Q1 2021 Costamare Inc Earnings Call
Thank you for standing by ladies and gentlemen, and welcome to the Costa Mary Inc.
Conference call on the fourth quarter 2021 financial results Pardon me, it's the first quarter, we have with US Mr. Gregory <unk>, Chief Financial Officer of the company.
At this time all participants are in a listen only mode. There will be a presentation followed by a question and answer session at which time if you wish to ask a question. Please press Star then 1 on your telephone keypad and wait for your name to be announced I'm on.
Just advise you that this conference is being recorded today Tuesday June 1st 2 golf on 'twenty 1.
To remind you that this conference call contains forward looking statements. Please take a moment to read slide number 2 of the presentation, which contains the forward looking statements.
Okay.
And I will now like to pass the call over to your Speaker. Mr. TECOS. