Q1 2020 Earnings Call
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Please continue to stand by feel confident well begin shortly.
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Thank you for standing by ladies and gentlemen, I'm welcome to the University's conference call on the fast quotes that Twentytwenty financial results, we have with US today, Mr. pits, Chairman and Chief Executive Officer, I missed that I, just filling this chief financial officer.
The company at this time, all participants are in the listen I need might there won't be a presentation for the five question answer session at which time if you wish to ask a question you will need to press star and one on your telephone keypad and wait for your name to be announced I must advise you that this conference is being recorded today Wednesday the.
97 foot may Twentytwenty, please be reminded that the company announced its results with a press release that has been publicly distribute it before passing the floats mr. pissed off I would like to remind everyone. The in today's presentation. Oh, that's cool you receive we'll be making forward looking statements. These statements I believe in.
I mean in the federal Securities laws statements in today's conference call to not historical facts, including among other things the expected financial performance for universities, but it's nice universities ability to pursue growth opportunities you're seeing expectations. Our objective is to go out in future a market.
Chaucer rate expectations and in particular that the effects of private 19 on the fly net financial condition and operations of your rights under contain the industry in general maybe forward looking statements I such as defined in section 21, eight of the Securities Exchange Act 19th that before.
It's a mandate mcus. They skus may be forward looking statements, which are based on product management expectations. A involve risks and uncertainties that may result, in such expectations not being realized I tightly draw your attention to slide to the <unk> presentation, which has the full forward looking statements on the fee.
Same statement was also included in the press release, please take a moment to go through the whole statement upgrade it and I would now like to flow how pass the floor over to Mr. pits. That's been Keysight. Please go ahead.
Good morning, ladies and gentlemen them, thank you and for joining us today foot on schedule going from school.
The Weve me Stuffs was just leave yourself Chief Financial Officer.
The purpose of Sunday school is to discuss sort of financial results for the city months, because then that much those first 2000 crazy.
Let's now turn to slide three D to C O. The income statement highlights.
Well the first thought that it doesn't that revenues rose $15.4 million.
Net income was $2 million and net income attributable to common shareholders. After some that have been $60000. They didn't seem to be offensives was $1.8 million.32 game, so sad basic and diluted.
Adjusted net income attributable to common shareholders for the period was 1 million or 17 cents per se basic and diluted.
Adjusted EBITDA was $4.1 million.
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The presentation.
Please turn to slide food for these days of some of our recent developments.
During the second half of 2019, the company acquired the eight vessels and then with another <unk> age of 12.5 years until two capacity of 25650, you, thus increasing the fleet by more than 70% number the vessels and moved into hundreds consent.
Those are still says do you capacity.
In addition to the bad news routine up but I suppose if it would do note was the events related to a fleet into five in 2020.
Yes, we sold the motor vessel minorities before Scott with dog deliberately built it into first half of April 2020.
Unfortunately lived assays was not completed due to the closing of the scrap yards related to go up into 19 looks downs.
Regarding the dispute with the buyers over the sale, which is being there's a little bit division in London.
The vessel, however would be sold for scrap went to Scott jobs or the open.
I'm pleased to a new buyer.
Secondly, I assume that I do they posted in January 2020, the motor vessel, Yeah, I mean, no says suffer the amazing <unk> fire.
Luckily we have no effect throughout through.
This is beat them. So that is really bad news have decided to Scott the basin as few months leave any recently envision as soon as cannot be out into the open in order to avoid costlier bears.
The coverage 19 fund their mix is come center stage into was seen since most twentytwenty with economic effects influencing well today than demand for shipping.
This slowdown is expected to result in the U.S charts of age and learnings into remaining of 2020.
That's the respect we have started discussions with the banks to differ somewhat but frenzy frenzy loan repayments to ensure that we have sufficient liquidity in the near the.
I suppose we provide you more information later on.
Let's turn to slide five where you can see I've got in fleet profile after the latest additions.
We now have a 19 vessels, which include 15 feet the container suits and five intermediate contain the guy views.
661000 deadweight tons and 51000 do you have capacity.
