Q2 2020 DHT Holdings Inc Earnings Call
Ladies and gentlemen, thank you first standing by and welcome to the Q2 Twentytwenty DGD Holdings incorporated earnings Conference call.
At this time.
Alright listen only mode. After your speaker presentation, there will be a question and answer recession.
A question. During this session you will need to press star one on your telephone I must advise you that this conference is being recorded today just the 11th of August the talent.
And I would now like they had to conference over to your first speaker today.
Thank you. Please go ahead.
Thank you.
Good morning, and good afternoon, everyone welcome and thank you for joining Phd holdings second quarter Twentytwenty earnings call.
I'm joined by <unk> East Coast.
Well that's hard to.
That.
Same they'd head of Investor Relations.
That's usually when we go through financial.
Before we open up for your question.
So linked to the side they can be found on our website <unk> dot com.
Before we get started with today's calls.
Well I would like to make the following.
A replay of this conference call will be available at our website <unk> Dot com until August 18.
In addition, our earnings press release will be available on our website <unk> see Edgar system, that's an exhibit.
Okay.
That's reminder, on this conference call will discuss matters that are forward looking in nature. These forward looking statements are based on our current expectations about future events, including DST prospects.
David I'm share repurchases and entertainment.
For the time to market in general.
They they show after I read some of it so utilization for cost of world economic activity oil prices and trading patterns anticipated levels of new building of scrapping and project to try to catch up.
Actual results may differ materially friendly dictation, that's reflected in these forward looking statement.
We actually to read our periodic reports are available on our website.
Yeah fair system, including the risk factors. Some of these reports for more information regarding risk that's what's that.
Yes.
Looking at the piano <unk> EBITDA for the quarter came in 578 million and a net income of 135.8 million or 92 cents per share.
Adjusted for noncash change in fair value related to interest rate derivatives, So zero point fourmillion.
I think on 136.3 million or 93 cents per share for the quarter.
They set another new record in the company 15 year history.
Well, thanks for the quarter was 19.7 million or eight stuff for they averaged for the fleet and DNA for the quarter with pardon me.
Moving over to the balance sheet.
The quarter ended with hunger in 30 million of cash.
During the quarter, we prepaid 59 million under the ATM and ROE and yeah credit facility.
The voluntary prepayments under the two facilities for me for old regular installments scheduled for 2021.
Current availability under our revolving credit facilities, if hundred 35 million.
Total liquidity, that's 273 million at quarter end.
Financial leverage is 39.4% based on book value and 38.6% based on market values for the shape.
No, that's it's 582 million, which equals an Irish connector.
81.5 million per vessel.
Looking at the catch Fritsch the quarter.
With 76 million of cash.
We generated hundreds and 78 million in habitat.
Ordinary debt repayments on cash interest amounted to 26 million.
52 million was paid any dividend.
10 million Houston scrubber on maintenance Capex.
So 2.5, new analyst provided by scrubber financing.
[laughter] 59 million most used for the prepayment.
[noise] changes in working capital amounted to 16 million and the quarter ended with hundreds and 30 million of cash.
With that I'll turn the call over to take that.
Thank you I don't.
Let me then walk you through the operational highlights toward a corridor.
Yes, you see in from the press release are supposed to be able to seize earned $92100 per day in the second quarter.
The time charter chips are at an average so 62700 per day Fleetwide. The average doesn't becomes 83800 per day.
[noise]. That's so today, we have covered 61% of the available spot days at an average rate 51400 per day.
More importantly, if you're an investor.
On the fleet wide basis, I would the time charter ships included.
Three quarters. So the tanker days are covered at an average rate of $51200 per day.
And that is with no profit sharing on the four ships with such arrangements.
Our aggressive pursuit of time charter opportunities earlier in the year was clearly the right strategy.
With that we've been able to extend the good times well into next year.
On the cost side the company continues to deliver stable and comparative numbers vessel operating expenses came in at 8000 Boes per day per ship for the quarter.
