Q3 2020 Costamare Inc Earnings Call
Thank you for standing by ladies and gentlemen, and welcome to the Costamare Inc. conference call on the third quarter 2025 actual results.
We have with us Mr. Gregory.
Chief Financial Officer of the company at.
At this time all participants are in a listen only mode.
It will be a presentation, followed by question and answer session at which time if you wish to ask a question. Please press star one.
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I must advise.
But I must advise you that this conference is being recorded today Wednesday October 20 2020.
We would like to remind you that this conference call contains forward looking statements.
Please take a moment to me slide number two of the presentation, which contains forward looking statements.
And I will now pass the floor to your speaker today Mr. Chicos. Please go ahead Sir.
Thank you Ed good morning, ladies and gentlemen.
During the third quarter, the company could even get to profitability as far as like everything about program. We sold for the Malaysian to buy says with an average age of 23 years, and we agreed to acquire the largest secondhand ships or not but it's 11 years younger you.
The new acquisitions would be initially funded with equity.
Meanwhile, our Newbuilding program is progressing on schedule and we have now accepted that you'd be doing three out of five to 10000 people batches. We tripled lastly, I think you had talkers.
Well the market today, not the containership fleet continues to scream to leverage below 2% well the bubble Kristen demand for container shipping.
Good age probably driving current.
Ive charted the consultant they've been shipped during the quarter.
Well a couple of things shapes comical charter over the next six miles whose lives as well. These are sustainably should the market momentum continue.
With liquidity with a Buck who founded immediately no meaningful getting what you were just over the next two years and maybe my topics. When we grant. We have work was you can put up would you got opportunities increasing shareholder value and did that movie.
Moving onto this documentation.
On slide three we are presenting a combined snapshot more than 45 years in the shipping industry I didn't get after dividend payments she's going property strong sponsorship or never got to just actually probably dead smoothed every penny for five full year life interest Golden Nuggets plug equities, each youngest that'd be my husband and ownership.
And I go that's young with no legacy that those pictures.
Moving to the next slide.
You can see the resilience of our business model steady <unk>, Inc. I mean, we're not died shipping environment.
On slide five you can see the highlights I definitely think couple of quarters. During December in New York at the adjusted PPS Ustwenty two cents, our adjusted net income for the first nine months of this year is not a lot of video and D.S. He 76 cents.
We do maintain a strong balance sheet and where do you feel about 210 million young leverage of approximately 42% and no meaningful debt maturity sometime 2024.
Moving to the next slide that's why the party sleeping well, though we continue to say look for the dormant over the past quarter people, who chose to compare decisions are now potato pretty pretty good and replace it with the three younger basis with an average age of 12 years.
<unk> expenses would have been you tend to find exactly we got whatever degree video for 15000, TV container ships out because judicial five she's devices. The shapes up nicely I think your childish with Yapping blacks.
Slide seven we have charted in total 15 garcia's during the quarter. The choppy markets has been rising on the back of course to supply and demand fundamentals.
I didn't fleet has dropped to 1.8% and the orders will pick up 8% and it is expected to remain low.
We consulting expenses coming off charter over the next six months, which begins of course, you know just favorably should the market momentum continued fine.
Finally, we wouldn't be on the 14th consecutive quarterly dividend in November inside Theres, a copy of Barclays. Your phasing seem to agree it's easy section housekeeping children exactly 92 million.
In the next slide you can see the third quarter 2022 jobs. During this quarter. The company generated revenue of about 8 million and adjusted net income of 27, a meager defeated boards the adjusted BPAC strictly to change.
I'll, let John its finkielstain could of course duration to follow noncash items, Yeah, cool chopper happiness I called to cancel those are for most of these pools, that's prepaid lease rentals and probably won't desktops.
On slide nine when discussing our capital structure I wouldn't ever that's it's going to be below 45% net gets to 12 month trailing EBITDA is 2.3 times and he'd be Delaware knitting doing to support its like somebody says five times, but now they've got enough. So at a minimum requirement of 2.5 times.
Got it.
That's right Dan we are showing good having contribution for our fleet.
Just wanted to send a particle and talking to Scotts counsel first that's out there is like Maersk MSC Evergreen Costco, you, having a topical or.
We have to pull in Colombia and contractor today things sent the remaining time charter duration of about 3.5 years.
