Q3 2019 Earnings Call
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[noise].
Thank you for standing by ladies and Gents, one and welcome to the Safe Bulkers conference call to discuss the third quarter 2019 financial results today, we have with US from say focus chairman and chief executive of sudden missed the policy Johnno President Dr. Lucas.
Bob Morris, Chief Financial Officer, Mr., Kum students, who knows I.
The more Paul lists and Chief operating Officer Mr. John is so tell you lost at this time all participants are gonna listen only mode they'll be a presentation followed by question answer session, which time, if you wish to ask a question you when its press star one on your telephone keypad and wait fuel name to be announced following this conference call if you need.
Any further information on the conference call on the presentation. Please contact capital link up to one to 6617566 I must advise you that this conference is being recorded today forward looking statements before with skin. Please note that this presentation contains forward looking statements.
As defined in section 27, eight of the Securities I have 1933 as amended and section 22 on each of the Securities Exchange Act of 1934 as amended concerning future events, the company's gross strategy and measures to implement such stretch de including expected vessel access.
Missions and entering into further time charters, let's just as expected intends plans believes anticipates, hey, estimates and variations of such words and similar expressions are intended to identify forward looking statements. Although the company believes that the expectations reflect in such forward looking.
Statements all reasonable notions can be given that such expectations will prove to be correct. These statements involve known and unknown risks I know based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which I'll be on the control of the.
Anthony actual results may differ materially from these expressed or implied by such forward looking statements factors that.
Could cause actual results to differ materially include but are not limited to changes in the demand for dry bulk vessels competitive factors in the markets in which the company operates with associated with operations outside the United States and other factors listed from that from time to time in the company's filings with the securities and exchange.
It's commission the company expressly disclaims any obligation on the take into release publicly any updates or revisions to any forward looking statements contained herein to reflect any change in the company's expectations with respect that too or any change in events conditions, all circumstances on which any.
Statement is based and now I pass the floor to Dr. Bumbaugh. This please go ahead so.
Got a woman its footing with gusto discussed his financial results for the first quarter anyway.
What if any names you anywhere in shop this holiday season, because it sounds good anything [noise].
She said we had been profitable.
Yes, I did.
Say that out of business as you described but we'll see.
You mean.
You know didn't buy them in any business bookings did I Miss from approximately half of our fleet and competing at guns cleaning the other Uh huh.
The effective visual value more [laughter] public relations and Ukraine.
Let's move into analyzing the might get confused.
Slide four.
We presented but for most people keep in mind them at that age Huston balancing.
Baby.
Despite the negative south of the year, they buy micro threed gathered during the two working opinion, they deem reaching the highest since babysitting.
Capesize reach the U.S., the 58000 and Panamax 18000.
But if he gave a phasing of the bulk of 23.7 thousand it's been a much at about 14.2 thousand.
Today to what developments as seen on.
Yes, but the main maybe maybe make one says something either.
Turning to slide five we present, the Chinese people to the major bulk commodities.
No and annualize since I don't know imports opinion 19 at 1.6% lowering combustion green the team these mainly due to the these reductions it today.
That leads from but I see.
However, after these since you on overall, but I see on the exports into three they eat wasn't volumes unrealized dim sum by 14% in Q3 in comparison to say stuff was the over this year.
Jamie for E books were robust throughout 2019 annualized EPS increased by 19% as compared to last year.
Specifically put us it quote unquote inputs, nonetheless them to pay somebody deciding 35% as compared to fiscal stimulus.
[noise], so he's been able to reflect precisely the status of the sign up they said.
Yes.
I don't hear when under license they said vocal about 1.7%, mainly because of a soft immunizing set up.
Well, she Benjamin from third waterless exemption green fence.
So the bottom left graph during Q3 being what sounds like 95%, Nonetheless, and perform better we said it best stuff will be yes.
[noise], what's important is everything from the remaining.
It's pretty amazing but.
Make no buckle mortgages, except that over some pacing.
During Q3, we are more didn't close it wont be business.
Turning to slide 650 cents on that's good enough.
The bottom up people find them on sleep indefinitely. So for this and on the bottom graph Jayson little bit fleet.
They will get booked already grandees, the bulk lump sum instead and 57 basis approximately six.
We used before looms, yes.
The main mileage.
Compared to go to double Brazil, who they also called the peaking fleet. We know took more than 240 basis over 20 years old at another three sound and then three basis I mean do they feel for 15 to 20 years away.
Pretty stoppage for compliance ballast water treatment systems, and IMO, two independent origination as well as increased it could be.