Gosh DNA amounted to 3.1 million for the quarter.
[noise], what doesn't turn to capital allocation.
Four to 42nd consecutive time will pay a quarterly dividend.
48 cents per share will be paid on September 2nd to shareholders on record August 26.
The amount equal 60% to net income divided by the fully diluted share count.
In the quarter, we continued to strengthen our balance sheet like pre paying almost $60 million a bank debt.
Specifically, we pre pay the 2021 regular installments on our two large loan facilities.
In addition to the overall de leveraging effect. This move that's a significant positive impact on next year's cash breakeven levels, something so I will discuss in more detail in a minute.
That's you have noted under 70, so July we exercised our call option on the 125 million convertible bond due August next year.
The conversion price is 5.34 $7 per share.
Thursday next week is the last chance for bondholders to convert or notes into common shares.
If they do not.
There will be redeemed in cash at par on Friday, the 21st.
The potential cash redemption will be covered by cash in hand, and a partial draw on our revolving credit facilities.
And on a general note, we'd like to add it we look forward to having this instrument retired from the capital structure.
Previous locations, we've been able to buyback convertible bonds in the open market at a discount.
However in recent quarters. This has been impossible to repeat as the bonus traded meaningfully above par.
At times seemingly as if the call option was not price then.
So in this context, we elected to called the bond at par.
With that I'll turn it over to side.
Thank you take that.
The quoted 19 virus continues to present significant chose us with respect to changing crews at regular intervals.
Consequently, many see farmers are serving long appeared at some more than originally planned.
There are too few porch some countries that facilitates crew changes and the variety of national a piece and the immigration practices does not make these talk an easier.
Additionally, the time required for crude changes are longer than normal and result in some of it.
But the his team we have all of ever increasing success with grew changes.
To date had two thirds of our fleet imports to change the song or older group.
This is a significant that sort of achieving from both our seafarers I know shore based stuff.
As previously discussed we have taken advantage of the strong freight markets to build a meaningful group core fixed income for our fleets.
Importantly, this level of fixed income covers a significant portion of the company's cash cost lower still required rights in order for the spot ships to cover the remaining cash costs for the company.
Specifically, we estimate the power 17 spoke ships need to earn $2800 per day for the company to be cash neutral for the remainder of there.
This does not take into consideration third quarter bookings to date, hence we are well ahead of this number.
Similarly, we estimate that the spot ships need to earn 11 posted a $400 per day to cover our cash costs in twentytwenty.
Cash breakeven might mean different things to different people.
At the U.S.G. It includes all true cash gross alrighty, Opex DNA scheduled debt repayments interest and maintenance Capex.
Both these numbers are very robust unquoted, that's a result, or tcs strategy and debt prepayments.
We believe that they make DST stand apart with staying power and ability to drain that cash even in the weaker markets.
[noise] already industry is highly cyclical.
Our industry is also very capital intensive.
Further it's essentially a spot business offering me limited opportunities to build a truly long term fixed income rewarding returns.
In recognition of this these two stress it is counter cyclical.
This means that they do different things, depending on where we are in the business cycles.
As you can see on this growth or actions. So I've been very focused during troughs and peaks.
In late 13 early 14, the expanded aggressively by acquiring 16 the agencies.
In the folding period <unk> earnings and thus itself is appreciated we stopped investing and shifted our focus by paying handsome dividends buying back bonds up a discount securing French article trucks as well as prepaying debt.
In the Tropo 17, you again expanded by acquiring 13 need to seize at attractive prices.
During the recent period or strong earnings we have continued to execute on our well defined strategy and extend our solid track record.
This included the following three key components.
Well rewarding shareholders generous formula based quarterly cash dividends.
To securing fixed income contracts for several of our ships at attractive rates.
And Threed allocating a significant portion of our cash flows to prepay that further strengthen our balance sheets.
These achievements are very important in anticipation and preparation for the next step you notice that the do you expect next leg in the market to offer attractive investment opportunities.
