Q4 2019 Earnings Call

January 29, 2020

I must advise you that this conference call is being recorded today Wednesday, January 29th, 2020. We would like to remind you that this conference call contains forward-looking statements. Please take your name and number two of the presentation which contains the forward-looking statements.

I don't know, Florida your speaker today. Mr. Zeko's, please go ahead sir.

Thank you, very good morning. Ladies and gentlemen, using the fourth quarter and the year net income and earnings per share increased substantially boosted by higher Saturday to the addition of new ships as far off repeating your program. We acquired during the quarter for panamax versus with an average of about eleven years and disposed of an equal number of seats with an average age of twenty-seven years.

Do you want to hear a lot of verses enjoy the rising total Market in today? There's limited Supply available in the postpartum exercises.

Without 18 plus plan on coming of charger over the next twelve months which produces favorably should Market momentum continued moving to the slides presentation or slight Trace. You can see the LED lights net income Rose by Approximately 80% in 2019 compared to last year. The audacity Pas is thirty-two cents over the past year net income was close to a hundred million posting a 7% increase increase compared to 2018 the audacity PS4 2019 is 91 cents moving to the next light over the past month. We sold for small size containers with an average age of twenty-seven years and replace them with for lot size panoramic spaces with an average age of eleven years. The for panamax have been acquired wage equity and we are currently in advanced discussions with a leading European bank for their financing.

We do maintain a strong balance sheet with approx 41% leverage and no balance it financing. We also concluded four separate refinancings with leading European and US financial institutions for for 11,000. You contain a six-count with your Capital with 265 million in total from this new financings regarding operational performance. Do we achieve utilization rate of close to 100% and very competitive operating expenses?

Morgan's to slide six

last container is continue to benefit from a tire supply Market over the next year 18 of our bases larger than 5000 to use are coming off Charter which positions as favorably with Market momentum confirm. The address late are traveling for breakfast undergoing Scrabble retrofits stands at the lower 1.5% while the older book has remained at Levels Close to 10% off would be paying our 37 consecutive quarterly dividend in February inside. Those have been participating in the drip and since Inception 2016 have reinvested in total $80 a month slide seven.

Can see the fourth quarter 2019 figures during the last quarter of this year. The company generated revenues of $124 million isn't as an income of 38 million based on the above the fourth quarter of nearly triple to $0.32 from last year's fourth quarter EPS of $0.12. Our adjusted figures taking into consideration. The following items are good at the revenues accounting a ProMaster disposes prepaid lease rentals and other non-cash charges.

It's like five.

Looks like 8 we're discussing our capital structure as already mentioned. There are no substantial balloon payments do over the next twelve months. Our Leverage is Comfortably below fifty percent needs to adjust to keep it up or 2019 was 3.7 times and ebit our net interest at four times. When our cabinets have a minimum requirement of 2.5 times coverage off on slight 9. We are showing that having some photography late almost hundred percent of our contacted gas comes from first and Saturdays like Evergreen Costco coming Thursday we have today 2.2 billion contracted revenues at the remaining time that the duration of about 3.5 years.

It is.

Fair to those of smaller versus the audiobook of slightly tires and 10% is at low levels with very thin delivery schedule from 2022 onwards.

Well, the last Light the Adler Flynn's is showing a 6.1% adjustment. However for the bestest other going scrubber installations, it drops 1.5% box rates are right since the end of last year as already mentioned. We actively looking for new transactions in this market environment. 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'd like to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press start off the stars and one to ask a question. And your first question comes from the line of Bengal and stifel please go ahead.

Yeah, Greg. How you doing? Thanks for taking my hybrid morning. I have a couple my first one is you called it out in the release and your birth the the ten or eleven or so vessels that are larger eight thousand plus teu that are coming off contract in the next few months. I'm I'm curious with the if the plan is to put those maybe on 1-year contract or if there is a good market for three or five-year contract and then specifically within that it is there a is there a wide gap between the contract a one-year contract rate versus a three or five-year contract rate terms of the pricing.

On the last two slides were discussing the market as soon as light and Saturdays for larger ships have been rising faster during 2018.

Of the question here is we would also consider a longer-term as opposed to in one here Charter like it could be three to four years or even longer five years, assuming that the charter eight makes sense. And also assuming that we feel comfortable with the with the with the counterparty risk now off, you know the second part of the question whether there is a wide gap between the one here Time chapter 8 verses the three or four years after 8, there is a gap but depending on the specific asset, but I don't think that the this is so white. So this is something we are considering as well assuming that we feel it makes sense to login contracted revenues for a longer. This is definitely something we're discussing.

But I mean the Gap I don't think that is as right as sort of this has been in the past leave aside the fact that some years ago. There was no three to five year at market for larger vessels. Now we have also seen the presidents of deals where lines have been committing for received two five year deal for like more than a donut.

It's helpful. And then my next question relates to four vessels that you required at. First of all, could you maybe you shouldn't see it? Let us know how much you paid for this but also it was interesting that it looks like they're all four of them are narrow being panamax as which I think it's been pretty wage discriminated against I'm curious what you're thinking is with respect to that specific asset class and and you know, especially as it relates, maybe just telling me that much smaller ships. You think these are going to fill the place of those smaller ships in terms of their Market position. Yeah for like Club reasons. It's difficult for me to sort of a revision. Now the sort of exact acquisition price all the ships were sort of got together and block off.

yeah, well the first

The container ships built in 2009 and two of them in 2010 the market for those ships today is between I would say 13.5 or fifteen thousand or so, so and what a year so and we do consider that the market rate wage is market rate together with the potential any capacity of those vessels compared to the purchase price it definitely it definitely makes sense. And we shouldn't forget that long as they have a 30-year useful life and ask for summary. We do have a lot of experience and I think this is one of our strengths in operating all the donuts. So I mean, we do take a long-term view regarding the capacity of those vessels and sort of endings a potential in the past four four similar prices for similar acquisition prices wage.

Right, okay.

Those shapes a couple of years ago. They were getting between 10 to $11,000 per day. So it's definitely a better Charter market for those vessels at prices. We have not moved a lot compared to levels every couple of years ago.

Now those four ships, these are the 4200.

Okay, and and and with respect to sort of replacing them with the older times that is that sort of the idea. Do you think that they'll they're sort of being slotted into the same Market position or dead know? I mean look, we generally renew our Fleet we sold for vessels on average. They have a -326.5 years so often those they have sort of a couple of times already. So I mean they were the way I think the right candidates are prescribing also taking into consideration today's prices which on the relative basis they are sort of high close to $400 or plus Raton. We would have both those for panamax ships in any case something goes for like all the vessels or not, but it coincided time wise or they could be differences of a couple of quarters it coincides.

We are renewing our Fleet and the sort of equity released from the sale of those vessels of the older ships together with a with with new debt, which have a we have a great for the for panamax vessels. I think it makes sense because without a huge Equity cash outflow. We arguing the fleet with like ships Seventeen years younger on average wage a lot of issues as well. Right? Okay, and then lastly for me. Turnover is just as it sort of relates to your customer demand prescribers. I know obviously off you you sort of taken the approach that if the customers will compensate you for it and that you you know do it but our customers now. Is there been a sort of a renewal of customers saying, okay. Well, let's go ahead and do it or or is that not really a discussion that you're having? So we are discussing it with with dead.

Say in fifteen of our vessels. These are the five new buildings which are currently under the construction phase attracted to young Link for ten years and we have already agreed to talk to a person for each other in 5:32. Every 10 seats are already in the water. We are in discussion with a liners rep regarding installation of the switch going to be a package together with a charter agreement if it's something that my thoughts of course, we're going to be announcing it but yes, there is there is a lot of interest from Land companies regarding the scrubber installation.

but generally

They I appreciate it. I'll turn it over. Thank you. Thank you. Next question today comes from security issues. Go ahead. Yeah. Thank you. Hey guys, you know maybe just to uh, Greg just moved to the one of Ben's questions you regarding the you know, the the purchases of the the panamax vessels wage, you know, you've been continuing a a trend or a theme of selling your your you know, sub 3002 EU ships. You're forgetting. You know, why I'd be more narrow being um, is this simply you're down to exit sort of that stuff $3,000 segment and just going larger or is it just simply you're selling them as a function of their age? As you said they were 27 years old.

We are in constant discussions with them we have after now agreed to install Scrabble.

For those for those for particular basis, we disposed of the other night of twenty-seven years old. So we dispose of them off today is like Scrabble prices and the ships as I said, they got the already, you know, turning the money or sort of the sort of equity investment a lot of times. So, uh, it does that I think they were the right candidates for scrapping. It doesn't mean that we are exiting this sort of a feeder vessel or like the smaller sizes in the past depending on the future the depending on prices were looking at a pretty much everything as long as it is a container vessel know we then to have another I mean I was sort of have it shipped size today is about 7,000 to you. So we tend to prepare all the tone bigotonas but generally wage.

This goes for specific vessels. I think they have reached innate that scrapping made sense from a commercial point of view.

Okay. Thanks. Thanks for that color. And then also just wanted to talk about you know, obviously you put in the release the the $265 refinancing on the for 11,000 to use drugs, you know, the first blush that seems very attractive it, you know, you probably have your own valuation, but it seems at least to be above a 70% loan-to-value which I think if you know quite compelling considering the shifts aren't on long-term contracts, you know, maybe could you perhaps just give you know explain a little bit about how you know, you're able to achieve that type of financing especially without the long-term contract.

no for those

Yeah, okay. Those are for six twenty two thousand 2017 built and we have we can refinance them with faith with new facilities. We've done for bilateral deals actually, so it's not it's not a syndicate with a tenor of five years for each facility and the terms are short of a pretty much a similar now based on our calculations. They Leverage is not seventy or like 75% but these but it is lower based on the valuations. We received and based on the evaluation also banned from their own sources have obtained off so and in some cases we have the a. Loan amount to be drawn on 65 million without the need to provide evaluation wage.

Uh, if it's something that makes sense it, even if it is a smaller readership, we're going to look at it. So it's not that we are exiting this say

So it was. With amount, but generally I would say that they leverage it's definitely below 70% for those type of of office today. These are high-speed ships 2018 built and I think it is they are sort of value is is higher than like what I have in mind for a servant to 75% leverage. Okay. Thank you. And it may be just you sort of touched on this also in the in the your remarks and also it depends question, you know those for something in particular, you know, they're they're like you said, they're high-spec. What's a charger appetite look like for those those vessels you think you could secure through your contracts in today's market?

Yes, first of all those shipped today two of them. They once charged with with the specific Saturday getting today close to $43,000 per day. So just attacking from that. I think the value of those assets. It is quite substantial. Now the second part of the question yes, is that we could definitely try to those ships are today for a period of three to five years or even longer of course subject to terms, but I think there is definitely a lot of it and say today for like a million more long-term contract for those specific fiber assets. It's five ships actually took the finals before and we are currently looking into the fifth one. So it is five six devices.

Our opening as we mentioned within twenty twenty. So and we definitely believe that the time opening of those vessels. It's something that makes sense off from my point of view. It is quite beneficial.

couple of days before drawing

Yep. Okay, very good Greg. Thanks so much for the color. That's it for me. Thank you. And our next question today comes from Chris weather be a city, please go ahead Thursday morning James on for Chris. Wanted to touch on scrubber capacity in Chinese New Year. Given Chinese New Year is underway. How much of a reduction of square installation capacity if you see any of those have any ships essentially Enterprise Market trying to understand essentially if there were Charters that decided to have an discover installation. What's the level of capacity to essentially have it installed within a month the end of the year?

Okay does because the line was not very clear. So they the question is whether there is capacity today for new scrub installation or also the weather there are delays. I mean wage what was the question just near-term near-term how much of a reduction scrubber installation capacity have you seen from Chinese New Year and then longer than Thursday? We haven't seen anything today. Look generally it has been reported that there have been delays in the shipyard for the Scrabble retrofit process. So which on average now to take between I would say 55 to 60 days or something, although initially people have called for a know for the master sorta. So long. So I mean there are some delays experienced the like a lot of shipowners and line companies leaving that aside with something that we know we have not dead.

okay, what was the

You know the Chinese New Year festivities, which is something that we sort of already knew and sort of and it was accounted for now the fact that the Chinese New Year. This may be extended for one more week as it has been reported and what's going to be the effect of of that it remains to be seen. I cannot make any comment now, this is a bit off a bit, you know, pretty much sure but up to now the sort of this week. It has been already factored in the calculations, uh beginning this crap capacity. Nothing has changed.

Didn't longer-term understanding that there there have been delays. Is there any possibility of actually being able to place an order for square retrofit and I am completing this year if you actually ordered today.

Yes, I think if you made an order today, it's two things. First of all, you need to make the order of the equipment and then secondly, you need to arrange for the retrofitting process with the c. So if you put in order today, I think and depending on the shipyard you going to choose I think yes, there is a capacity in order to have the square box installed within this year. Now. It depends on the specific vessel asset size and see. And also the cost that maybe sort of incurred but I will say that out for a 2020 installation within this year. I would say that yes, there is capacity. We haven't seen something to the contrary.

On your side you guys called out slow steaming one to understand if you'd actually seen any slowdown in your Fleet particularly.

Any slowdown, so it was in your Fleet know it's I think we are progressing we have okay The Office Buildings where the scrubbers have to be installed. They're progressing normally and for the rest ten of the vessels. They may be some slight delays. But nothing that is going to Thursday. It's going to change dramatically Describe economic. I would say so they could be something less of weeks or so, but it's not it's going to be like the days of of like a sort of something like that.

any specific delay or sort of any specific capacity reduction because of

Got it. And then I think just wanted to touch on the level of slow steaming you're seeing in the market. Have you actually seen a reduction in speeds on your vessels off? Yeah, there have been reports that they generally slow steaming. It's something that has been taking place. I cannot quantify exactly because it it depends on how long the vessel on the trade routes and and also on the particular artists of Wichita. But generally the slow steaming and if someone takes if you over the last year or eighteen months, this is something that we have been witnessing with generally especially for the larger vessels. It is something that that does help discipline MX for sure. I cannot forecast whether the slow steaming is going to continue at what levels however assuming that the birth

Yeah.

Yes.

Got it. Thank you for you.

Thank you for a question-and-answer session. I'd like to turn the conference back over to mr. Seacoast when he final remarks.

Thank you for being here with us today. And for dining in is a conference call. We are looking forward to speaking with you again in the

and the next day of quarterly results. Thank you. Thank you that does conclude our conference for today. Thank you all for participating you may now disconnect.

That the fuel expenses. Uh, they have been heading North I think a slow streaming. It is something that definitely makes

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