Q1 2021 Diana Shipping Inc Earnings Call
[music].
Greetings and welcome to the Diana shipping incorporated 2021 first quarter earnings Conference call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce Ed.
<unk> of Investor Relations. Thank you you may begin.
Thank you Daryl and thanks to all of you for joining us today for the Diana Shipping Inc.
First quarter conference call. The members of the management team who are with US today include Ms. Semiramis, <unk>, Chief Executive Officer, Mr. <unk> <unk> President Mr. Yano, Zephyr, Rochus, Chief Financial Officer, Chief Strategy Officer, Treasurer and Secretary.
Mr. Terry was.
Puppetry phone Chief operating officer, and MS Maria de de Chief Accounting Officer.
Before management begins the remarks and presentation, let me briefly summarize the safe Harbor notice, which you can see in its entirety in today's news release and in the deck that has been provided certain statements made during this conference call are forward looking statements under the safe Harbor provisions of.
Private Securities Litigation Reform Act in the forward looking statements are based on assumptions expectations projections and beliefs.
As to future events that may or may not prove to be accurate and for a description of the risks uncertainties and other factors that may cause future results to differ materially from the forward looking statements. Please refer to the company's filings with the SEC.
And now with that it is my pleasure to turn the call over to Ms semi.
<unk> Chief Executive Officer.
Thank you Ed.
Good morning, ladies and gentlemen, and welcome to Diana Shipping, Inc. First quarter 2021 earnings call.
My name is <unk>, the company's CEO and it is an honor and privilege to be presenting to you today.
As you have probably noticed already we have Alfred somewhat the format.
Call by adding a slide presentation to accompany our presentation.
As a result, we will reference the various slides as we go along and we hope that you will be able to seamlessly follows.
Turning to slide 4.
We thought that since this is the first time that we are presenting a slide presentation, which will be beneficial to provide a brief company summary.
Diana Shipping Inc. Is a pure dry bulk company that has been listed continuously on the New York stock exchange since 2000.2005.
We currently have 37 vessels in the water with a carrying capacity of approximately $4.7 million deadweight pattern.
We have focused on the largest dry bulk vessels with our fleet ranging in size from panamax vessels to Newcastle maxes.
As a result, we mainly carrying major bulk cargos and for 2020, we transport, it's $35.2 million metric tons with iron ore being the main cargo we carried at $26.2 million metric tons.
The majority of our fleet 31 vessels is managed in house by Diana shipping services and 6 vessels are managed by our 50.50 joint venture with Williamson ship management.
We currently employ over 900 people at sea in the store.
Moving on to slide 5.
I will go over the highlights of the first quarter and recent developments.
This has been a very it has been a very interesting quarter characterized by the rapidly improving market conditions that haven't been seen for years.
The anticipated Chinese lung expected between the months of January and February 2021 did not materialize on the contrary there was strong demand for raw materials.
The fiscal policies to stimulate global economic growth the frenzy to refill depleted inventories the ban on Australian coal imports to China, and the limited supply of new ships, all seem to support the higher prices for commodities and transportation.
More specifically for our company.
Within the first quarter, we implemented leadership changes to ensure the continued sound strategic management of the company.
Our new management team is eager to continue on the path that by our founder and chairman Mr. Simon Patios, following the guidelines and principles adopted at inception.
At the same time, we will endeavor to prepare navigate and expand the company successfully in this area characterized by rapid and radical radical technological changes and innovation.
Also within the quarter, we repurchased via tender offer at $6 million of our common shares at a price of $2.
5 U S dollars per share we view the timing is very opportune as based on the market developments over the last few months. This move has proved to be immediately accretive to our shareholders.
The market strength experienced during the course of last quarter, which resulted in increased asset values allows us to reach an agreement to sell 1 of our older vessels the motor vessel <unk>.
At an attractive price of $11.25 million.
U S dollars gross.
We are also pleased that during last quarter Diana shipping services signed an agreement with American Bureau of shipping to implement the ABS environmental monitoring digital sustainability solutions across 31 of the company's vessels managed by DSS.
This is a cloud based application that enables us to monitor and track overall fleet or vessels specific environmental data in such categories as emissions waste in consumables.
We believe that the data analysis and reporting features of this application will support more sustainable vessel operations for our fleet, while helping us enhance environmental performance.