Our balance sheet, well have capacity to make meaningful investments without relying on raising additional equity.
This will ensure additional investments will be accretive to earnings.
Further we enjoy excellent support from our lending banks and are confident in credit being available when required.
In sum, we are now coming out of appeared that except navihealth depressed levels and position the company to be able to take advantage of attractive growth opportunities when they arise.
And with that we opened up accumulate operator.
Thank you, ladies and gentlemen, who will now begin the question and answer session. If you wish to ask question. Please press star one on your telephone keypad.
Your first question for from the line US Chris Jones from Weber Research. Please ask your question.
Hey, good afternoon, guys how are you.
Good thanks.
Okay, great great Congrats on the great quarter.
I guess I wanted to just kind of dial in on the to your time charter that you guys are able to sign for stallion I had I think 41 41 42000 a day.
There is their profit share component to this end and to like are there plans to do more of these.
I know that you guys six.
Six in April for about 61000, a day, probably capturing the search trade, but it kind of just sends like I guess it bears signaled that current spot rates, which are around let's call. It 18000, a day at these rates might persist and I guess put another way is there a price level or duration that would encourage you guys see do.
Our time charters versus spot and is there like a.
Percentage of fleet that you guys are aiming for tablets times charter versus spot that you guys. We think offers.
Yes, and optimal risk reward return.
To the first part there is no profit sharing element on the time charter on selling as you referred to.
To the second part if there is a magic number on percentage covered on time charter and so forth. It is not.
And that is really unchanged from a over the years, we will pursue time charters. When we think that the numbers makes sense. So if we can look in rates that give a good return on investments into vessels that we have.
Then we will do it.
But it is not like we are desperate to to lock in cash flow no matter where rates are so.
We've done it in this upcycle done as many charters as we could find we did it in prior high markets, but you will note that and lower markets. We have not been nearly as eager to develop new time sort of business. It's more a reflects no.
What rate levels, we receive.
Doable and not so much about the percentage of the total fleet.
Okay, great, Thanks, and I guess.
There's like recent news coming on surrounding congestion in China, I think kepware peg like around 80, some odd tankers currently being held up and I guess would you guys gave it had some sort of visibility into how much of this is the result of.
Claim floating storage, where charters are purposely holding or slow steaming right outside the courts as the from floating storage or is there like a some sort of structural bottleneck Ur cobot related congestion in China and are you guys exposed to this in any way and if you are.
Our the demerits charges, I think greater than the headline spot rate.
Well, we think that number you mentioned.
Certainly a judge 12 other reports that the that we are reviewing the also starting turns on the Intel is picking up.
We believe this is really a.
Reflection, though in then Chris being.
But full in China, or Lipsey ASU service short. Thanks. So it takes time for the refiners will also reduce some of those reserves to consume the so then Chris.
It's a holding up chips, we don't really believe this is so much of a cool total player Thats also talk much talked about in the spring.
Also to your other parts of the question. This instead to earn them illustrates the metrics so very much be reflectional when these charters for a fixed.
We ever had some ships on diverse in China, and we still have so a and this is a you know where we get paid everyday and then.
The red certainly about it but a aftermarket has come off a recently most of these tumors rates are meaningfully higher than the than the current spot work.
Okay, great Yeah, Thats gain its kind of good tend to be able to capture something steady to come in well buy rates have kind of taken a little bit ever did and I guess just my final question.
I know that you said most of the crude discharge and changes you're going to take up a lot of the off hire days and in your presentation. A report. Thank you had 77 off hire days in Q3.
I just wanted to get in a sense. It how much of that is true changes and if.
You guys are still going ahead with the five vessels that are just on the go scrubber retrofits and if that will happen this year.
The crude changes already included in this scheduled off hire days lets you will see on them on the list. So it's just.
Just sort of relative and why that number in the total scheme of things.
But in general if it does take longer than.
What has been the norm in the past typically we'll do this wants to do over operations, either discharging loading or bunkering imports.
Let's now if my single some degradation and.