Well no go see we'd be she's got elements.
In the Deboning Southern California, this usually they actually Duncan mother, daughter, who what do you think dive computer satellite services.
Well like I said, there will be sent this idea of the five year old Spano, it's difficult to head winds up almost when you're talking about.
[noise] ruefully lithography nodes fun, Alexa, probably 60, 40 see Nixon's usefulness and it makes money because this consistent positive things.
No the Blue line denotes the 90 days moving out into the Panamax. Other it's 40 C.E. that's in fish flawless the Orange line denotes the Baltic exchange the savings because assessment.
Did you see a index in the years thorson diversified single asset prices.
[noise] I supposed to fund a coordinated with southern market room, because if I can often be connected to begin a b C and other Sophie good luck.
The decision we made good actually which offers a bunch higher.
That means like eight in the context about another one on fulfilling question before you know that taken that I'm, asking but that's mainly by digital freaking grabbing transition from ballast water treatment systems in 58 basis [noise].
Well, that's where the business itself and I almost think swaying determination require substantial investment and advanced technical into but it's like a b.
The dental is headquartered it would have invested 55.5 major.
I think of course of automatically business is expected to being that he's going to 17, new unique on them.
And Peter Dental for Gold then we would have put into effect. It's nice job. This 18 ballast water treatment systems.
Yeah, Hey, six most others will be still being the book of number of Savage <unk> to 15.
In the Sip and stable, we're presenting also expect it down dying days for Q4 2019 into lump into two Andy you noted plus she's done at least with their future if we make.
The next life would benefit if you market data about installation of Robison price if it is central to us.
On slide nine would be sensitive element from national books, I mean, I'm afraid depended English.
[laughter] according to get easier, they're not going to Scrabble speaker.
This is second piece of it.
But if any the focus is a that's a 56% of case and 16% of front I'm actually will be scrub it feels like green Green.
How about 80, but some of the sad to see the basis would it be open loop.
The bottom graph would be sent it looks good I bet. If he could this is not segments, including driver.
I see somebody did have 20 magazine about 2023 basis will be scrabble, c. diff and by branded granting the focus brings is another 2007 founded in one.
It's estimated that then people are simple a whole bunch can create noise would be said with the kind of described uptake in clinic Randy across all segments.
Slice it wouldnt be information about fuel price.
I would probably be stuff outside the G.
Used to being a fourfold supplement of element that is elements and maintain our competitiveness.
And this effectively comply fully with regulation by installing a good our best in about 50% of our fleet, mainly in Mississippi, Let me share of your trip assumption and by using compliance with US and then it's safe Bulkers will improve.
Compared to the mission Penny to Andy I said, Mrs. We Scrabulous, we capture the presidential between that baby care Lori Wade for the remaining fleet. They that we'll use from land in a 11 ships either equity.
On slide 11, where do you think automation above that people norms.
Davis President XI, Chris is about the person who can put [noise].
Yes, okay.
And I have got something about 6005 consult for a medium size visit the benefit will be about 1.6 million for 22, Andy even kids today.
We expect to the benefits will say bucket, we exceed 50 million for branded Randy for investment in that age of Cc media.
Concluding in flight growth, let somebody that actually keep pick up.
Hey, Bob this is fully prepared for the new and side I mean, if I move dreamed Randy.
The company is expected to have 15 basis in operation would scrabulous by the end of things you Nike.
Motivations, we'd be able if we didnt, especially north of 22 anything.
The company opted to put it shortly before they had what needs to take advantage from that but isn't strong market condition.
The main please completing the tank cleaning entity surgical blank will operation.
She's been to see being at the forefront pull them, but I'm going to investments and it was actions to improve competitiveness you said it before 2028 years as we exit relatively strong market for political reasons. He sustainable we shouldn't say at least five years problem, where supply, but she's done much demand for dry bulk and of course it station.
And on the supply, but yes, we would it be Nick Gulf, we'd expect it stopping so we will pick up you too.
Okay.
Now all Chief Financial Officer.
Yes, I guess I'm open to us we present our quarter. If we find ourselves. Thank you know question good morning, everyone.
Slide 14, we presented quarterly time topic, we women with stood up to $3311.
Good day, and we focus we're not expenses both opex in January .
I guess could figure for at least two components for a there.
Well go to blend Tonight in was 5000 $5811.
And this quarter is onto nice they'll get expenses related to foreign countries a dry dockings.
Well, we decreased amounted to freeze sounds by a monitors major due to the favorable movement in that Sanjay the view versus Douglas.