Somewhat related to the above issue is the new $91 million sustainability linked loan that we signed earlier this week.
Although the primary reason for entering into this loan was to refinance early our loan facilities maturing in 2022.
We are particularly pleased that we have been able to work together with ABN to introduce sustainability elements into the loan.
This displays even further our commitment and being proactive in this specific field.
We are further fostering our low long term commitment to sustainability by establishing a sustainability committee at board level.
Lastly, we have continued over the last quarter to tackling successfully the COVID-19 pandemic related operating challenges.
Such as crew changes and crew repatriations procurement of provisions in spares and handling scheduled and unscheduled repairs.
I would like to take a moment to highlight the most important.
Short term challenge faced to date in the shipping industry during the pandemic.
That is the difficulties to repatriate our crew.
The restrictions placed by ports borders local and international authorities travel disruptions and suspension of flights have made it extremely challenging for our crew to return home to their families.
The lack of cooperation by a number of charters in facilitating this issue is noteworthy.
We consider the crew change and repatriation issue extremely important not only due to the human element factor.
It affects the safety of our crew the safety of the ship and the cargo and could potentially affect the global supply chain of goods.
Regardless the shipping industry has shown once again resilience and adaptability to unforeseen and unprecedented events.
Turning to the financial highlights of the first quarter of 2021 on slide 6.
We find ourselves as of March 31, 2021, with a cash and cash equivalent position of $86 million, including restricted cash as against $82.9 U S dollars.
As of December 31, 2020.
Our debt net of deferred financial costs stood at $411.4 million at the end of the first quarter of 2021 as against $423 million at the end of 2020.
Our time charter revenues for the first quarter of 2020, 'twenty, 1 amounted to $41.1 million as against $43.8 million for the first quarter of 2020.
Lastly, our earnings per share for the first quarter of 2021 came in at a loss per share of <unk> <unk> versus a loss of $1.21 per share for the same period of 2020.
It should be noted that last year's figures included in impairment loss taken at the time.
Our CFO <unk> will go over these numbers in more detail further on in the presentation.
Moving on to slide 7 we find the summary of all of our year to date chartering activity.
Consistent with our conservative and disciplined chartering strategy.
We have taken advantage of the improving chartering market and have secured attractive time charters for 13 vessels of our fleet.
More specifically.
We chartered 7 Panamax to post Panamax vessels at a weighted average daily rate of $16570.1 million.
For our remaining average period of 169 days per vessel.
We have also charted 6 capesize to Newcastle Max vessels at a weighted average rate of $18896 per day for our remaining average period of 244 days.
We anticipate that we will continue chartering our vessels that will be redelivered to us in a similar way.
By staggering maturities locking in cash flows and position positioning us in a manner that will allow us to continue to participate in a potentially improving market in a balanced way.
Slide 8.
Provide an indication of the kind of cash flows that can be secured by our vessels that will be redelivered from their current charters within the remaining of 2021.
As a base we use the already fixed time charter revenues of $72.1 million U S dollars, which amount to a daily average contracted time charter rate of $16136 per vessel.
If we use the current FFA rates for fixing the vessels opening up within the remainder of 2021 for a 1 year period.
We expect to generate an additional $83.5 million of time charter revenues that equates to an average fixed time charter daily rate of 21.
$800.9900 per vessel.
When we compare to some of the fixed and fixed revenues as against our breakeven levels, we find ourselves with a possibility of generating approximately $53.3 million of free cash flow equating to an average free cash flow margin of $6438.
The vessel per day over the remainder of the year.
Again.
This is presented in order to display the free cash flow generating capacity of our fleet in the current market.
It should be noted that the actual results will be dependent on how the market performs for the rest of the year and on how exactly we fix our vessels in this period of time.
I will turn over the call now to <unk> to go over our first quarter 2021 financials in more detail.
Thank you.
Moving.
Quarter, we recorded.
As we have already.
<unk> net loss attributed to common stockholders of $2.7 million.
0.03.
Sure.
As you can see the slide during the first quarter.
3 vessels that we've had that many to sell in 2022, let me give it to them.
As expected with environmental by July 2021.
Following the sale of the vessels in 2020 and those completed in the quarter ownership days.
