Q2 2020 Pangaea Logistics Solutions Ltd Earnings Call

Good morning, My name is Stephanie that will be your conference operator today at this time I would like to welcome everyone to the been Jay is logistics solutions second quarter.

[music].

I'll be your conference operator today at this time I would like to welcome everyone to the bed Jay is logistic solutions second quarter Twentytwenty earnings teleconference.

Our host for today's call Mr., Ed Cold, Chairman and Chief Executive Officer, Mr., Gianni Delsignore, Chief Financial Officer more clarity on today's call is be report and will be available for replay beginning at 11 am Eastern time, I think the recording can be accessed by dialing 805 858367.

Domestic or 4045373, 406 international and referencing I'd 8947 zero to five.

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It is now my pleasure to turn the floor Optimists, Tia Golan occur with Prosek partners.

Thank you Stephanie and thank you for joining us for this morning second quite a tiny plenty.

Corporate Sanjay logistic solution with us today, and the company, our chairman and CEO Mr. at Cool and Chief Financial Officer, Mr. GRT Delsignore before I turn the call over to add I'd like to read the Safe Harbor statement. This conference call contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 19.

Besides about pin down logistic solution forward looking statements. Our statements that are not the historical facts such forward looking statements are based upon the current beliefs and expectations in jail logistics solutions management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements such west online.

Well, we just thought Sanjay logistic solutions filings with the Securities and Exchange Commission information set forth uranium should be under study in light of such risks and jail logistic solutions. It does not assume any obligation to update the information conceived this conference call also please recall that a supplemental slide presentation both companies Oh.

Slides can be found attached to the eat tied that was filed with last evening Lilly's, which is available on the investor section of Www, Sanjay I last dotcom and their company filings or on the FCC, let's say I see fees that.

Now I'd like to turn the call oversupply in jail logistic solutions, Chairman and CEO Mr. I'd call I.

Thanks to you and good morning to all of you and thank you for joining us on the call <unk>.

This morning, I'll provide an update on our operations on the overall market before turning the call over to Gianni our CFO.

To provide a more detailed overview of the second quarter financial.

Well then open the line for questions.

I'd like to begin by expressing well wishes to you and your families. So I hope that you're all healthy and Steve.

Our thoughts are with all of those should've been impacted by corporate 19.

We are especially grateful to our dedicated crew members.

Working toward our vessels that stay support the global supply chain.

Country remains committed to the health and wellbeing of our employees.

And as a company will continue to follow all local and international regulatory guidance and best practices. When it comes to operating our business safely.

We hope you had time to view, our press release and accompanying presentation, which were issued last evening.

Our strong second quarter results reflected a remarkable turnaround from the first quarter 2020.

Adhering to our strategy, we navigated the drybulk market the test at historic lows in April and May.

We limited our exposure to the market by adjusting our fleet composition.

We delivered chartered in vessels to their owners and replace them when needed lower cost in sync with cargo demand.

As we said in the past our client focused business with a model that priority. We're supposed to cargo we continue to main profitability in a volatile market environment.

We think the second quarter exemplified this.

Our T C E rate, while lower year over year continue to outperform against the average of the Baltic Panamax and Super Max market indexes.

We exceeded the average market rates by $5185 per day.

An industry, leading 93 person premium to market indexes.

This is significant that's a second quarter is typically a transitional period.

For ice class fleet, how should we prepare for summer ice season, which is seasonally our strongest.

I'll now summarize our results for the quarter.

Total revenue decreased to 70.3 million for three months ending June 30.

2020 from 83.2 million for the same period in 2019, due to the increase or decrease or market rates.

We reported net income of $3 million during Q2, 2020 as compared to 4 million.

For Q2 2019.

Actually at June Thirtyth, 2020, we held cash and cash equivalence restricted cash or $49.4 million.

During the quarter as part of our free fleet renewal plan. We also entered an agreement to sell the bulk biopic.