So more time to its automaker logistics, Eric so.
Okay, Yeah, it makes sense and discover retrofits.
Yes, so we postponed the number of these ships.
Yes, the earnings are very strong.
So some of these are yet to take place and Ah, yes, probably not to focus. So these two coincides with natural Drydocking days.
Well it will take the ships are fine in any case. So that is something that will develop later this year and also into next year.
Yes that makes sense, that's super efficient alright, great. Thanks, guys. Thanks for your time have a great rescue them.
Your next question comes on the line our friends events from Jefferies. Please ask your question.
Howdy gentlemen has gone.
Good thanks.
Great. So I guess first question just trying to come more color around your decision to convert the 4.5% Merck.
At this time right given that your shares are trading well below NAV.
Her governor Rod that have already been converted and I guess last quarter question to avoid the diverse.
We look or possibly repurchase some agronomics here for good actors are.
And as we said in her remarks.
We've really been trying to see if we could buy some of these bonds in the in the open market, but we found the pricing to be.
Attractive and then back in mid July our share price was basically right at the conversion price resort and we were hopeful that were.
We're going to be able to sort of call. It.
On the and redeem it in cash.
Of course.
It's a 30 day notice period, so the shares straight over to stock is trading freely in between so it is still too early to say, whether it's going to convert or not or redeemed in cash but.
I think in terms so.
Consequential action on the outcome that speculative at this point, so we'd prefer to see how it all shakes out at the end of next week before we decide or a potential next move.
Okay.
And then.
Randy Let me it does that also that it is oh of course.
Dilution issue if it is converted.
But you see the pretty strong dividends for this quarter.
See in our booking guidance for the current quarters.
So by by just waiting we were afraid that the dilution was just going to increase so we elected to go have now that lend to share price was.
The conversion price.
Got it probably that's there.
And then speaking of the quarter the rates.
Very strong numbers. We go ahead of the benchmark rate sequencing in last few weeks.
But remember borough years, because the time Carter's Burger group away some of that product versus your upside and.
And then what kind of premium good your coverage.
He sees earn mass corridor and so far this quarter and then what are kind of the current rate levels, that's you're breaking up the FCC. Your most recent or this week.
We did have a specific dollar per day number for you but.
What do you see into different broker reports on the delta between comply and tool and old fashion heavy sulfur or sell for fuel.
This is a good indication and just multiply that delta with a daily consumption and that's that's really your answers. So of course this spread is much tighter now than what.
Most people anticipated at the beginning of the year.
But.
Year to date, we have essentially recovered the half of the capex on the on the retrofits that we have done.
And.
It is not obvious to us.
Margins got to going to stay where they are is that it might as well expand we'll go back out again.
That's a speculative to other strong opinion on it.
And then most recent booking or rigs this week curvy FCC.
Well, we have voiced the will to have booked courts today, Kevin spot market. This 20000 plus per day, maybe they'll take this so.
Yep.
Our capacity space.
Got it.
All right and that just quick modeling question, the $9 million quarterly earmarked.
Should we use that for the rest of this year and then to throughout 2021.
No.
For the rest of this year, it's sort of full regular installments schedule. So what we have prepaid is the year 2021 for those two big facilities, we're not prepaid and their regular installments for this year.
The reason for that is that our time charter coverage is so much stronger this year and I would it is for next year.
So with cash breakeven at $2800 today for the spot ships this year.
Well, it's better use of the cash to prepay next year's installment.
Got it.
Timing difference.
Thanks, so much and congrats again.
Thank you.
Your next question from the line then Nolan from Stifel. Please ask your question.
Hi, Thanks, This is Ben Nolan so.
Close now but.
I have a couple.
His first.
I I know that you guys take a very formulaic and systematic approach to how you think about buying and selling assets countercyclical is you've talked about but.
And it does sound like you're a little bit more.
Opened to the idea of expansion now than you probably have been under previous quarter.
Can you maybe just remind me where you all or where are those thresholds are in terms of.