Downtick.
3484 and <unk>.
74 compared to 3801.
And for the same quarter in 2000 and Duane.
And this is why you see the lower revenues at $41.1 million compared to $43.8 million for the first quarter of 2000.
Duane.
The voyage expenses.
Also decreased compared to last year to $1.8 million compared to $3.7 million for the same quarter.
And the decrease in voyage expenses.
Was.
Good morning.
The decrease in going as efficient as it was not only due to decreased commission on lower revenues, but also due to a gain of $5 million in bank as compared to a loss of <unk>.
1.3 million in the same quarter.
During the discussion water our vessel operating expenses decreased to $18.6 million compared to.
$21.3 mainly due to the decrease in the number of vessels in the fleet daily operating expenses.
Also decreased to $5.4000 compared to $5.6 for the same quarter in 2020, mainly due to decreased pension expense and other operating expense.
This decrease was offset by increased crew cost insurances supply.
And supplies of stores and provisions.
Our agenda and administrative expenses decreased to $6.7 million compared to $9.6 million for the same quarter last year, mainly due to decreased pay it off.
Interest and finance costs.
Among the 246 compared to $6.
$4 million.
In the same quarter of 2020. This decrease was attributable to.
The interest expense.
Due to decreased interest rates and decreased average debt compared to the same quarter of 2012.
Looking at the balance sheet.
You can see that our Scott.
Stood at $86 million and our thoughts on that.
Net of deferred cost.
411.
Our net debt.
So only that brought our net debt to only 327.8.
Hum.
We have another slide.
For the.
Selected by American and others out there for you to look at.
I think most of it peaks.
Something that we have already said previously.
But again.
I want to stress.
Your.
Mentioned, the time charter equivalent.
Time charter rates that we.
They're being 11432 compared to 11 <unk> 77.
And the lower operating expenses that we've had for this quarter.
Hey, this is the first time that we are trying to give you an idea about.
Cash flow breakeven and you can see that.
Based on the results of March 31st and based on the expected bookings that we are going to have for the remaining of the year.
All right Scott.
Low breakeven stands at $12350, approximately which gives you a very good idea.
On.
The ability of the company, obviously your investments from earlier to generate.
Free cash flow for the remaining of the year.
I will now give the floor to Stacy mining royalties to discuss.
The third item.
Boston market basket.
The way, we see things.
Thank you, Jamie we definitely need to start our short presentation on the current state and future prospects of the dry bulk carrier market by looking at the Baltic exchange dry bulking disease.
The slides.
We have here shows the last 5 years levels over the above mentioned indices as well as the 12 month time charter rates for Capes and Panamax.
We can look at some more detailed statistics to get a better idea of short and long term trends.
On January 4th which was the first trading day of 2021.
The Baltic dry index stood at 1374 and by May 19, Kitkat reached 2801.
This compares with an all time high of 11793 reached on May 22008.
Which was nearly executive 13 years ago to the day.
The Baltic Panamax Index started this year at 1364.
And closed on May 19th 2857.
The all time high for this index was 11713 reached on October 32007.
The Baltic Cape Index was at 2008 on January 4th and closed at 3785 on May 19th.
This compares with an all time high for this index of 19006 page 7 reached on June 5th 2008, which once again was 13 years ago.
Here, we cannot dictate the 5.
Time charter rout average return January 4th 2000, $16065 per day, and then May 19th has reached 31392 per day.
The Panamax 5.
Time charter routes averaged.
At the beginning of the year 12.
<unk> 72 per day in the May 19th to the 25709 per day.
For comparison purposes. It is worth noting that the all time high for the slightly differently calculated panamax for Tc routes.
94977.
In October 2007, and for the Capes before TC average was 233988 in June 2008.
On the next slide we are going to look at the key demand drivers.
The macroeconomic statistics and how well the GTP has been moving during the past 20 years or so can be looked at here compared with ton mile growth of major bulk commodities.
These are iron ore grains, and soybeans corn, both thermal and coking.
And we will also look at the combined volumes of minor bulk cargo such as sulfur salts cement sugar anthracite alumina fertilizers bauxite and others.
According to the IMF and the OECD World GDP is expected to grow by 6%. This year following a drop of 3.3% in 2020 due to the pandemic.