Since from dry docking, bringing our total fleet to 17 owned vessels.

Further we continue to see progress on our ice class two building project.

Which we expect to take delivery of the first two.

Vessels and beginning of 2021.

Looking forward, we're positioned well as we enter are seasonally strong summer ice season.

So the market is recovered somewhat since June.

Section global economic output and the disruptions caused by covert 19.

From changes to are working environment to rotate inclusion border festivals we.

We sincerely appreciate the dedication of our people ashore in onboard our vessels our results are encouraging, but we expect tumble prepared for continued uncertainty.

And turbulence in our markets over the next few quarters.

However, we continue to be opportunistic as we have always been and delivering best in class services to our clients.

Looking to acquire a new vessels when opportunities arise and developing new business the complements our platform.

Look forward to uptick dating you and developments in the coming quarters.

With that I'll turn the call over to Johnny.

[noise]. Thank you Ed and thank you all for joining us on today's call.

Again, we hope everyone remains healthy and safe as we continue to adapt or in some cases return to noon or normal work environments.

We thank our employees and crew further extra efforts during these unprecedented times.

Before walking through our financials I'd like to expand upon its earlier comments and how we navigated another challenging markets that demonstrated our where unique strategy.

As it said the second quarter tested historic lows in April and May with the beady eye hitting 393.

However, heading into the quarter, we were actively reducing our exposure to the market.

Following our nimble cargo driven chartering strategy.

Rebalanced, our fleet by Redelivering vessels to their owners on schedule and chartered in new tonnage at a lower cost to match our clients cargo requirements.

We reduced our chartered in cost per day down to 7600 nicely in Q2 2020 from 10764 in Q1 of 2020.

We have also taking additional steps to renew our fleet reduce our average fleet age and strengthen our financial position.

In January we accelerated our purchase option on the phone biotic finance lease facility to pay off one of our most expensive debt facilities.

During the quarter, we entered into an agreement to sell the vessel, which resulted in a noncash loss on impairment of 1.8 million. However, we were happy to report the sale was finalized.

Yes, generating 4.6 million of cash.

With that I will now turn to our second quarter financials.

Voyage revenue, which are revenue generated from Korean cargo for clients was 66.8 million a decrease of approximately 14% compared to 77 point fourmillion for the same person in 2019.

This is predominantly due to lower average market rates.

Our Tc rates decreased 17%.

210733 per day from 12933 in the second quarter of 2019.

I wasn't the company's achieved Tc rates continue to outperform against the published market rates by approximately 93%.

Charter revenue, which are opportunistic and tied to market rates decreased to 3.5 million compared to 5.8 million in Q1 of 2019.

A decrease in charter revenue due to a decrease in market charter rates and a decline in time charter days as we've limited our exposure to the market.

Voyage expenses were 31.7 million compared to 37.2 million for the same period in 2019, a decrease of approximately 15%.

The decrease was primarily due to decrease in bunker expenses was all of the covert 19 trigger decline in market prices for bunkers and the second quarter of 2020 compared to the second quarter of 2019.

Vessel operating expenses on a pretty basis, excluding technical management fees were down 4%.

Fourth 5398 in Q2 2019 to 5167 in Q2 of 2020 [noise].

Net income for the quarter ended June 30, 2020 was 3 million or seven cents per share compared to 4 million or nine cents per share for the same period in 2019.

Moving onto the balance sheet and cash flows total cash and cash equivalents, including restricted cash for 49.4 million at June 30, 2020, compared to 43.6 million at June 32019.

For the six month period net cash provided by operating activities was 6.9 million.

Her to 19.5 million through Q2 2019.

Net cash provided by investing activities was 5.8 million through Q2 2020, as a result with the sale of vessels compared to usage of cash of 33.5 million through Q2 of 29 team due to the acquisition of vessels as well as deposits on new buildings. During the first six months of 2019.

Net cash used in financing activities totaled 16.2 million through Q2 2020.