Slide 11 shows the contracted revenue by business size.
As you can see more than 90% of our contract is that everyone is comfortable branches, which are about 7000 to you.
Well the last two slides we are discussing the market outlook as shown on slide two and chocolate age. So she can meet the navigate group since Q2, 2020, I cross border business ideas, but especially for the larger basis.
Books rates have increased by more than 70% on a yearly basis.
Slide 15, the eyes and fleet has been reduced to 1.8% from 7.9% almost three months ago. The order book has fallen to 8% and is expected to remain at low leverage.
Today. The order book is there anything from 2022 on watch.
Our main priority is to carve it out with downside to it right at the same time, we people opportunities again attributable to market environment. It's.
This concludes our presentation and we can now take questions. Thank you operator, we can take questions now.
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Our first question will come from Chris Wetherbee Citi. Please go ahead.
Hey, guys. Good morning, James on for Chris I wanted to first touch on some of the so I guess the incremental here [laughter] revenue declined sequentially, but opex was actually up sequentially, which given the chartering environment sounds a little bit surprising so recognizing that there probably was some voyage expenses in the optic side just want to know if there isn't.
He sort of catch up opex in there that might have been deferred from QQ and that you actually incurred in Threeq you and then also.
On the revenue side, just kind of wanted to get an understanding of what you are thinking about maybe going into the fourth quarter from the third quarter should we expect revenue to increase sequentially from here just.
Vessel count was relatively flat, but yet the.
TC rate was down so just trying to understand the puts and takes there.
Yeah.
Regarding the Opex you are right now slightly talia this quarter or not but as for the whole group is close to $5500 per day in the previous quarter. It was north of $5000 per day slightly below that their needs are and as you may know a as you know you mentioned it has to do with sound much of the incremental <unk> expenses.
Got you do you think about the Asia Oh programmable power ships. This is something we expect that a and I think that there going forward.
For the next quarter. So this is something that wouldn't be normalized shelf well. This quarter you can treat that that's probably in line of sight both I can.
Moving full up there for the next quarter and you got to think that it was this was the second part of that waste and as we mentioned today, we thought of all shapes, garnering a lot of talk over the next six small local 14 vessels and good markets for those benefits today, especially for the larger cities.
Sorry, I couldn't quite a little like ER.
They talk is the obvious even today show generally you know rising.
Targeting and why the main thing that we assumed that the situation will remain the same for Q4 and for the first quarter 2020, we would normally expect revenues coming from those guys tends to generally increase.
You should note that our native speakers said, we target the voice I said 2006, and a half thousand people vessel.
Awful close to 417 combined to 19 mountain like it went to 1000 Boes per day, we talk is a 90 to 1000 or 2600 vessels.
How about the $10000 per day and these are great Matthias want the latest fixtures show a shortlist and continue I think there is generally the upside now gotten good having sold in this quarter and this quarter did you see revenue was up some ships that they have been south it do you need a third and second quarter of this year.
In that in a market environment, where charter rates did not pick up decorate started picking up after June July over these years short peaks yours.
Well move it into the first quarter or like April and May of this year, the outlet was lower compared to that peak well good levels.
Got it into just one quick follow up on the expense side and how how much was the incremental crew expense I don't think I caught that.
Just to be more generally I would say if any on average if you look at the previous quarter and the quarter before our reception Robyn I I think on average for the whole fleet to close to $5000 per day. This quarter. We were close to 5000 $4000 per day, well show. So I wouldn't expect it to be something that we'd be normalized.
The next day couple of quarters.
So we should be in the region of 5000 5101 as per day on average.
Got it and then just looking.
Looking ahead to the fourth quarter in the first quarter. It seems like you have some ship.
Ships coming.
You are vessels coming due that.
Rechartering is there like the Marquis is how.
How would you think about the current rate relative to those and what you're likely to get in terms of a premium and then I'll hand it over.
Yeah, Okay, Okay, what's out there.
I won't give you a specific example, we have a two lines of 5000, taking shape so hoping over the next six.
Six months, the Costco basis.
Good games.
They are they are now getting good rates look like they're built into $2000. This sister ships.
Hey, popping fucking he said the topic in this quarter.
I thought I don't think 1000.