This year, China is expected to grow by 8.4% after growing by 2.3% in 2020 during the first quarter of this year Chinas gross domestic product grew by an impressive 18, 3% year on year.
The U S economy is expected to grow by 6.4% in 2021, while the euro area is anticipated to grow by 4.4% this year.
According to Clarksons overall global seaborne dry bulk trade is projected to grow by 4% in ton miles in 2021 against the underlying fleet growth of 2.8%, which we will discuss later on.
Within the freight sector iron ore shipments are currently expected to grow by about 3% in 2021 compared to 2020 levels and reach 155 billion tons.
Small growth of a further 1% as expected for 2022.
Clarksons report that Chinese government regulations on emissions might lead to steel output curve later this year iron ore demand might be affected by these regulations, especially during the second half of this year.
Global seaborne coking coal is currently projected by Clarksons to grow by around 6% this year.
This will follow a 7% decline in 2020.
Volumes in 2021 are expected to reach 266 million tons.
<unk> 274 million tons in 2022, which will be in a further 4% increase.
At this point it is worth pointing out that China's recent band of imports of coal from Australia has led to an effective collapse of imports to under 1 million tons. In January of this year. The shortfall has been made up by imports by land from Russia in Mongolia, as well as by increases in domestic production.
Commodore Research report that Mongolian imports of coking coal have been coming under pressure due to the pandemic. This will most likely result in China anything to import more coking coal for much further seaborne based exporters, including Canada and the United States.
As regards thermal coal Clarksons report that after a 10% decline in 2020 due to the effects of the COVID-19 pandemic on global trade seaborne steam coal trade is currently expected to grow by about 5% this year and reach 965 million tons for 2022, Clarksons our forecasts.
We're seeing a small increase of another 1% on volumes.
To place the Chinese coal demand in perspective, it is worth noting that according to Commodore research, China recently announced that it will only start materially reducing coal consumption in 2026.
After growing by 7% to reach 512 million tonnes in 2020 global seaborne grain.
Trade is projected to grow by about 3% this year and another 3% in 2022.
With great category, we need to monitor soybean shipments, which have been driving the green market statistics for a while now.
During the first quarter of this year, China imported $19.1 million tons of soybeans, which was up nearly 18% year on year.
As much as 94% of this volume will shift from the United States and 6% from Brazil.
After a 2% decline in full year 2020, global seaborne minor bulk trade is projected by clarksons to grow there around 4% this year and a further 3% in 2022.
What is interesting to note in this slide is that according to Clarksons in spite of the sharp drop in global GDP growth in 2020 volumes overall bulk cargoes witnessed on average a very small drop in the rate of growth, which was still slightly positive about half percent in ton miles.
And just 1.6% negative in pure volumes during 2020.
Next slide we look at supply.
On May 1.2021, the Capesize order book stood at $20.6 million deadweight, representing about 5.6% of the global trading fleet.
From these ships are scheduled for delivery this year and $9.1 million deadweight is expected to be delivered in 2022.
The Panamax order book consisted of a 174 vessels with a combined deadweight of $14.5 million deadweight.
This is the equivalent of 6.3% of the fleet by deadweight.
From these new buildings $6.5 million will be delivered this year and an expected $5.8 million in 2022.
On an overall basis on May 1st this year, they were $51.5 million deadweight worth of bulk carriers on order.
Representing 5.6% of the total global trading fleet. According to the head research of Simpson Spence <unk> Young this is the lowest percentage figures seen in over 20 years.
According to Clarksons and as mentioned earlier on the trading fleet is expected to grow by only 2.8% this year with deliveries dropping to $35.4 million deadweight down 28% year on year in deadweight terms.
According to <unk> Costa another shipping analysts the trading fleet will grow by a mere 1% by the end of 2022 compared to this year.
We will briefly mentioned certain conservative assumptions, which have been made on scrapping losses.
And congestion for this year and next which has been incorporated in the calculation of the fleet growth estimates mentioned above.
On scrapping.
Clarksons estimate that last year bulk carriers or about $15.3 million deadweight were scrapped according to material cost. So far this year only $4.6 9 million deadweight bulk carriers have been scrap around 11% of the trading fleet is over 20 years old and a further 11% is between 15 and 19.
Years old at the other end of the age spectrum, 16% of the dry bulk fleet is less than 5 years old.
At the moment the situation in India remains extremely difficult.
Rising COVID-19 cases are leading to the diversion of oxygen from scrapping facilities to hospitals.
Consequently recycling activity in that country has effectively see.
Similar pressures as seen in Pakistan.
Thank you Gian Costa optimistic on demolition statistics and estimate that during 2021 about 165 dry bulk vessels might be scrap for a total of $14.1 million deadweight.
For 2022, and 23, they predict even stronger demolition statistics due to the age profile structure and environmental regulations.
From past experience. However, we believe that.
As we got scrapping for the rest of this year and beyond.
Much will depend on the future cost of the freight market and also sentiment.
Congestion.
To counterbalance this positive projection braemar raised the following warning flag.
Our skus in Brazil loading ports continue to fall and congestion is reducing its usual seasonal pattern congestion will be harbored by July as this happens and more ships open up in the far east after discharging we could see a temporary cooling off effect on the current strong freight market.
As regards the outlook now even though due to time restrictions we have not analyzed steel production in this presentation. It is worthwhile, noting that according to Commodore research the combination of steel and iron ore demand model for both China and the world at large remains 1 of several bullish element poised to.
Continue to support the dry bulk market going forward.
Our Robinson, we have analyzed the above mentioned projections on GDP growth.
We have observed that since 2009 financial recession growth in dry bulk cargo shipments has outperformed growth in international trade as a whole.
They present evidence showing that from 2005 to 2021 dry bulk cargo shipments have grown almost twice as fast as GDP growth.
This is also confirmed in the key demand drivers slide shown earlier on.
Our simulation results coming from their dry bulk model.
So a 6.7% increase in cargo volumes for 2021, followed by a further increase of 4.3% in 2022.
If these projections are realized the dry bulk market should before even better than the statistics presented earlier on with indicate.
Thank you Stacey.
Before we open it up to Q&A session I would like to come up as follows.
As we have done in the first quarter, we will continue taking advantage of the current positive market fundamentals in striving to enhance shareholder value.
We will retain our focus on generating positive free cash flow while at the same time strengthening our balance sheet.
We are also maintaining our vigilance and keeping abreast of industry development, allowing us to take informed and educated decisions decisions as the shipping industry evolves.
And last but not least.
We remain committed to our disciplined operational and financial strategy that we have implemented since inception, which has allowed us to navigate successfully through the various market cycles and now permits us to look into the future with optimism.
Now I'll turn it over to the operator to commence the Q&A session.
Thank you.
We will now be conducting a question and answer session.
If you would like to ask a question. Please press star 1 on your telephone keypad.
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For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, 1 moment. Please while we poll for your questions.
Our first questions come from the line of Randy <unk> with Jefferies. Please proceed with your questions.
Routine Diana How's it going.
Hi, Randy.
Doing well. Thank you excellent great. Yes, first off so nice to see the slide deck certainly a great addition to the earnings call. So kudos on that.
Now looking at the business, obviously, you've done a great job with asset sales the tender offer buying at $2.50 share prices over $4 now.
Share price has doubled to date congrats on that so with the market outlook being so attractive.
Guess what are your plans for your fleet in terms of sales and acquisitions and then what are your plans for cash in terms of either further repurchases of shares or maybe a possible dividend later this year.
Okay I'll take that question and this is guidance.
Hey, Dan and all you know that we have always tried to have a lot of options ahead of us.
This is exactly as the absolute time that we've gone through so.
We have to consider the volume assumptions that we have.
You mentioned, either buying other versus buying back our stock or.
Paying a dividend I can tell you that we have a track record that we have.
By the fact that everybody knows how we see.
At the moment and looking at the current.
Market environment.
Seems like.
Diana could have the ability of paying a dividend in a sustainable manner for the next quarter or so.
This is something that we will have to consider seriously, but we have not taken any decision to that effect.
As we speak of course.
We keep trading below NAV.
And you show the benefit of what we have done and we may continue doing so as well and buying other vessels is something that.
You know that we are doing but we are doing after.
Having.
After.
Trading above in AAV and raising equity at above it.
Giving back to our shareholders value by doing that so.
The answer to your question Neal.