Due to the early purchase option.

On the bulk biotic finance lease facility compared to 1.5 million provided by financing activities in Q1 of two times 2019.

As a result, the financing of two vessels during the first six months of 2019.

As you can see we continue to make progress in our platform expansion initiatives and implementing a strategy that optimizes our assets.

Our ability to continually strengthen our financial position.

Also driving growth and expansion opportunities will by extension continue to generate shareholder value.

With that I will now turn the call back over to Ed for any additional remarks before we get to the tune a portion of the call said.

Thank you Johnny.

We thank our customers business partners and shareholders for their continued.

Commitment in partnership and we look forward.

Updating you further in the coming quarters I'll now open the floor for questions.

At this time, if he would like to ask a question. Please press Star then the number one on your telephone keypad that star one to ask a question well pause for just a moment.

Your first question comes on the line up post frat with noble capital markets.

Good morning, good morning Gianni.

Its had a couple of questions about you know the tone of business right now when sort of Ed. If you could you could describe you said you're talking about a little bits, but your markets rebounded quickly. We did see you know very low levels second quarter.

Seen much a much stronger market second in the third quarter.

Do you what would you attribute some of the turned around to and then also.

You could.

He.

Talk about any changes in trade routes or trade flows or anything that you potentially.

Took advantage up in the second quarter net potentially is durable ended the second half the year.

Okay. So what I can say is that you know.

The rebound has to do as usual with.

I know they didn't sit still well this stuff was only gone they stimulated their economy. There's a lot of stockpiling there because I think that they're nervous about their relationship with the United States and I'm. So.

Price of Iron ore delivered in China is still over $100, which is very healthy.

So I think there's that there's that piece of it and I think so it's it's a lot of Chinese growth.

We have a.

Lots of continued problems in the United States.

But you know which is the market is much healthier and in a second quarter. We do what we normally do when we have a dramatic change in the market. We you know we oh.

No. We go to ground you use the fleet.

We deliver.

Vessels and that's what we've done.

Third quarter, which I think you mentioned that know these such normally.

Strong this quarter and I think that's.

That's playing out that that way because we have Baffin island in the summer and a.

A lot of ships in there.

Profitable.

And.

Number ships we have.

Now this has grown.

Quite a bit.

Going into third quarter.

The fourth quarter, I would say I'm cautiously optimistic that that pattern will will continue so I believe that.

At the end by the end of the you will end up with a decent.

Decent year, certainly compared to more.

Our competitors.

I would say.

Great. That's that's helpful and.

Can you put a little more you know maybe quantify sort of what you're expecting as far as the third quarter have you like in your <unk> book, what kind of.

What kind of you know what kind of expectations should we have for shipping days and then even I know, it's always hard to.

It's always hard to work cask or predict but.

Do you think you know the T.C. outperformance you typically narrows. There's good Mark goes up any reason to think that's not going to happen in the third and fourth quarter.

In the in the third quarter I would say.

Probably spend that said, it's going to continue to be very should be very wide because what we are able to.

Chief in the ice class fleet, and what we were able to achieve.

Oh or.

Sure makeup business. So you know in the fourth quarter.

I can't I can't say that but you're right warmly.

Normally that spread which you know for the second quarter was over 90%.

No that.

Probably over time will now but.

That's actually healthier for for the business.

If you have a.

You know 5000 dollar market and you outperformed by 90 something percent.

It's a it's nice but it doesn't really catching where you want to be.

And so.

Better if you have a you know 12000 dollar market.

Maybe outperform and by 70%.

So one of things that we see.

A lot of the project business that we've been working on has gotten stall because of.

I hope that.

And.

Well that will come back you know, but the uncertainty that we've had in the economy here.

Made it difficult for people to make decisions.

Any longer term.

Projects than we've had some stuff that we're doing with the for example, with the.

You know with the Air force and with the government.

And they just stopped.

And.