During the overall our management fee expense are denominated in euros.
And also uses a degree company of many states <unk> expenses.
Moving on to slide 16.
We present, some financial data on the quarterly basis, our quarterly revenues on adjusted EBITDA, and Oh Baby Gusto have been improving overall, we're probably not shows thing.
Well, we presented on slide 16, our daily free cash flow water for for the headquartered Oakland benign beam.
We ended the month of between 3000 physician business not 9.6 thousand Boes per day, but listen for on our baby outflows, including or babies DNA in that is.
Basic why the payments and deferred dividends, leaving about 3.7 thousand but they position us basically cash flow.
Let's move to slide 17 without quarterly financial highlights for the last Wednesday night being compared to the same be are those men 18.
Net revenues increased by 1% to 50.7 million promos from $50.1 billion.
And it used to improvement in charter rates.
I see this or do you see.
But the vessel increased marginally to 15000 to the common and $11 per day.
I've been talking about $265 doing the same build into Wendy 18.
There are limitations on expenses increased by 7% to 4004, Honda and $48 compared to $4151 for the same because last year.
Were very tiny expense, excluding dry docking and be delivery expenses increased by only 1% to $4053 for the third quarter 219 compared to $4032 for the same buildings with 18.
Adjusted EBITDA for the third quarter of Glenn to 90 degrees, Brian decreased by 9%.
So do MP 5.1 million compared to when to 7.7, maybe on the for the same period.
Our adjusted earnings per share for the third quarter Wednesday night in worth three cents upgrades on the weighted average number of 101.3 million shares.
Compared to five cents newsstand buildings Med D is being just completely done there was another topic of 100 is 1.6 million shares.
[noise] during our presentation on slide 18, we present, our fourth and a few days, though and I was very scary those.
With more detail compared to the San Diego left here.
We will likely unless I've been disappeared or was it worked extensively in implementing anywhere in the right amount on investments orphaned Scarborough says were less ballast water treatment systems.
Not only central installation, but those are with regards to boil deal with agreement.
I was going so I'm kind of on scrubbers.
I couldn't go designs and that's one of my videos and of course commissioning a training.
Got a bottom on more terms.
In order to what seems a long period of for months and the best good financial reasons.
Oh places loosely presents a more detailed our friend notion of the babies are drugs, we're now ready to take your questions.
Thank you, ladies and gentlemen, I never mind, if you wish to ask a question. Please press star one on your telephone I might feel name to be announced he wished to come to your question. Please press star to once again. Please press star one if you wish to ask a question.
[noise]. Thank you and your first question comes from the line of Ryan Givens Jefferies. Please go ahead. Your line is a pen.
Hi, This is Chris Robertson on for Randy Thanks for taking our call.
I wanted to add some clarifying questions on slide eight in terms of the scrubber program. So as of last quarter I think you'd expect it all the scrubber units to be installed by the ended the year I think we're seeing a few slip into Q1 now can you comment on if the delay is due to kind of getting space at the shipyard sort of bottleneck in their manufacturing so.
Why chain of the scrubber or is it simply just engineering and installation delays.
Okay, No we don't have anything any new installation delays.
Is there any chance that had won best similar for as much as 23 D.A. They said.
[noise] the new one minute has a site visits show that moved a full basis from the here and they go through those 2020 simply because due to trade that Asian food happens that system. This is delayed a little bit. So we didnt find or any reason to pull to these efficiencies.
And it seemed a shipyard or doing a Chinese new year. So that's where we have delayed them at the same time, we usually it would might get right now I'm sure. There's no reason to all the better than before.
Yeah that makes sense. Thanks for that and then just a second clarification question here on of the nine vessels, which you expect that had the scrubbers installed by the end of October which ones were installed exclusively during fourq versus Threeq you.
[noise] I think a week.
Right just simply amazing.
In minutes in disabled so in the table five of our its outs of shall we say that the during Q4.
We have ER, we haven't talked about nine installation.
And then installations is show.
[noise].
Yes, they said that they should it. This is that were down the work that will as far motor Ben Shim issue and a fun I got a key show three vessels or we're done during the fourth quarter that headquarters.
Oh.
Got it thank you.
In terms of the a.
Low sulfur fuel oil you'll use for the rest of your vessels are you going to lock in future supply in order to secure availability or kind of walk in a price and do you have any plans to hedge the price at the low sulfur fuels.
Oh I know, we thought we launched a worry about fuel up and liability because you have too many ships because she.
