term contract, it's going to be up to you know whoever the liner is but is that part of the consideration are you guys are looking to do you ever to do it would you be willing to have LNG is a primary fuel or or is it just a time, where you'd rather not do any new buildings, just because you don't know what the alternative.

Propulsion systems kind of look like.

No no good whether we're going to be entering into a new building transaction I backed by long term charter, especially if it refers to a bigger shapes and so it's got doesn't get their numbers. It's got to do out there what surprised by what do the financing because fuel that's gonna be our equity requirements and what this our expected.

We did it doesn't affect coding and that the chart the right. So.

Requirements and what's gonna be the return on equity for our shareholders a problem that we have pretty much.

Well open the same way we're open for like a large new buildings, a we said 10 or 20 year charter.

As for like 70 year old vessels.

Oh boy closely caused by the so in others, but we are pretty flexible I would say.

Okay and would you say that there's a decent I'm appetite currently in the market for those newbuilding contracts in the liner.

I think there is yet to say we have recently.

Okay perfect.

All right that that does it for me I'll turn it over thanks, Greg.

So we get through to the new year or is there sort of plan that you hear from liners extended beyond that I just want to get a sense of your views on on the Blake.

Yeah. They lost sailing this is something.

We've seen it relatively recently and it's also a function of this lack of videos.

England, Dennis you think we just traditionally the fourth quarter over the year. So at this point I cannot possibly predict whether these going up one thing you and like.

For like a lot the amount of time.

However.

But I cannot possibly sort of.

Forecast what capacity this could take off market.

Over the next over the next quarter.

All right that's helpful appreciate that color.

And then maybe another another question taking it from a bit of a different angle or maybe just have to do a little bit with some a larger vessels not being available, but yes, there's clearly been scrubber installations going on as we move through Threeq you wanted to Fourq you. How long do you think that last or does it sort of what's the tail into 2020 that you would expect to see some capacity out.

Yes, I mean, what we've seen now in the market is that they generally speaking as grabbing installations that whole process takes longer than originally anticipated.

And.

We also have a seeps without without a that brought us a fabulous.

I cannot tell you a like a whether it's going up before the first or second quarter or third but that doesn't from situation. Today I can tell that therefore the whole at 22 entered this is something that is gonna be taking capacity all of that market. This space any for the logic business.

Of course grabbing installation.

It's not like that or are those crop is gonna be installed within three to four weeks I said he said he thought it takes a much longer than that.

Also the capacity in the shipyards are especially a inez yeah, it's rather constrain so that I know tofa delays, though.

Okay. No. That's helpful. If that's good color and then I guess my last question just to sort of conceptually there's been the thought.

Yes, I wanted to get a sense, if you think that there's any risk.

Charter or level, so what youre level as your chartering out ships the liner companies that there could be so I.

Capacity carriers like yourself.

[noise] look a couple of points first of all.

The fuel expanded this it pass through cost into the line, which we all know, but they have to stress out there. This indicates because sometimes there's something so understanding that the the owners also solve some short old freeze regarding that fuel expense. It said now regarding that our customers.

Of course, a that are consistent generally about that the line the industrys ability to pass on the.

You know fuel expense so part of this incremental expense to the shippers.

With I kind of course, we answer right now, but generally I have to say that we feel extremely comfortable with said the greatest quality.

Of our business it bothers meeting the liner companies.

Okay. Okay.

And a lot of thinking about the credit side, so that makes sense. Okay. Thanks for the time I appreciate it.

Thank you.

Our next question comes from the line of Jade minutes Meyer of value investors.

Please go ahead.

Hi, Good afternoon, Greg first of all fantastic results on this quarter, it's really good to watch your earnings continue to go up I very nice charters on those two a 11 Katy you ships I first off is there any interest in the other ones I see there's three more they come off in March and one of them is also is them.

Yes, you're right there like a three you know sister ships, the 11000 to use gumming opt out there over the next couple of quarters.

Or do something we have in mind generally there is interest.