Average weighted average age bite do you have 16 in the five fuse.
As mentioned earlier my notes be a need to be news, just having the purchase of being scrapped the seamless get up jobs open.
Please turn to slide six foot outsourcing operational and dry dockings highlights.
Oh, no we haven't been able to the new most of the charters expire due with the first the months of the year at that age gender really a little bit lower than that lost jobs and without facing guidance dimes, except to the actually not the beneath the ninos invades era, which each faced about 15 days revising.
Only they expenses, which opened up the early may has not yet found a new employment.
I will not go through the complete list of a new charleston's achieved but you can see them all on slide six.
Slide seven shows a vessel employment and graphical form as well.
As of May 20 feet, we have about 57% covenants for the remainder of Twentytwenty based on the minimum two days.
Please turn to slide eight.
Over the last five years I hope that answers on fleet utilization has been in excess of 98.9%.
You are going to see it has an outstanding safety and environmental had good but at the same time, the company's managing to keep costs low despite that I need to know the fleets and the other listed companies.
Well the first quarter of 2020 operationally fleet utilization was 96.2, but said.
I, particularly all the dog <unk> is attributed to the five on the news.
The commencing fleet utilization rate in the first quarter of 2020 was 99%.
They get off from the base compared to the daily costs, excluding that I'd docking since 2011, we though peers.
Overall, I will close it seemed among the lowest of the public shipping companies.
Let's turn to slide then to discuss the containership markets highlights from the first quarter.
I'm sorry, the base in the first quarter for feed that an intermediate size vessels ranging from 1000 for six to 5680 you vessels.
<unk> negative big suit as shown by the context index.
The 1700 to 4200 80, you sizes.
And at about 10%.
The biggest seems also fell but the big less.
April and May Fieger's, I've, even lower and the number of idling vessels is rising.
According to Clarksons. The 1700 do you get vessel said some of the average age in the 5000 in Q4 to 7717 Q1 and currently stands at 6200.
That's one of 5000 do you did vessel fell from at an average of 10100 themselves during Q4.
9003 content than 17 Q1, and currently stands at around 7500 don't live Sunday.
Why is the 4400 a de you did this vessel from some of that because of 13008 tons. In Q4 212900 in Q1 and currently stands at 8250.
I wouldn't secondhand prices the older than 20 year old vessels remained around the not dropping those scrap prices. However for younger bases of about five to 15 years old.
There was a develops you just got 15 that said.
Hey, NAC Containership fleet serves to at an excellent to 524 vessels totaling 2.6 million. The you as of May 11th According to recent Hadrian South Dakota.
This includes I do you describe the retrofitting, which of course is mostly larger vessels and is about 700000, the you though.
Good wrapping it remains at the same levels as the latter part of 2019, which is very low for the guidance looks good.
Only about 40000 did you ask it ops in 2020, so far.
Due to the locking down the scrap yards worldwide vessels can be scrapped got Huntley and then he quoted prices a 20, 25% lower than the previous prices.
This leads us go by Boeing 6% in 2020, so far.
Without of course accounting firm I, just vessels of Activations or idling.
Please turn to slide 11.
Due to government to 19, the I admit that exact it was GDP growth in Twentytwenty is the revised downwards from three point sleep in a sense positive growth do minus 3%.
The reduction stemming from the USAID, China, India and he is in five economies mostly.
India was also that usually school after from 5.8, but saying that the IMF, but addicted to pretty much set of live to 1.9% growth because it today.
Well 2021 global GDP grows at a bounce to 5.8%, that's but the I imagine.
As to the base case scenario is filled it happy to global recovery.
For a major global economies are expected to rebound strongly in 2021 with the U.S. into you know its own rebounding by 4.7%, India by 7.4% in China by 9.2%.
In terms of demand for containerized trade.
I love the mezzanine didn't see you put a my exit is expected by Clarksons do have a soft the dog at minus 10.3% in 2020.
While the high growth of eight of 8.9% is expected to with the other than 2000 and frenzy won over into that I sort of the global economy.