Well fall.
Installing scrubbers shoulder fuel ever nothing is guaranteed by the Fox about this is why is the consumption was more than 30% of all off the lids consumption on wouldn't be on H. a fall.
The.
I don't know comes out your main above the comply funeral all the extra fall the compliant fuels.
The compounds will not be wouldn't be available than we see the nominal when she sees a waiting outside.
And our pool and or would be I went up on incremental volumes in the in the kidney us, especially in the pilots I think about are the main problem with a comeback children's a the compatibility or the foods and how its fuel is.
Yes.
Well, so probably a deep well so you would still blends easy which added five product and a this wouldn't be then manage all these short haul horseshoe Baltimore.
How does that fuel about oh.
We will pop as follows welcome sends out decision for the first of all three months old and new year on the ship something we need to ban the compliance with rather stopped with and essentially all forms on social ones falling a lesson Joel fall on board dollar ships already and we will know something on the central.
Oil and maybe towards Motley fool stop converting into the compliance he wants to be on the same site shows the other the prominence of reality, we then suppliers for being on the markets.
Gotcha that makes sense.
Turning to slide five on some of the demand factors here, So I wonder whether he gave.
Certainly the guarantee that we like to make is that what am I getting data a lease a busy Lisa for I'd expect it bank downtime during a each quarter. This is true on at least for makes a little bit calculation. So for anything I would say be able to five we share. The during Q4 opinion I didn't really.
There would be the total number of installations will be nine a installations.
During Q4, and expect that don't timing Daisy stick on 16, so we by using these number where you can come all the two bed approximation of our yes, yes.
Right right.
Okay shifting over to the demand side on slide five.
[noise]. So can you talk a little bit more about the increase in the Chinese grain imports rising during the quarter I was that mainly driven by a substitution effect from U.S. screen right and then what kind of what kind of products drove the increase in and from wherever they being imported from.
No that's kind of it was a majority of the whole grain imports into China was coming from South America from Brazil, and Argentina, We see this continuing even now and we see a very active.
And syndrome and solve Amedica, they said if north grain cargoes.
It all into China.
Now the that them looks like a that thing to wall wouldn't be watching it and possibly in a place the.
Also during the next couple of weeks, we saw that commitment of the Chinese batches.
A U.S. filling up Mitch we already see Kosmos in a market that less than 10 days Oh says, we'll have done they're very good threeq. So why should we how that's why these bundles and they do a scalable to fix a 19 anyhow falls on loan loss or better today for a long voyages shuffle, you'll start to China.
Shows you about new customers coming to the modern fit then the Chinese wouldn't comment not be flat fourth quarter of impulse all fall from all the U.S.. So I think not up until now into a full summer. Many companies right now we see a shift into into showing up in some fall goods.
Okay.
And last follow up question for me can you talk about anything outside of the Chinese iron ore coal and grain trades that you find interesting in terms of a demand driver.
No we should bauxite local bauxite home for almost right.
Into into into.
Uh huh.
She said, if Nols roles, most of India, and Indonesia coal and saw public on coal into India training is very active us right.
How about callable mention to China, which already was halted trends are very active.
ER in Europe , which is a explosives on off on the Black Sea there.
There wasn't a more grain kosmos though.
From like supporting I'd have to the continental to the fathers, we see volumes now start picking up it from the Baltic Sea of callable much into Europe Oriental them. It. So this all the they saw the main had irrational activity in the last few weeks.
Right I appreciate you taking my call. Thanks.
Okay.
Thank you and your next question comes from the line of Chris Wetherbee from Citi. Please go ahead. Your line is say pen.
Yeah. Thanks for taking my call wanted to ask a question about slide nine.
Helpful Information there so I appreciate it but looking at the top left chart. There you kind of highlight.
The scrubbers as a percent double fleet for the various size ships I guess you do the math there it looks like it's about 18% of those three vessel segments are going to be scrubber fitted obviously overweight. The capesize do you have a sense of how much of the fuel consumption that is 18% of the ships can you give us a sensitive.
Sort of tie ins at 23% number that you mentioned on the slide as well in terms of what the heavy fuel oil will be preserve that I'm, just trying to get a sense of what how much of the fuel consumptions actually going to be going towards the scrubber fit your ships.
Yes, I was when we say they are we get the data from D.N.V. from there's less because I've seen from the N.V. there Mark Dnbi is Bob.
I wish they made the these people left in May and would have noticed without it.