We don't have an answer but what we have is the ability to choose the right thing at the right time and you know that we always choose the right thing to do.
Great, Yes, I think youre certainly have that reputation. So I was just trying to get some insight into what Diana do next.
All right.
Well, yes, that's what I can tell you anyway second question in terms of chartering lets talk about that obviously the market has improved as well. So there's 2 ways to do this do you switch to more short term charters or even spot.
On the other hand is there any new interest from charters for 18 months or even 2 year time charters.
It's pretty much everything else is 6 to 14 months and just continue to roll those.
Hi, Ryan this is Eric.
I think.
We have been disciplined.
Since early on and we are not.
Basically we have proven that no matter, how the market behaves.
We will be.
Disciplined in our approach and how we charter our vessels.
Especially if nothing really changes, especially if we're not making acquisitions, specifically the numbers, where you would need to go.
And talk about the vessels a little bit longer.
To minimize the risk of those acquisition so for the vessels that we have in our fleet right now I think we will continue.
Chartering in the same manner.
I'm going to start getting maturities with maturities ranging anywhere from 6 months, sometimes you have to reposition the vessels, sometimes we have an upcoming dry book that basically.
Means that it's probably better for us to charter the vessel with a shorter duration in order to reposition it for the Drydock or.
We could go even longer.
Now for a year or a little bit over a year now going back to your question of.
We've talked to there's a graph for longer periods I think.
Charterers are always there for longer periods of the question is if the owners like the numbers that the target is that offering I mean, we are entering into territory now.
Not everyone will be taking.
2 and 3 year.
Period deals because.
Some people are a little bit more aggressive than us.
Always up out of.
Accepting a lower rate for the 2 or 3 year period rather than.
Securing what sometimes it's a very attractive rate if you look at the things historically.
Going forward I think.
We haven't reached that.
Level, yet, but I think we might be getting close were at.
Some point in time not in the.
Very power Q2, we might see charters offering based on the FFA curve, obviously, they're not doing it based on anything else offering rates that could be attractive too long to lock in for the longer duration, but for the time being the way we.
I'm thinking of things, it's exactly the way we presented in our slides that went over well.
We are on average is going to be chartering vessels somewhere else original 1 year and then.
That obviously will provide us with excess cash flow as we speak.
Perfect.
Good deal I won't keep asking questions. So I'll turn it over but also I noticed the sustainability linked loan congrats on that all you're doing on the ESG front has not gone unnoticed. So keep up the great work. Thank you.
Thank you. Thank you.
Thank you. Our next question comes from the line of Greg Lewis with <unk>. Please proceed with your questions.
Yes, hi, Thank you and good afternoon everybody.
I was hoping to kind of dig in a little bit with some questions around asset prices and clearly asset prices are going higher you honest you mentioned.
The fleet trading at a discount to NAV.
Just kind of curious.
If you could kind of parcel out there has been a nice run up in asset prices, obviously, everyone is watching steel prices go higher.
That in and of itself is probably helping lift asset prices, but is there any way to think about the strength balancing the strength in the market and those increases in asset prices higher increases in steel and maybe some of these inflationary environment in terms of.
The percentages or how youre thinking about those impacting in pushing asset prices higher.
You know Greg.
There is always a lag between the charter rates going up.
And advisors following.
The sentiment plays a big part.
And that then also.
How people will see that this upturn is going to be sustainable and we have seen an increase in the price, but secondly, I think it is.
Fair for someone to believe that we will see further increases in the charter rates and also as regards the prices.
Of.
Of the vessels talking about <unk>.
I would like to point out something that you oppose the analysts can easily understand but these goods for the sake of all the people that are listening in or reading the transcript to explain.
How well aligned what.
Good decision has been the last 2 years to keep buying back our stock at a discount to NAV.
If you were to make a very quick calculation.
And maybe on a per share basis. If you would on the scenario that we have kept those vessels instead of selling them and not buying back our shares and you try to find the NAV.
Per share basis today.
Really notice that it would have been lower by easily <unk>.
And what you have in your calculations. So basically what we have done is that up to now we created value by taking advantage of the inefficiencies in the capital markets for our shareholders and Thats.
So also.
Taken into account the increase in the price of the vessels and the increase in our AAV and we keep saying that every time that we buy back our stock at a discount to NAV.