Sure. We noted that debate and it goes to projections garden teammate would probably be revised I've covered the 19 develops but also due to the uncertainty of the geopolitical situation.
Therefore market development, the Jackson's I'll, even cognizant of unusually to make.
Please turn to slide, whereas you have you the containership based profile in order to book can deliver the schedule.
As you can see on the containership baseball quite soft on the left side of the slide we have a young fleet with EMEA, 6% of seems being over 20 years old only.
These however is concentrated in the smaller size classes, where we operate.
Well the right side. That's also the delivery schedule of the current containership over the book, which is which is expressed as a percentage of the fleet.
The served as the figures for the years 2017 to 2019, so the actual fleet to go after taking into account scrapping cancellations and slippages.
Was the Red circle figures for 2020 to 2022, so the order book before any scrapping in Slippages.
Currently the containership order book stands at 10% of the fleet.
Figure, which is the lowest observed in more than 20 years.
This low level above the book provides US also bought him is probably a quick recovery of the age if trade demand that covers a supply side vessels will be minimal levels.
Please turn on slide 16, when we discussed the outlook.
I would take somebody.
The disruption of economic activity in seaborne trade caused by the M. P's dented worldwide locked down as well as the still evolving pandemic event that any focused very ambitious exercise surrounded with a high degree of uncertainty.
As discussed in used to less damage from Clarksons to quantify the effects of the pandemic on containerized trade indicate to soften drop in demand in 2001 trend to your 10% followed by some recovery in 2020 run up 9% similar through the way economies reacted during the two away.
Two or nine finances guys.
Therefore, we expect the very weak twentytwenty and the strongly strengths ending 2021 and 2022.
Hoping to have been through the toughest part of the Pandemics effect in the first half 2020, we still might not expects to see any significant gains during the summer.
That's markets could see meaningful improvements by yearend.
Well the following a few months it will be difficult to try to the best as it's ever delivered by that size business and the owners. The best scope is to extend if possible with existing softer that's for whatever periods that available at somewhat lower at age in order to avoid dicing.
The order book.
As a percentage of the fleet is the lowest over the last 20 plus years, indicating limited supply growth over the next two years.
Still a significant percentage of it is to be delivered in 2020, though some moving to spill into 2021.
Lastly, there it doesn't have quite a few vessels mainly loves the ones that doesn't ship kids retrofitting scarred Bet's will dampen the effect of any market recovery as the effects of covered 19, hopefully that lead towards the latter part of the year.
The order book for 2021 onwards is luckily quite low and since own lives and not get to know what's the optimal fuel for the not too distant future who will be they are reluctant to place new of those so the second half of 2021 and the whole of 2022 may prove to be boom.
It is if global demand picks up as generally expected.
Let's turn to slide 14.
The left side of this slide shows the evolution over the one year time charter rates for containers of two in the 5000 to you since 2000.
Since the financial crisis of 2008 at eight state that other than past with three spikes within the 5500 to $15000 per day range.
Got it in clean we see charter rates for building at seven in the $5000 for today.
Yeah, Hi, 10 side of this slide shows vessel values in relation to historical prices since 2011.
As you can see containership values are still below the median historical values and disclose significantly lower than historical average levels as well.
And with that I will now the flow to a CFO dasso sleeve used to go over a financial highlights.
Thank you very much.
Morning from years, when ladies and gentlemen.
I will take the next first life.
Overview.
So.
For the first quarter of 2000, trendy and compare them with a shame.
Okay.
Well, let's look first at slide 16.
Well the first quarter of 2020.
Reported net earnings were 15.4.
Representing an 85% goodies.
Net revenues of 8.3 million during the first quarter of left here.
The main reason for does anything change.
The number of vessels, we operated 19 too far isn't Randy.
Compared to 11 2019.
The company reported net income for them.
And then net income attributable to common shareholders 1.8.
That's come back to a net loss.
Yes.
And then at <unk>.
Sure.
Going forward.
For the first quarter of 2019.
Jerry Jones for the first quarter from frozen trending well shrink.
Probably near to medium.
Asian, No margin time charter supply.
Depreciation expenses for the first quarter of 2000 drank amounted to 1.7 million compared to zero point for the same here.