33% of all the shapes wouldn't have continued for by nature poll of course, not although not all of them would start from all from day, one off 2020 because many of the scrub those wouldn't be we'd be that don't fit it in the south for less than nine months of 10 to 20.
You know that the honest from Wolfe definitely not including ourselves we enjoyed the vast majority of our ships out all day to send them to enjoy scrubber scrabulous before the fiscal Jordan ruddy.
I was Lucas previously set some five vessels for five vessels, we let them a fit the stub. This after the Chinese new year engine in February because there's no point in a good market to put the ships in the yard in mid December .
And the by any chance, we don't completed by mid January would we fall into that Chinese new year does yeah. The Chinese new year. These are very only is it on the 20.
So the total John Gotti, So we don't want to get stuck in the shipyards for two weeks and we know work itself to complete the [laughter]. The they select from them that retrofitting. That's why because offset then also changes of the bought them from the ultimate that says we.
Decided it's up the shape the shoots up it cannot I, probably we've seen early December other should go to perform demo for a couple of muffin going so inevitably.
Okay.
No it does that make sense, but like so 23 isn't where you think is a reasonable number to sort of really tight 18% for 20 years that fuel yeah, we'll pick up 18% of fleet.
Yeah, we take default consumption wise, just makes sense because a big ships the yeah.
ER Big ER, Capesize and Newcastlemaxes, maybe a little she's dysfunctional much more bomb the panamax is a little bit handymaxes.
Although telmex's so yeah. It looks like this number is about right, but you could be 22. It could be 25, I don't know I mean, I mean, we expressly experts will tell us a.
Yes, it will tell us a in the 10 million diversity mountrail. The here, we will have a very good idea of what's going on about them. They bases that are now does help establish on what you can do we don't down because they should fuel and everybody's installing a and then as a full analysis in digital boards that would have seen and that's up.
Forces figure.
Okay. Okay. No. That's helpful. I appreciate it guys good to just get our arms around what bush should be thinking about their.
Yes, a couple of other question I guess stay sticking on scrubbers. There. The 50 million that you guys highlighted sort of the scrubber investment is there any risk to that we heard a lot from from people in the market about increasing price I. Just don't know how much is locked in hopefully all of that $50 million lock into covered all the 20 ships that are being a retrofit.
But I just want to get a sense is there is or any sort of fluctuations that number or is that pretty much a done deal.
Well I think that are first of all a they certainly I mean would have already indicated who can already be capitalized 55.5 million until now out of these 50, a we have not seen a I mean, we have a all this equipment that is already contracted to the yen ethical and who have babies.
The Minister shall we go so what's your specific to coordinate and social with yards. We have the speech is the same a contract at the continue show don't find any decision on what further that a this figure will go.
We will not be will not be reflecting the actual cost about fees.
We believe we believe up quite a medium size they said.
Oh sure boat out all inclusive was about 2.5 meter.
Okay. Okay. That's helpful.
And then my last question is just as we think about 2020 and sort of the the economics of ships with scrubbers.
Is there anything we need to be thinking about either from a daily opex perspective, or otherwise in terms of costs are they more expensive to operate you anticipate them to be more expensive to operate.
Putting aside the incremental depreciation of the copper lines investment. If there is there an opex component that we need to think about.
Yes look a oh, we would have done a day cornering said.
And are we seeing that the they all baby expenses.
Besides a much any tire because first but I guess, we need to a number of Ah. When it's just an addition of said Bob.
Which is reasonable and those to shut down do you know so far for Oh, I wouldn't I didn't see hobbies incinerator.
I I tend to believe that this would be about a $700.
Yeah, Dave.
We caution creates a due to these are pretty quotient between them to date you know so they're not this if we don't think that's because she said downtime of scrap Bursa and ER and continued operation. We are said to enjoy we said we'd go play into it.
And.
We should be like more complicated.
Yeah, Okay, and $200, but they bought dogs, we know we in funding all 50% off the fleet.
He said will be on that on a click basis $50 per day, but basically this is a prudent thing to do to play some more spare parts for the this isn't that April from boat, Oh shook something Oh is need to be overhaul defitelio and the not to take any this was an operational discover.
Okay. That's very helpful. I appreciate the time thank you.
Thank you.
Thank you, ladies and gentlemen, as a reminder, if he would like to ask a question. Please press Star then one stop and one is she'd like to ask a question.
They're about coming they notified the questions that piece continues.
So thank you very much for attending these Oh My school and we look forward to discuss again with you in the next quarter. Thank you.
[noise]. Thank you that does conclude our conference. It stay tank is participating you may all disconnect.