I don't have a day. So I mean, you can think of these glass I cannot predict whether that mark and we'd be next for the older people are fine, but there aren't any that can day the market for those guys. It's a it's a much higher compared to the latest fixtures.
Also the bottom up and as we saw a continued sluggish on buying much about 15 days or adding a floor.
Before I went to nine to dump boss said, we've not seen any way talk to like 17 $18000 per day for just under 4250 vessel.
We talk about bottlenecks of license and cloud to during the first quarter.
Quarter of this year and are now getting to like.
Like you, we know $8000 per day.
As always basis, I will not be opening over the next six to nine months. So I mean do you guys think a decent answer in that today, assuming that we don't go back to the gold level cyber warfare market, where the bottom up listen we're getting in the below 8000 to 8000 barrels per day, I think a deeper into India.
Upsides from Ti should the fed continue I quite important.
Got it.
And do you think you might be able to.
Right and are we chartered those panamax vessels in Q4 Q1 are you should probably closer to the <unk>.
Expiration date.
Yeah look after they those myself.
Today I can tell you that that seems about right at 3500. They use a lot of them are being sold out and then I have a yeah, okay and they're all this into their openings or like a theirs and local demand for bonacina from Lannett company.
I'm not going to get market I would not do that and I can tell you where the market will be to corpus Guy. However.
Assuming the same dynamic.
We are in a much better.
The market environment today compared to where we.
Where we were in the first in the first quarter of this year.
Initially a hockey reminds me that Oh.
During the first quarter of this year there were predictions of day contained in today's day would go down by 10% to 20% based on the latest.
ER brokers and online these estimates.
These are not out right now.
These.
As the night I congratulate the scrappy created by close to 4% for the whole year.
On a <unk> basis would you say not say some wonderful and taxable gain to the lining that initially anticipated show in container shipping we have seen up to now and much better market.
Both really walk isn't that they've got the books today Central chart today compared to the marketing people thought at the beginning of the year and there's a dynamic in the supply and demand fundamentals they seem to be quite.
Quite positive.
Thank you.
Hey.
Okay. Thanks, a lot. Thank you James.
Our next question will come from Ben Nolan with Stifel. Please go ahead.
Hi, Greg.
Good afternoon [noise].
I wanted to dig in a little bit on sort of what you're seeing in the market obviously.
We're all seeing the raise a lot higher and it seems like they're pressing higher everyday and utilization is lower and that's not really a mystery to anybody.
The one thing that I think would be a little bit more telling is yeah.
If you are starting to see contract tenors lengthen.
And in your discussions with which obviously would mean that the liners are increasingly confident in the outlook for for continued strength in demand.
Are you beginning to see that at all or or or contract tenors stretching out from you know 12 months to 24 months or 36 months or.
Or anything that sort.
Ah, Yes say, yes, he gets up and you're right. It's we've seen that and you can you can also see that the in our latest features for instance, they joke with the well I said earlier it.
It was getting a $11500 per day and now at least he says he couldn't have thousand do your shape 2000 via the PC said 20 year old vessel and Disney I was fixed that they're doing to $1250 per day for the thesis of 17 to 19 months.
2000 old vessel.
The previous weeks, who was for a shorter period. So there is a day and this is just an example, there is it doing so also I can tell you that the coastal business it would childhood.
Are they helping job with it for longer than a year and we have seen 40 cents because it's not a panamax vessels getting between seven to $8000 for payments of six to nine months now we have seen their knowledge, oh, 12, months' or or or like north of that.
And one last example, I would give you is that said we have a 11000 TV vessel.
We just like we've talked extensively that's out there for two years.
In each of the we've got the toss it to go up I think 2023 and during the quarter, we have extended for two more years.
In 2015 to five pieces that came out the mutual and and Oh, good aid for the five year period, They said that the $6650.
Generally I would say, yes that that there is a tendency for longer periods and goes through a tendency for short term extension options I was thinking the choppiness.
A show from Duffy as best I would say that the market is starting to get its bomb went to see longer pediatric shorten extension options.
In the chart today, it's probably moving up.
Sure, Yes, although again, if there was an anticipation of the liners that maybe this is just seasonal or something that maybe there would be a little bit less apt to.
To go long tonnage the.
Changing topics a little bit as you had mentioned there hasn't been much <unk>.