Okay.
The inclusion on their investment.
Right.
[noise] in the first quarter from frozen trending none of our vessels from.
Talking right in the same.
Here, we had one vessel completing especially on surveyed dry dog with of course from zero point 70.
And.
Another financing cost for the first quarter of 2020 amounted to one point.
0.7 anywhere in the first quarter of 2019.
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The increased amount that weekend, the current period compared to last year.
And just back to your should somebody that lower lightbridge.
Okay.
Again as compared to the here.
Here.
Adjusted EBITDA for the first quarter of 2000 24.1.
Compared to 1.5.
Shifting to first quarter justifies ranking.
Presenting Michigan.
9%.
Okay.
Again, mostly driven by higher number 11.
Right.
Basic and diluted earnings per share for the first quarter two frozen trending.
Were you referring certainty.
Dollars.
Hi, good or five point 58.
Basic and diluted weighted average number of shares outstanding.
Basic and diluted loss.
Sure.
Zero point fair to $2 for the first quarter after from 19.
Later to one point 54 million basic and diluted weighted average number of shares outstanding.
Excluding the effect on fee income attributable to common shareholders.
Well, the unrealized gains on derivatives and the amortization of below market charters required.
Adjusted earnings per share for the quarter ended March Turkey fares.
Randy what's your being 17 cents.
Factoring I'm, sorry, that's almost 73 cents.
First quarter during 2019.
Furnish acumen.
Okay.
There are probably 60 minutes.
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Let's now turn to slide 17 to review our fleet performance for the first quarter for frozen Randy and again compared to a shame.
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Let's first look at our fleet utilization right.
As user breaking down our fleet utilization rate in commercial and operational.
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That's right for the first quarter of 2000, Randy We reported and 90, 849% commercial aviation right, and then 96.2 person or personal utilization rate.
That's compared between 99.4% comments Jim.
Your first then.
Hi, Jason right furnishing.
2019.
I would like to remind you haven't thought realization that calculation.
Mushrooms and schedule I don't know scheduled repairs.
Verizon.
Very important themes.
Yes, I mentioned that during the first quarter of 2000, Randy we operated 19 vessels.
She had another starting charter equivalent great. My sense is found in $15 per vessel per day.
Eric time charter equivalent rate of $9088 per vessel per day for the same period of 2019.
We operated 11, that's something happens.
Total operating expenses.
<unk> management fees in general and administrative expenses, but excluding there and of course, we're $5881 per vessel per day for the first quantum two frozen trendy compared to 6200 during different dollars prevention for date for the same right here.
Let's move now to put them on the table drone daily cash flow breakeven levels presented here on that.
Fashion brand name basis.
Well, the first quarter of too far from Brendan.
Reported an operating cash flow breakeven 11, <unk> conglomerate payments, but before.
Payments.
I was on Friday from making during this transition per day.
As compared to.
Hey, frozen $800 prevention per day.
For the first quarter of 2019.
Let's now move to slide 18, you aren't that profile.
This slide shows on their IP inside our cash flow breakeven expectation for the next time for moms.
I left side, we can see our scheduled debt repayments over the next several years.
As you can see from the chart on the left.
Almost 30% of our loan repayments here about frightening argued related party.
Good.
There are certain conditions, the Colombian kindred Bhavan insurance.
In 2021.
We have to repay 19.2 million of a bundle payment.
For a long that covers 94 vessels in 2000.
It's also been 7.7 million balloon payments related to one of our vessels.
Finally in frozen food, we have to make free bundled payments from here in fact, the median for the remaining nine of our vessels.
Yeah. Thank you Laurie laundry payments, if I may say show that dark part and parcel and it's Sean.
Decline every year over the next four years.
[noise] expressed in dollars per vessel per day.
No one repayments over the next 12 months.
$1700 and corporate conduct <unk> cash flow breakeven 11.
Switching now and there are part of this light and the statement there.
By making assumptions for the main components from foreign cash flow breakeven 11.
That is operating expenses gene a expenses interest dry dock.
Josh.
And then.