You know you in that situation. So hopefully you can be some normalization.

Our domestic economy here that will help.

Projects.

As they have to happen eventually in the meantime.

Clients are healthy as I mentioned the.

The iron ore prices.

Very healthy and that's good for our clients in Baton.

The aluminum business is.

It's very healthy.

As well so that's good for us in Jamaica.

So.

We see all sorts of projects coming but you know again, it's hard to.

Mark for them to get going until we have political stability here.

So it's it's gratifying that you have things and.

Let's say in China better supported.

It is the market.

At the moment.

Great and then airports the levels are shipping days in the third quarter typically it picks up.

And I guess I guess, if we could just talk about your charter in book has it has its likely to go to allow you to take advantage of some of that low rates big piece on the second quarter is.

Typically you don't go too long out, but were you able to capture some low rates and potentially charter in some.

I'm Kinda kids and their tractor Gray said [laughter], Yeah, we were in a the easiest way to look at that is I.

It checked this morning, and I think we're running.

59 ships on the water and that's a lot more than it was.

You know.

Two months ago.

No and that's a natural that's natural evolution.

Okay great.

And when you're working Johnny if we could look at you know any potential refinancing activity that you're looking at up in second half a year I.

I think at some point, you're gonna have to talk about the joint venture debt, maybe pushing out maturities there refinancing some of the joint venture debt can you just talked about any potential activity, we're looking out over the second half the year.

Yes, sure and you hit it right on the head right with the joint venture.

But luckily we do have.

We're we're fortunate we have some flexibility we can sort of choose our own.

And.

Well, we're certainly looking at.

The the very low rate environment, right now, but we don't really see any upward pressure there.

And.

Yeah, we're going to we're going to you know.

She was a 0.2 I certainly.

Refinance, but there's a big went ahead of US is within within the joint venture. We you know we had some flexibility there.

Right I expect on the second half, we certainly will.

Look to to do some refinancing.

Okay, and then you highlighted our Opex can you talk about opex over the second half of the year and and then also you mentioned in your comments you know bunker fuels, which you know bunker fuel prices were very favorable.

My sense is they haven't recovered so potentially they could be stable ended the third quarter two exact a reasonable expectation.

Who knows what the market goes but yeah as of today I think that's that's where we're at what we're expecting a future as far as your comment on on Opex.

Where we did have a plan to to review our fleet and we we sort of 'em, we follow through on that plan.

Completed the sale football biotic.

Here in August, but I think that's a natural evolution of the fleet as we look to you know lowering the average age and find a little more efficiency in the fleet that we did see they opex will come down. So we're happy to that our efforts are actually paying off.

And we'll look for new well look when your tonnage what we're always looking for new opportunities to acquire vessels that fit our profile.

And as we renew the fleet, we hope we can keep that number.

Good point.

Okay, and then at better and you are the sporting you're running 59.

Vessels is that do you.

Is that due to an average for the quarter, yet or is that a reasonable number to use for potential.

Shipping days for the quarter. Its course in average fleet of 59 or is it going to be you know, maybe if you can get a little color or not.

Well, we already halfway through the quarter right. So I suspect that that's probably the right number.

You know two to work on give or take a couple of.

Chips, you know I should know well use.

Be living and.

In chips et cetera, et cetera, So I think that's probably a reasonable.

You know assumption for sure.

Yeah.

Yes.

You know <unk>.

Three ice season.

Yeah, we do charter in additional tonnage to to support that contract. So.

I think we'll see that number stayed pretty steady for for Q3.

Okay, great. Thank you so much in you know.

Really strong results does prove model.

Once again can deliver in a pretty tough times so congratulations.

Thank you very much thanks, both appreciate it.

At this time there are no additional questions I'd like to turn it back over to management.

Well. Thank you everyone for Ah for joining us today and that please.

We continue to say.

Hey safe.

And all the best your films.

Thank you. This concludes today's conference call you may now disconnect.