What what you view as historically, good prices versus historically prices, where youd rather stand assignment.
We haven't been an investment mode now for more than three years. So.
And.
No rush to making new investments, but I.
I think all these preparations estimate for the company has to be ready.
When those things are right. So it's still you think it's a bit earlier.
We're not going to sort of flag at particular price per ship, but if you look back at that sort of trucks in 13 and 17, you should note that the five year old ships are sort of below 60 million.
And.
Newbuildings were a bit on life to it so I know.
The in 13 and it all was below 80 in 17.
So that's sort of some indication.
But.
I will tell you know what led you said asset price will go we think won't key permit to look at fair is that the yards in general are well they have got very very little business and then.
That might the driving to further reduce their pricing and that will also be think impacts opportunities on taken on ships. So.
This is really what they need to watch carefully but again there is no rush me. This preparing the company and then this might be a next day event. So.
Sure.
Then I wanted to get back to to convert question a little better I mean, obviously you guys. It's it's.
I will complete common sense they want to take this out ahead of the dividend, there's no question and that needed to be done.
And obviously I would say at this point pretty clearly most of that is going to be converted into equity, but it doesn't leave your share count a lot higher than what it has historically been.
Yes.
Longer term perspective is that.
Good with that or.
Would you view the company's under Levered, assuming that all of that.
Is converted.
I think if you.
Yes, it converts your.
Your leverage is going to be maybe south of 30% and so forth.
But we don't have a fixed answer to what the right percentages as we've said many times that for us.
Average really translates into cash breakeven levels than we have been very careful not to run those up.
But our leverage is going to change with the cycle. So right now where maybe a very conservative you said underlevered.
But frankly, we were able to get it down closer to zero percent leverage at this point in the cycle, we'd be more if you know even more excited because then we have tremendous financial muscle built in so that we can go up and buy things when nobody else there to do it when it's at its really a term at the trough. So that's that's what is all about.
And at that point, we'd be happy too.
Never up to 50% or something like that but again, it's the nominal numbers that drives it.
But thats the whole clued here that we're setting up the balance sheet. So that we can do the right moves into trough.
Okay, and then lastly from me.
In the June update you talked about.
The.
Scandinavian missing its time charter could you, maybe just give a little bit more color on that.
I guess there was any.
Ability to recapture that or anything of that Sir.
No. So you know when you the agreed to do a time sharpie degree for delivery, even though the ship.
And the this ship boasts a impacted by.
What you talked about turn it on this fall Oh. This is sort of short types being at school. So scan their spend almost two most getting our cargo ups.
Just by a simple natural that she mr. counseling and we Didnt plan for the ship to discharge. The two most this start terms. So it was only three there so.
Obviously, the will pay the merchandise period the unfortunate a consequence most of the mystery shopper. So.
Okay. All right appreciate it thank you.
Your next question comes the line off Omar Nokta from Clarksons Platou. Please ask your question.
Hi, guys. My first question actually is relates to.
Spine your comments and then Ben's question in relation to the potential change and tactics.
After the three year hiatus from the investment window, there, particularly part of the fleet you're looking at targeting we've seen pressure really over the past several months on older vessels resell Newbuilding prices, you mentioned that still all under evaluation, but anything right now that jumps out at you as attractive.
Walter Reed and so as you mentioned this is just a question no explaining why the abdominal the thinks is only recently and preparing the company on what we expect to be sort of the next a sort of a significant activity.
The company.
So it's a way too early to say that them.
We look at our false activities, we have gone M&A vehicle newbuildings to that picked up distressed assets. So.
It could still be mix. So those things several look at rather than the best about it says symptoms. So I think in addition to that.
When we do go out and acquire things there's another aspect of that some some sort of fleet renewal so sure.
The preference will clearly be to look at ships built.
Since 2015.
Or or re sales, but is at this point difficult to see ourselves growing up the buying 18 year old ships to gamble on the on the immediate spike in the into freight market.