The order book is low there has been virtually no ordering.
Of size all year, there's been some rumors including some of which you guys have been involved in that.
Maybe that's picking up a little bit.
First of all you know is are you in the market you know if the terms are right to be ordering ships, but but secondly has there been any change in the return profile I know you know probably one of your biggest competitors is that they're not really looking for a new buildings at the moment.
But.
<unk> has that had any impact or availability capital or whatever had any impact on on sort of the types of returns.
Yeah the rate over time that you might be able to get.
Now on Newbuilds.
Yeah on on the new business a couple of things first of all yes. There are pockets of them articles about some potential new building projects, which are older projects would generally.
With that I'll decide because like what we did see some but these are just the discussions but I would say that it's bad generally weaker volumes out there linac one thing is entry born winners.
Stop selling the look of the city and in new building ordering over the last eight quarters or we do something positive there for the whole checked off now.
As far as obviously as you know we.
We are concerned we have been traditionally doing both secondhand deals and we think it was actually on share we probably do more newbuildings to be delivered last week in the next day a couple of quarters.
And this is part of our business in any case.
As far as we're concerned Oh, we struggled to eat into saying first of all we we really do drive the top of our downside risk.
Just to make sure that are different than many vessels the dealers.
Solid but are there any residual value we used the assumed by us it into something that day.
If these were seeing or are we just talking about levels and of course dinner and ER and of course, a Indiana. The then there should be some upsides in some type of a return on our equity. This has not changed as far as we are concerned if I have a question, but there's a lot of discipline. That's a it will probably go up.
In the order book, which today, especially if he's got anything for for like 2022, and it takes almost two years to be sick when Dennis you Betcha ER and ER. However, I was dropped the jokes looking both at second hand ships and as I said, there will be things, we they're saying he's profile.
Hi, liking that Boston has not changed it is exactly the same.
Okay, and just to follow up quickly with that you know almost everything that you've done in the last few years has been on a standalone basis not part of your your joint venture should <unk> to the extent that were looking forward is is that what we should expect that that.
Secondly, you're you're sort of incrementally adding solely on the part of the smart.
You look at the last is the latter because actually we do say you're right that the size that it doesn't thousand do you ship shape with young means you guys are still way on the Standalone basis. However, we do have an excellent relationship with your existing.
Hosting continues.
And leases are marked a and the subject of discussion show a New York has been our partner we've done a lot of a lot of things together with you all at once as we did with your deposit 514003 vessels.
Oh, we have done to 3000, it's funny thing you are seeing but newbuildings charted the best so it depends on the circumstances, where we saw some of that could be down would go. However, if you will because what we want to participate for Oh, we do have the means.
I do believe the only for some other standalone basis. I think this is in addition to an offshore the reason that they brought about a half a dozen we got there we may need to do the deal with other percentage of course, I'm not 11, like and like there would be talking about.
Okay, and then last just her for my.
Modeling purposes, you maybe walk through what the remaining Capex is.
For the fourth quarter and then the first half of 2022 for the.
New building yeah.
Yeah for they hey, we still have to accept the verticals do 15000, Nike as you integrate linkswitch II, we've been deliberate delayed as we can to second quarter of next year.
The remaining equity Capex commitment there because those ships are fully funding from a debt perspective, they may be able to pick up is when we've been focused on myday is close to 200 media.
Joe This is really just to say, whether you'll be getting dizzy why wouldn't mention that likely without when we must Catholic say commitment.
Russo it to me they said.
Joey what does it all and no sorry, including DAT just.
Dynamic look did not disclose the.
You know acquisition price a little expenses and the this is the reason it gives you meet and beat the skeptic got so these why I'm imagining discussing that were sort of eight would pick up is going with the Minnesota joins me on.
It is not good for the two remaining newbuilding. So it's so it's like 6 million per basis, which is nothing for the size of the company and put out I guess that's about it.
Okay.
Okay sounds good thanks, Greg.
Thank you.
Again, if youd like to ask the question. It is star then one.
Our then one task your question.
At this time I'm showing no further questions. So this will conclude our Q and a session.
I would like to hand, the conference over to Mr. Xie does for closing remarks.
Thank you very much for dialing in today and for your interest in Kamada were looking forward to speaking with you again during the fourth quarter 2020 results call. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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