ER and Ah we are a in disguise from say the garden, but they sent out that didn't although oh those vessels, but on the other kind of these have been pretty much on another couple of October those come all within the next two quarters. So it may be a bit pretty mature now, but we definitely consider these.

More us an upside assuming that that market fundamentals day, where they are today.

ER and not the downside definitely not.

Excellent makes sense and then can you confirm those those five by 11 case. They don't have scrubbers correct is there any discussion on adding scrubbers to that's oh. They don't subscribers are those that same says that the that have been delivered to us in that 2017, there's a new buildings a high spec vessels.

Installed a as they caused it to be borne by the charter amortized over this a short them be it.

Yeah definitely definitely makes sense you want to see a longer term charter on those before committing to that installation you made a really good timing transaction with buying those York vessels. The 14 case Youre also owns the ownership in the 11 case, which as we're seeing are very lucrative assets is there any interest from New York to want to sell either rest of those 11 case or do you.

I think they're going to be in what the long term.

I think a there is no das a those are young ships I said that during the second thing that delivers we'd have an accident unless you bet with York and we've had a very good discussion regarding the acquisition of the 14000 dealerships, which was end of 2018 or the thing is that of course, we know the vessels.

We are managing those saves we'd have a 40% ownership on leverage and goes five ships. So there may be just CASM says we've got a in the future, but I think I know to make any forecast right now regarding the outcome of those discussions.

But that I mean generally this is something that a in the future or maybe on the table no discussions with your.

Definitely makes sense. Thanks, Greg last last question on the fleet I know I'm asking a lot here. We have somebody 95 case ships coming up in April and May and they're at about 29000 that used to be way above market, but now it looks like that's pretty much. The current market has there been any discussions to extend those potentially or some sort of scrubber deal or is that kind of a wait and see on those.

Not yet the you're right that the market. The is slightly below 30000 off of those resident no. We don't have any sort of discussion right now and Oh, there's other no discussions for scrubbers, either but they would think that the timing all the you know I am hoping to hope, but those vessels for.

Nothing I.

As well as the for the 11000 generally.

It looks like a good good timing.

Okay that dividend yield that happened there now, but like a north of 6%, which I consider to be a shelton like a deep within guilt based on the you know our our dropping I put out at this doesn't our performance since 2010 plus.

All of the sort of.

But they sell for upside.

From our ships coming off charter.

Are we likely this has led to remind you that a insiders own north of 55% Oh The company and there are no other shipping interest outside those type of some of it but are those sort of a increased dividend says would normally come together with increased contracted cash flows.

From long term business or it would there be I mean should put us at all.

Raise the dividend now by seven cents per quarter. This would be easy, but whether this would be the wise decision from an economical point of view or not this sounds as if we just got.

So it is important we see it is a board decision, but my personal opinion would be that the this would be truth or we should grow at the same time with the growth of the contracted cash flows.

All right Yeah definitely makes sense I appreciate the balanced approach and I keep up the good work. Thanks.

Yeah. Thanks for squeezing me back in with a follow up quite sure I wanted to specific model question, just looking at DNA depreciation amortization expense was was.

Good step down from Twoq, you wanted to get a sense of maybe what drove that that relatively lower line item for the quarter. It looks like maybe one of your amortization expenses went to zero. So as I understand what that was and then that's the right run rate to use going forward somewhere.

You are you a insight into the line item on what they shouldn't say prepared the lease rentals correct. We've now is you know these include that a in the depreciation expense line.

Okay.

So that's all I mean that we got said you separately I depreciation schedule, but they're not because that was there either between this quarter is included in our depreciation expense this pretty much states, but another was pretty low interest.

It was close to 2.5 million per quarter.

It wasn't that become.

And then move from 28 million down to 25 million, but also include that other numbers at the right way to think about it going forward.

Correct.

Perfect. Thank you very much I appreciate it.

This concludes today's question and answer session I would like to turn the conference back over to Mr. ZIP codes for his closing remarks.

The conference has now concluded.

Thank you for attending today's presentation you may now disconnect.

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