So far pretty fairly spoke it then.
We come up.
Cash flow breakeven 11 for the next 12 months, which amounts to about 80000 server from them and they did dollars per vessel per day.
Hey, sorry, Steve mentioned there.
Andrew the extreme circumstances.
And your Spike coffee 19 branding were in discussions with all banks pretty fair, Sean the laundry payments.
During 2000 trending.
We're also in discussions with our preferred equity holders.
Well should be paying the dividend in 2000 brandy.
Okay.
We expect this recommendation went for my life.
In car for more than cost requirements are for a long repayments professor dividend payments.
Looking down our breakeven level.
So oh, just below $8000 per vessel per day.
Let's turn now to slide 19.
This slide provides some highlights from our balance sheet.
As of March 31st 2020.
Oh gosh, another hostage 13.6 me and the book value for our vessel.
About 1000 30 million using us for total assets total book value for our assets for approximately I founded in 2016.
And then I didn't decide.
That's an outstanding Bang out there that.
About 87 million preferred equity or for about 18, and other liabilities of 9.5 me.
Gosh, leaving goes with a book value well for about 20 to me.
We adjusted book value.
With that market value for investors.
Based on internal estimates, we can come from late then that passion Friday or pharmacy.
During the six median or 4.7.
So let's first there.
Well, there's some surprise trading range between $23 per share.
Levering represents a significant discount.
Okay, and Natasha value of the company.
Attention that presents a quick investment for our shareholders.
It was up or would like to turn the floor back to our distinguish to minus the remainder of the corn.
Okay.
Yes, that's the same Q.
I mean, I'm now opening the floor for any questions may have.
Thank you ladies and gentlemen, we will now begin the question and answer session. If he wishes to ask a question. Please press star one on your telephone keypad Mike's your name to be announced if you wish to cancel your request. Please press star today.
Thank you we will now take Alpha last question tight Sullivan from Maxim Group. Please go ahead. Your line is now I pad.
Hi, Thank you Hello.
Just first question on the shelf thinks that the current term contracts per year. We when you when you indicate and your ship list and and the reason for the question to set expectations for this current quarter next when you indicate for instance, a term contract current term contracts and then may is that usually at the ended the month or can it area is it something.
Metal them up there at the beginning in the month for all your term contracts. Please.
Yeah, well, Danny and they could be in time during the month, we tried to be.
On things and we report them on Sunday, especially if you date.
Okay.
Okay and then your earlier comments on the scrap yards or can you give more background on where usually can take your containerships make it scrapped and are the yards in the process of opening or where are they in general or are more background on the regional diversification of where they are closed and where where maybe they may be open faster. Please.
Yeah, I mean, 90% of this soups that does get up the other scrapped in India, Pakistan and Bangladesh. These are the three areas where.
We just have the biggest scrapping and the pay the most you can scale out pursuits in Turkey or in a few other places, but you get much less money for that both of 'em soups other position the in or in the U.S.
No the United that UBS.
Look.
Location, there and do that for the most probable places for them to be good I've studied the Pakistan All India.
These countries have locked down the scrap yards for nearly a full go over the months now.
And but there are discussions over these scrap yards opening up very soon in fact in Pakistan. They say that they can open up the yards are open. However, the there is no way to get back to the age youre going to yet so practically you cannot sell a vessel for sale because you cannot.
For scrap because you can look take your cool, but we hope that things will or.
Improve or within the next a few weeks couple of weeks and the ships will be sold yeah within this quarter within Q2.
Oh within two key okay.
Hi, Thank you very much how aggressive.
Same state.
Your next question.
Comes from poor.
<unk> capital markets. Please go ahead. Your line is now I pad.
Hi, Good morning are still it's good morning contest.
Can you highlight on the whether there's gonna be potentially any insurance recovery for the fire in mansion.
Room, and then secondly can you just highlight the scrap value that you're looking for it looked like you gotta deposit on them analysts pay about 1.1 million can you just highlight any additional cash they do potentially you're lucky night with scrapping them and all the ski and then also.
Yes.
Yes.