Yeah that makes sense and and obviously, it's a it's a question that.
We've known the answer for some time, but how to new buildings at this point towards some of the uncertainty out there how do those fit into the equation.
Pricing today in Korea, So I do some in China, it's low at this and last time, we hope that could be added the.
Big shifts that a lot of equipment below 80.
So you get deliberately today in the first half will turn to ticket too.
But again quite being you know we are not sort of.
Various sort of trigger eager right though.
Preparing the company and.
Thank you will certainly be multiply that when you do something.
Yep Yep understood.
I have just a maybe a follow up to some of the discussion points you repaid a lot of debt or sorry pre paid a lot of debt. That's doing 21, you're in the middle of redeeming the converts.
You're bringing down your scheduled repayments down drastically here.
For next year, you'll have plenty of flexibility.
How do you think about utilizing the cash flow that's generated during the second half of this year. We know it's not going to be Bonanza earnings, but you do have the tea season place as you mentioned that part is going to go until next year. How do you think about the cash that comes into the company in the second half do you want to.
Prepay debt further or do not want to maybe built a bit of a mini war chest.
Head of the potential next next wave of strategy.
We think it's in the best interest so all shareholders that that we prepaid that you're reducing your interest expenses. When you do that so rather than building a war chest, earning nothing in deposit accounts, we think it's better to prepay debt and.
As I had said, we're confident that the credits kind of either when we think its right to to start to invest again.
So in the short term.
It's really more of the say that we will.
Continue to to prepay debt it.
Fixed underleveraged increases the financial flexibility and it also gives us a unbeatable cash breakeven levels into markets, where we may be hit by negative surprises.
And then from a freight perspective.
Yes.
Yes, absolutely okay, well. Thank you that's it for me.
Thank you.
Next question comes online George Berman from Securities. Please ask your question.
Thanks for taking my call on congratulations great quarter.
Thank you.
Quick question last conference call. The you mentioned that one of your ships had had been involved in an accident and whats out of service has that been.
Covered we paired and is back in service.
Yes, the ship as a most repair definitely back in service and there's some insurance claim in the that'll obviously take time to settle the so but the ship is fully operational.
Okay. Great next question I have all is on the convertible debt.
That you're calling back.
Back of the envelope calculation that on 87 per 1000 would facilitate the issue of about.
23 million shares.
At the current conversion rate if everyone is converted some way in your press release that they talk about 74 million shares.
Could you explain the difference there.
I don't know if you want to add color to that lineup, but.
And you're absolutely right that the convert itself is 33 point something no excuse me 23 point something shares so I.
Yes.
No that's correct.
It's over 23 million.
The question if.
And we bombed older ships is to come.
And your note seven.
That stated assuming the maximum fundamental change conversion right. So that's.
The front this is not.
Fundamental change.
Okay, well see a make whole event.
Yes.
Okay. So if everyone converts.
You would there would be about 23 million more she has out.
Correct.
Hi.
And that just for for argument sake, if I don't convert you'll pay me cash I don't get to dividend, but if I do convert and I have to convert.
Before the ex dividend date, I would get to 48 cents cash dividend on my shares.
Correct.
Okay.
And I would I would assume a couple of the a call US have asked the question what the tremendous amount of cash on hand.
Everything prepaid wait still very positive that you would probably entertain a stock buyback program unless the stock really traits up to its real value closer to the 910 dollar level.
Yes, I'm sure you're aware that we do have a buyback program in place. It has been used in a little while but we're certainly done buybacks both of the convert down on the their common equity in.
On prime locations.
So this is something that the board, we'll always look at the or whether we should focus on cash dividends or a mix with buybacks.
Okay great.
Maybe one last question in general on the oil trade do you still see a lot of transportation requests from.
South America, and the us into the far East why has that at down.
No.
You alluded to we certainly see a strong program out to South America with Brazil in particular.
So that is going quite strongly.
Yes.
A little more irregular foot.