We are investing more money.
In our vessels.
So we are very happy with what we have done up to now.
If we are seeing that there would be a point where.
We will have higher charter rates and our.
Our ability to pay a dividend is going to be clear in there and then we're going to be in a position to be trading at premiums to energy and again, you will see us buying at that time more vessels with longer employment strengthening the balance sheet.
It's something that we always do.
And that has proven to be the right recipe in order to make nice money in the shipping industry.
Our risk reward wise.
Yes, absolutely.
I had a couple of questions, but I'll reach out to you offline.
Thanks for the time everybody.
Thank you. Thank you.
Thank you. Our next question comes from the line of Ben Nolan with Stifel. Please proceed with your questions.
Yes. Thanks.
Good afternoon to all of you.
I wanted to ask.
Well I have a couple of things number 1 is.
Obviously.
As has been discussed the order book is pretty low but at the same time we've seen.
Increased freight rates the secondhand asset values have appreciated.
I know, it's not really an <unk>.
And the Diana DNA really to be out order and chips and you might not.
I wanted to do that right now anyway, but you guys have your ear to the ground or certainly.
All of your neighbors are in the similar business.
And the discipline that we've that we've seen here lately with respect to ordering now that the cash flows are high.
I think.
I think we've seen we've seen I mean, obviously as rates move higher and higher and we will see the crux getting bigger in.
Wider.
We've seen some people going out and ordering vessels. It hasnt really changed the picture that space it displayed a little bit earlier.
I think.
A reason for that has been set.
A lot of orders have been made.
On the tanker space earlier 1.
Last year and more recently in the container space I mean, we've seen huge orders on the container space and the billions of dollars. So thats pretty much gives you an answer of what could potentially come in the dry bulk market if things get very heated in the container market is very heated and obviously that has led to a lot of ordering.
People might say, where youre going to find the orders obviously.
A lot of.
Premier shipyards might not have any any capacity for 2022, and maybe early 2023, but as we've seen in the past you might see some second or third.
Offering.
Capacity at that point in time, I mean, Fortunately, we haven't seen it yet in our industry, but that doesn't mean that we are not going to see it sometime in the future.
Okay.
Actually just want to ask towards let's say discuss it.
You know we do not.
Is that.
There is lack of YOD logical find not seeing us start like this when the market is good then the revenues of the vessel justify the investment you will see the order book coming in.
Also Ben if I could that be.
The fact that we don't have a clear picture of what the.
Next technological solutions will be regarding fuel.
Is the current in order to put the new orders at the moment I think that is working in our favor at the moment.
Yeah, absolutely and I guess.
And Thats been talked about a lot I guess the question is at some point.
Does the does the concern over the.
Technological changes in what's going to be needed in the future.
Is this you guys were sort of maybe 1 of it maybe not the most outspoken with respect to not installing scrubbers on your ships here or you're almost a year and a half later.
And for the better part of that time, it has proven to be a probably a good idea things seem to be stabilize I was curious as you guys have consistent special surveys coming up and dry dockings and any thoughts about maybe now that sort of things are settled a bit and and.
Installing scrubbers on your ships or is there any demand by your charterers are to do that.
We think that we have the opportunity because we have a better use of our free cash flow and we think that.
And by not investing and scrubbers and we can do a lot of other things.
Try to explain and Elliot I think.
And our shareholders, we will be more upbeat and seeing a dividend or seeing us buying more vessels or buying back our stock or whatever and rather than trying to play.
The oil price and the <unk>.
Investing is carrabba's right to make some money through that investment up to now our decision has proven to be brought it.
And we keep saying to everybody that the.
And installing scrubbers is just and investment.
That is highly dependent on annoyed and prices.
And this is not what we're here for and we are here to create value for our shareholders doing shipping and <unk>.
Taking advantage of the couple of markets and efficiencies.
And up to now we have done a good job.
Right.
Sort of thought that would be your answer and last 1 from me on on on.
On capital allocation you mentioned it earlier about all of your options I'm curious when you consider I believe they are the preferreds are callable soon and at some point those bonds are callable soon as the cash flow as billed AR and.
Any thoughts yet Bachelor day.
Possibly calling those back and refinancing.
And any of those things.