On the my loyalists be as you say correctly, we said 1.1 million deposit, which should we now have put in an escrow account.
It is subject to the developments in the arbitration procedure.
Scrap prices are being quoted the 20, 25% below where they want before the crisis and although this is somehow artificial because if you look at steel scrap prices globally, they haven't dog today or they might even be increasing but.
Because of the scrap yards, having been close for so long.
This could blow because oh no.
Asking are paying lower the price, we will see how that will develop.
The monopolies.
We'll be sold or at the price so maybe anything between 300 and a 300 than 80, let's say.
The door lives the.
The Dawn I would say, which is just a little bit less than what we said the gilead previously.
But let's say around one of the half million dollars.
About two and a half million dollars maybe.
And the news is ER will be sold or something like close to see into $5 million to $4 million I would probably estimated I know a and of course, we aren't going to get a fully covered and from the insulins for all the damage is that a week.
Suffered so that cost will lead the cobbled fully.
My name is 600 700000 of deductible maybe.
And would you be able to quantify the damage it was incurred on from the fire.
Hi, just a I wouldn't like to to do that tonight's now. This is opposed to sue we are in with the with the in schools.
Two.
But it really doesn't matter too much because what we recovered is what we expensed.
Okay, great it's hard to cover the cash collected on Yeah then.
Hi, So can you talk about the below market time, chartering amortization and will we see that in the second quarter or for how long should we see that.
And we should she during the second quarter, two buttons declining grades I'll be happy to provide some information for you about relates primarily to the seems that we bought back in November that came with some charter that wherever then below market.
There's you know when you do when we acquire center charter you have to make the appropriate.
Sounds congestion, but I think that they would be going down over the next couple of quarters, let's say in everything goes you're watching sounds okay. This time around.
Great and then could you highlight how much you're looking at port scores the deferral of amortization in 2020.
I think as I mentioned, we expect to see something close to $800 per vessel per day, which.
I think should the mountain thing nearly four and across the 5 million.
And that's it. Thank you notice on slide 18 that you're.
The next 12 months budget numbers there based on 19.
Battles.
You should its the right is there a linear association if we based on 17 vessels or any adjustments that you could highlight sports that are bad what do you feel like you must have the numbers would be the same the video name will increase by about $500.
And the and be pretty fair dividend or might increase by about a.
$50.
If you didn't mention Kashi victories, congrats and can pick it will not affect the cash flow breakeven the only affect actually here that could be there.
The Gionee. That's my answer is a kind in dollars and.
Of course, the loan repayments that would be proportionately.
All the most proportion depends on especially if conditions you didn't use in due course <unk>.
When you sell it she you might have to repay part of the understanding that.
Great and then it looks like dry dock activity, which is pretty low in the first quarter and it's you know you're budgeting higher numbers could you just give us some timing on maybe the second quarter dry docking antibody or for the rest of the year.
Yeah, I believe we have wonder I talk next quarter or go to be to be certain I would like to check and to get back to you on that.
If we have a couple of ships that have you for a special survey and no one a in Q3 and one in Q4.
We will decide if we're going to two boss those special surveys the iwear amongst the USDA robo vessels and we will decide if we're going to pass those special surveys or north depending on how the market has.
You will be phasing as the time, if the markets are very poor, we will not spending the money to pass the special surveys if the my mother could certainly doubling and we can see that a we will look recovered to the money for the special survey within the U.S time. After we Boston, we will pass those person service.
And your cities, where do you mind mentioning that you know the name to the vessels that are.
Third and fourth quarter Special service.
It's a then ninos say things can be Athens.
Great. Thank you so much.
Thank you Paul.
Thank you.
Once again, please press star one if he wishes to ask a question and started to cancel that request.
There are a nice size or questions at this time with Topeka. Please continue.
Thank you again for participating in our goal the this quarter and the we will see you in three months time again and discuss the Q2 developments and hopefully.
The introduction of the cope with 19 worldwide.
Thank you on.
That does conclude our conference call today. Thank you for participation you may all disconnect.
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[noise] well can Peel comes Ensco. Please continue to stand by your conference where begin shortly.
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