In the recent weeks or the Atlantic market has certainly been more active than the Arabian Gulf market in terms of loading so vlccs.
So.
These are becoming more and more important a low quarter load areas for for to be able to see trade no doubt.
So the idea ton miles are still overall at an increasing.
Right now.
The distances are increasing but of course right now we're suffering from a very low level of fixture in south of the Arabian Gulf.
Right, Okay, well on that you've shown you put in had great way caught our and I look forward to a very profitable future from here.
Great. Thank you.
Your next question is on the line of one low fast from private Investor. Please ask your question.
Hello, good that earn on congratulations on moving quotes multiple my question, how banter already had Joe.
Ryan how you look at long term Embedment project.
When you look that why why did the right and we've got.
One by ship.
Well movement.
Hi, John will be very helpful.
Thank you.
Your your line was a little blurry, but Oh I think what you were asking some of the things have been was touching upon earlier and what is our return requirements or expectations. When we make investments and that formula we've been discussing in the past is that.
Well, we move we contemplate an investment we really look at what the required rate is to provide a 10% unlevered key unlevered return on investment.
We want that required rate to be meaningfully lower than historic average spot rates.
So.
That is really a simple as it is.
We've made investments would required rates from the sort of mid to high $20000 per day up to the two to mid $30000 per day, whilst the long term historic averages.
About 42000 Boes a day, if I remember correctly.
So that gives you some sort of indication on when we think it is interesting to deploy capital.
Okay. That's very helpful. Thank you very much.
Your next question comes the line of Robert to Vera from Artesia Vera.
Your question.
Okay.
Hello, gentlemen, and thank you for a wonderful performance, especially during this quarter.
But more reflective I think of your long term strategy approaches.
Shows that you are running the company extremely well.
I love the.
Philosophy going to zero percent, yes.
So that you have built your cash the way you have built your cash to one of the highest levels on record at this point.
This is extremely.
Encouraging to us to see you doing that.
I would imagine you will announce after next week the amount of conversion that has taken place.
Sure.
Yeah, I'm asking you.
After next week when you announce the amount of conversion.
Of the.
Convertible debt that has taken place.
Yes, so post a the took the first there'll be an announcement. So the decision that the low told us have taken by the to covert or whether the looks to be reviewed so we will send though for sort of their conclusion, if you like.
So that the its Douglas.
Wonderful.
Now help me understand one thing.
On your charts you presented.
Show, the net debt, which you have reduced this year alone by over 100 million.
To be down to.
581.5 million on the net debt.
Yes as of August.
You show the notional debt to be 730.6 million can you help me understand why there was such a large increase in the debt between the end of June.
And August 10th.
No I now would you take that please.
If you will get done not floor.
The total interest bearing debt.
[music].
Asset in June.
Lets you referring to win.
Yes.
Thanks.
Cash.
So I guess left.
Answers your question.
Well no you that's what I'm.
Having trouble understanding.
In the end of quarter to the interest bearing debt was 719.2, yet you say the net debt is only 581.5.
And that is because of the cash and cash equivalent differential.
Correct, Yes, that's correct okay.
Well then the the real interest bearing debt is the one we're interested in and I am complementing you on reducing its so significantly.
I Love. The fact that you have continuously increase that cash and cash equivalents to put you in a position to move strategically as the market shows you opportunity that's wonderful.
Could you give us some indication.
How you see within the next year with the current.
Right.
Being what they are and scrappage rates being what they are and the small order book being what it is.
Do you have any feeling for the rest of this year and going into next year.
The rates that will be present in our market in the spot market.
No. We're already industries. So certainly not only Acyclical is also were able to tighten seasonal and it's a also impacted by you know curve Olson the political decisions on opaque.
I will tell you. So we've been in this industry along it often do quite a very very hard.
Not impossible.
Credible.
Great their projections, but.
As you alluded to the way they manage thieves to your life is to really be able to withstand sort of will end the tough market.
At the same time without giving away the upside the.
Should sort of good times.
You know spring up almost so.
We think though the company is very well positioned in order to sort of a moving to appear that we expect will have the weaker rates.
To give you won't indication if you look over the past 25 years.
The three worst years since this time period.
Earnings at about 18000 $19000 today on average those three extremely bad years. So we're not suggesting that the death is representative of wants to call. It.
It's a shipping coal thanks to the cash breakeven level stuff, you're having the company and even in a market like that to be able to generate cash.
Yes, and I think that is because you added strategically thought ahead and done a wonderful job in the decision making that you have made.
I'd like to just say, thank you very much share holder, our company and receiving the sweet dividend you just gave to us as well as increasing the cash that way you have.
Just a testimony to a very well run company. Thank you that's all I have.
Thank you.
Once again for questions. Please press star one thing you telephone keypad.
Your next question comes on the line of Geoffrey Scott from Scott I said, please ask your question.
Good afternoon.
Industry wide, there's been a lack of a demolition activity.
Perhaps the have the ships that have reached 20 years or even 17 in half years really been going in for special survey or have the owner has been able to defer that activity because of the <unk>.
Because the cobot.
I think there's been very little a then we'll issue that predominantly because of a very strong freight market. So it is sort of Florida.
Owners of older ships, the opportunity to continue to trade and actually paid for for the Drydock.
Also a we believe a little these older ships have.
Been engaged in storage Lloyd full living contango opportunities.
<unk> percent so earlier this year.
But I think.
If the market continues at current levels than you see some of these stores activity unwinding overtime.
Demolition activity will increase.
But you also about the Colgate and you're right. There have been there was sort of a stop in activity for wine.
Where it was just frankly most is it was made it possible to take ships a shore and they get cruise off a et cetera, et cetera, but that is that easing up.
Although only able to mind their scale, but then.
It's more that sort of market economics, we think that is driving this than just the logistics.
The logistical liability, although overall the spec ours.
Okay are what are you hearing from the people in the recycling industry regarding the prospect for more demolition in the fourth quarter.
Yeah that really see than the prospects so that fit the brokers have suggested that the there's some level of increased activity in this quarter to compared to what you saw in the spring so.
Yeah.
Don't really having these ships in that category. So we're not so.
Following this this part diploma databases, if you like that prices have gone up from the levels in the in the second quarter I think thats the alternative sexual Oh, so more activity and then they activities and certainly halted by then by the government and that is starting to get a little bit more normal now.
To your expectation would be there would be more demolition in the fourth quarter.
It all depends on freight rates, we think that's you touched upon there's certainly there is an inventory of ships or a good bit glasses or shifts that are coming up for a special surveys and intermediate survey so.
If the freight rates are lackluster and expectations are low that's typically when you see people call it quits and start recycling.
But it really rights on on where spot market is and where people think it's going to go.
Okay me ask a follow up before wouldnt, usually stronger than the third quarter.
If things remain the same when you when would you expect rates to go up and Conversely, if rates don't go up by what.
What time period would you begin to worried that.
The future is not going to the same as usual.
I think what we're experiencing now is a very very unusual year.
So we've seen a phenomenally strong market into first half it has been stronger than most people anticipated in the third quarter and that's partly because what we discussed on the.
Congestion, especially from China, but also for the U.S. West coast to pick another area.
This is tied up a lot of ships and freight rates have held up much better than normal at this time of year.
Fourth quarter normally yes, it's a it's a boost but if we see a unwinding of their congestions around the world. A then you could well see a situation where the fourth quarter is not as relative strong as it normally is.
Right now everything is really a bit up in the areas is hard to have a strong conviction case on on where rates are going to be in the fourth quarter compared to third quarter.
Okay I appreciate it thanks very much.
Thank you.
There are no further questions at this time please continue.
Alright, then we'll just say thank you very much for your interest in the H.T., we've had a fantastic quarter and we're starting the third quarter on on the on the strong putting as well so thanks for your interest having today.
That does conclude their conference for today. Thank you for participating you may all disconnect.
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