Q1 2020 Earnings Call

The course call, please. Hold an operator will be with you shortly.

What is call? May I have your first and last name?

What company are you with?

Over there is a challenge yet. It is worth noting that the protective measures adopted across the world are intended to be temporary and we believe that the restrictions and Falls are also creating a deferred wage rate in demand.

In this environment the safety of power versus Cruise as well as our owners or employees remains our top priority. We have taken steps in order to protect our employees as well as to ensure uninterrupted service to our clients.

For the first quarter in the company delivered profitable results liquidity increase to $268 million dollars. We can confirm the timings of 2.1 billion continue to access to commercial break. This is smooth debt repayment schedule and minimal Capital requirements.

During the order which are then. Well chips including three eleven thousand daily basis, which works article. Raising from 1 to 3 years.

Finally, we recently declared our 38 dividends is going public has always been the case, but especially during today is unprecedented X Auto priorities downside building up on that. We will continue to monitor the market and assess new initiatives in order to bolster our balance sheet and liquidity position while at the same time evaluating new opportunities in a volatile Market environment moving out to the slide presentation.

what's ninety-three you can see the

Highlights net income Rose by approximately $35 in q1 compared to last year. The adjusted EPS is twenty-seven thousand eight hundred forty percent increase to q1 2019 month. We do maintain a strong balance sheet with liquidity close to two hundred seventy million levels of approximately 40% and no meaningful debt maturities over the next twelve months.

Moving to slide for we have concluded three separate financing with European financial institutions for a total amount of, 65 million and maturities ranging from four to five years operational performance during the previous quarter. We achieved utilization rate of close to 100% and very competitive operating expenses of below $5,100 per day service.

Sly side during q1 in a volatile environment. We have two hundred twelve places including the three eleven thousand SRT4. Rating from 1 to 3 years. The continuously Mark has been negatively affected by the corporate our brakes at the same time the iron plate as professors belongs collaborate trophies and blank sailings. All python has providers plans at 1.2% off. Why is the order group has remained the players close to 10% and is expected to remain low. We will pay our 38 consecutive quarterly dividend in February insiders have been participating in the drip and sees Inception have reinvested in total eighty seven billion dollars.

Moving to the next light you can see the first quarter 2020 results during the first quarter of this year. The company generated revenues 421 million and it doesn't income of 33 million off the above. The first quarter EPS comes at $0.27 more than double on a year-to-year basis are adjusted figures that into consideration the following Marcus items accrue charges accounting gains or losses from asset disposals and other non-cash charges.

Was like seven, we're discussing our capital structure as already mentioned. There are no substantial value payments over the next twelve months. Our Leverage is Comfortably below 50% off and that's that's to 12 months trailing if it is 3.4 times and if it over net interest is at 4.9 times when our financial covenants have a minimum requirement of at least two point five.

It's like 8 we're showing the living contribution for our Fleet ninety-nine percent of our contractors cars comes from first-class shutters like Merce Embassy Evergreen Costco. Yang Ming and haploid. We had a 2.1 bologna contracted revenues and the remaining time for the duration of about 3.4 years.

Well, the last was lights were discussing the market as as shown on slide 9 Saturday. It's a full moon in the first quarter as a result of reduced demand in it's a blank sales rep room by substantial capacity reductions in all major trades box rates have been under pressure for most of you. Are they start? However at Levis close to those a year ago,

Slide that the athlete is show not 10.2% However, the number of ships on python has providers that are today available for Charter is only 1.2% of the total capacity. The order book is slightly higher than 10% and it is expected to remain at all levels as already mentioned. Our main priority is to cover our downside risk while at the same time looking for opportunities in such a volatile 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 would like to ask you a question, please press star then one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star then again, that's star one to ask a question.

And your first question comes from the line of Chris Weatherby of City, please go ahead. Good morning James on for Chris. Just wanted to touch on the market and the current wage. Good morning. Just wanted to touch on the market and the current Outlook just understand your strategy will have to be managing the current environment looks like rates will probably be softer and you will be charged during below the existing levels. Just wanted to get a sense of how you might that and if the environment so weak that we should be really thinking about utilization possibly falling off to pack some point where it's below the historical run rate in the high 90s.

Yeah, there's a lot of utilization today or like the last quarter was slightly below 100% And generally we had the utilization rate of between a 98 to 99 + percent every quarter. Now, we have Ships coming up Charter until the end of the year. And this is something normal life. You've seen that in this quarter. We started twelve seems address which today they are at levels that they you know make sense. Now, what we have been doing is that as mentioned we do have a lot of liquidity slightly below two hundred seventy million. We have proactively refinanced debt maturing over the next twelve months Jim Lehrer Finance our facilities you a year in advance. We have also been very careful regarding our operating expenses as you have noticed in this club.

Service at the average operating expenses of close to $5,100 per day per vessel and they have to stress here that our average jeep has the size of lots of 7 a.m. And we do maintain excellent relationship with our Charters. So I agree that the utilization rate can fall although we cannot predict the future and we don't know yet what the recovery safe will be and what the type of the recovery will be and the timing however, even in that case based on where we suggested a I think that considering the circumstances we are in a state where we feel comfortable about weathering the storm with customer shipping for 45 years or more. It's not the first crisis. We have come across, you know, we came across a 2008 2009 crisis we're dead.

We didn't.

Any financial company during the videos Plus in the past. We've come a long a number of shipping crisis. So it's not the first time we come back home we come.

We come across the garage is like that. However, I have to say that this is unique. This is something that was definitely unexpected. But us as I said, I think that the company fundamentals are shuts off so that I think we are prepared for the next quarter's.

Got it, then. Also just wanted to impact that the coronavirus has had on shipyards and dry-docking if you think what should we really be expecting for the length of time that it dry docking takes in the current environment.

Looking for Scrabble head of it to start with that describe. It's I mean even before the coronavirus the weather delays simply because there was a lot of demand for installation of scrubbers and the shipper capacity was not big enough in order to have the demand absorbed and now this has made been Wars and there are delays so it could be like two or three months or even more or more than 90 days in order to have scrubbers installed now dead regarding dry. He's scheduled right organs. I don't think that I mean I cannot predict but normally wage depending on the price of the size and the circumstances four to five weeks. Now, this could be something more. I cannot say it could be five six seven weeks. I

Cannot tell from now. However, I don't think that uh this incremental of guy because of a scheduled drydocking it would change fundamentals for income statement going forward you talk about a fleet of 65 vessels in the water. We talked about contract with evidence of 2.1 billion. So I don't think that's the issue from those things. It's going to be that huge and I'm afraid that I cannot quantify this yet.

Got it. All right. Thank you.

Again, if you would like to ask a question, please press * then 1 and our next question will come from the Nolan please go ahead. Hey Greg, So I I'll start with some of your contracts specifically on the on the 11002 you shift the three that you contracted. Those are off what I would think are are pretty good rate. And so I assume they were probably done a little bit earlier in in a time frame, but if I'm not mistaken two more that come off contract soon or or or now, could you maybe compare or give some sort of an idea of where you think the market is for those kind of shifts relative to the 38,000 or so that you were able to get on the first three?

Yeah, the first three ships you mentioned those eleven. Guess there were two other for thirty eight thousand two of them for like a year and the third was started at 38753 here. Now those others were concluded during the first quarter, not yesterday. But but I guess it was during the quarter now. I have two more sister ships come of Charter. Which going to be September October. So, uh, it's not something imminent if it was something if losses were coming out of chocolate cake as well. I think it would have been wise to Charter them already, but they're coming out of charger September or October. So there is still some type of those shapes. These are you buildings 2017 build very fuel-efficient vessels which have been in great demand, but I'm afraid that I cannot predict what the rate wage.

Going to be for those vessels at the fourth quarter of the year or so at the end of the third quarter for the fourth quarter. And also the rate is also a function of the name of the charter. So again, we will have to take a view where they would like to go for a longer period for a special going for the short video that the different rate wage. Um, but I'm afraid we're the market is today and bring bring mine. To the happy. No other recent deals or pictures for that size for those type of new buildings. I'm afraid I cannot I cannot predict now the two ships just just close to close the page him. They were they were contracted at the end of March. So it's a month ago. It's not like three or four months ago just to make money.

Clear, right? Okay. No, that's helpful. And another thing it looked like from the income statement that you guys have been buying back preferred shares. Did you maybe if you can quantify what you've done there and sort of what the thinking is around that.

Yeah, we haven't done it much for a couple of reasons. First of all that we have been in the local in a local local. For the last four weeks because of the results and we may be coming from tomorrow and secondly because there is a thing liquidity for those type of of instruments now ballpark figures. We have a nice day preferred. I mean all all four classes in aggregate at the dollar value of close to one point four million and with and we have the benefit of close to 600,000. So the Redemption of prefers have has been in the face value of 2 million, so they discuss one point four million then I prefer to talk to million War.

And and I suppose with with those preferreds. I think all four of them still trading below par your you know, once you're locked out your that's still something that you're interested in doing a yeah.

Yes, yes, I mean depending on how the trade but now the trade between eighteen to twenty dollars. We managed to buy some at the price of like fourteen to sixteen dollars. So we had a bit of 600,000 by paying one point four million, which you can argue with this quite substantial as a present that was but I mean the dollar value capital B. So, this is something we would assume as you've seen we have to close to 270. I think it's something that they make sense. The only concern is the liquidity because generally those those instruments are thinly traded sure. Yeah. Okay. Now that's helpful. And then last minute I turn it over with respect to the five new buildings down for Yang Ming the begin to deliver later this year. Just curious if there's any interest or capacity dead.

By either yourself or Yang Ming or Shipyard to to slip those back a little bit. Is there any flexibility they're just given the kind of state of the market and you know, maybe shipyards or might have issues crewing and Staffing up and everything else. Is there is that something that maybe possibility

no, nothing. Nothing that I can I can do for you at this stage. I think the first couple of steps will be delivered just with one month delay. This is the latest Thursday we have today which is meaningless considering that it's of the apartment buildings have a 10-year Charter. So nothing to report regarding whether you know, this could slip back or PAC was looking for nothing to report at this stage. This is the latest schedule we have I just have to add that for the sake of clarity that took those five new buildings. They have been fully funded on the proposed delivery basis and the remaining cupcakes commitments for the total of the five ships from our site today is close 2:31 a.m. And this is why I'm mentioning in my commentary that we have minimal topics commitments like close to 6 million per vessel, which of course it is something that can be easily paid when dead

I'm comes upon delivery. All right, that's that's helpful. I appreciate it. Thank you.

Thank you. Our next question comes from J Mayer a value investors, please. Go ahead.

Good afternoon, Greg. How are you?

Hi.

Good morning. How are you doing? Well good good results. It's good to see the study cash flows, even though the market backdrop, of course is challenging. I'm great dialogue before as well about the 11th you ships I will look forward to the next ones. I did have a question about the 9.5 KATU ships that came off. I believe they're at $29,000 before you mentioned the the roll it was three months six months and it was a confidential rate. Can you provide just a big picture guide of where that was was that slightly below substantially below what it was before?

Yeah, this is a five sister ships in total in total of five nine thousand built in 2006. We have reached Thursday the 1st to which game of Charter and we have retarded them for a period of three to six months as we mentioned now regarding the charter rate. I'm afraid because of confidentiality reasons off on discussions. We got with each other. I cannot go into more detail probably in the future when hopefully also the rest of the sales will be chartered and when also additional ships are gon not retarded, then we can give more figures but at least eight I'm afraid that I'm not at Liberty to disclose more.

Okay, I understand. I figured I'd try I figured some broad guidance there but next question for you with the coronavirus shutdown of a lot of the ship docks. I know there's been some back up in demolition as well. Now. I know you have several older ships that are coming due for surveys that you might have considered scrapping there's 9 mm builds and there's 195 build. Are you still planning to demolish any of those vessels this year? And is that possible in this environment?

Yeah, I know depending first of all, we don't plan to demolish those verses tomorrow morning, right? So depending on market conditions were going to take the view whether it makes sense to me that keep owning and managing those vessels or not. Also bearing in mind. What is the related topics for those vessels in order to continue throughout trading? This is a decision that it's going to be taken on a sip by sip basis. Now if we decide to sell for the Malaysian those presents, I think that the demolition Market was completely locked because of the reasons, we all know I hear and we understand that it is slowly coming back and wait to see when off of it will finally open, but I cannot give you more details because we have not approached any ship breakers for those vessels today. So, yep.

I don't know what what like would be the time of the day if someone wanted to scrub a veces those if I don't have any information but going to take each one of them as she comes but I don't think that this is something that I mean if we decide to grab those vessels they may be some delay, but finally at some point May describe them. So I think it would take the decision. It's going to be a matter of timing rather than you know, whether we will be able to actually scrub them it just it may take some more time, but I don't have more info on this topic, but don't have any ship to be scrapped imminently.

Excellent. Thank you very much, Greg.

the good work

this concludes our questions and answer sessions. I would like to turn the conference back over to mister as far as closing remarks.

Thank you for being with us today. We're looking forward to speaking to you again in our 2020 quarterly results. Thank you.

Thank you. This does conclude our conference for today. Thank you all for participating and you may now disconnect.