With the with probably a better cost of capital.
And the preferred.
Sure.
Perpetual for a reason.
And at the moment and we have another option to repay the existing bond, which was maturing in 2023 and <unk>.
Boeing as well and this is why you do the question is that we always are very proactive on sort of got to managing our cash flow and our maturities. So the only thing I can say to you that it's easy now at Ada.
To see what we May do.
Maturities in 2023, which is the bonds.
Mainly the bonds on that time, and you'll have noticed with a new facility that we did recently and we basically eliminated the maturities achievement for 2022.
If you take into account and the fact that we have as an option and the nordea alone and to go through 2023, and even 2020 before so basically again.
We have created the appropriate and environment.
To cloud.
Uh huh.
US better cash flow what's possible.
And for our shareholders.
Right. Okay I appreciate it that does it from me I appreciate it thanks guys.
And welcome.
Thank you. Our next question is coming from the line of Omar <unk> with Clarksons <unk> Securities. Please proceed with your questions.
Hi, Thank you Hey, guys. Good afternoon, I just wanted to.
Follow up on the previous topic or are the main sort of discussion points.
Use of capital and your fleet makeup and you're honest you mentioned wanting to keep us guessing as to what your next moves are but you know.
The past several years <unk> been trading below NAV.
And you've sold shifts and use the proceeds to buy stock and created value along that way.
But you still do trade at a discount to NAV today.
And so just wanted to maybe get your perspective as you see things today.
We're at a discount to asset values have continued to push higher do you do you see Diana at this point continuing to be a seller.
Or more just sitting back and collecting cash.
Total vessel and see you on asking yes.
Yes.
And I said that on vessels it doesn't mean anything.
Still we know what we're going to be doing with the money.
So and.
Making and ASP.
And <unk> into way into cash and then think again and again.
And not yet again and.
And it makes no difference but.
And yes, we have we seen that we have reached the point where.
There are a lot of things, we can do with investors and with the order vessels allow us and that may not be selling them.
But.
Uh huh.
I have tried really hard not.
To give you an idea on how we are thinking but.
<unk>.
And we're seeing that.
And other things, we can do even with the vessels that we have the older vessels evolves.
Okay. That's interesting so I guess it's.
And I'm going to infer basically from your commentary that for now the Diana is not interested in selling ships.
What day.
[laughter] and.
And I guess that it was going to bring me to my.
Sort of like a follow up to that which as you know this market.
Foot print and critical mass and you you had 50 ships a few years ago, you down to 36 months. After you sell the and I did.
Did you feel that with the fleet size of 36 ships is that enough.
Enough capacity to still feel very much involved and the game and very relevant and.
And the business.
Or could it even be smaller than that and you would still feel comfortable.
This is a third is high on my I think it's you know having a fleet of.
35 vessels, plus it's definitely a fleet that has scale okay not the other.
50, or 60 vessel fleet, but.
It's still you know you are relevant when the market will have a very good name.
Obviously, you know we are going to go going back to what the honest said I guess, we might be on that and maybe right now what we are chasing it at this point in time with US advisors going up on a daily basis, but our plan is is to try to change that and once we do and they play.
It makes sense we might.
And look for ways to renew the fleet, but for the time being we are convinced with the fleet that we have I mean, we still have scale. We're still upsize, we have our relationships and I've chartering relationships and our relationships with various vendors and suppliers out there. So.
Size is not should not really I mean, that's my personal view and maybe people.
Different should not be the V and game.
You know if you are going to have 67, 3 hundreds vessels and it should be you have to be profitable and you have to be there.
And do you currently.
And what.
And if that is to say, it's exactly the same but the and a different manner, what is critical and the balance sheet more than.
And the actual size of the fleet and you have seen that and the bus.
Being having a sound balance sheet was a much better thing to us and the full cycle or others on.
A big fleet.
You know what I mean I.
I don't want them and names.
[laughter], yeah, it was pretty clear.
Yes.
Clear.
Yeah, well I think thank you and looking forward to seeing what you guys have up your sleeve.
And I'll leave it there.
Thank you.
Thank you there are no further questions at this time I would like to turn the call back over to management for any closing comments.
So thank you for joining us today, and we look forward to talking to you again at our next financial earnings call.
Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time.
Have a great day.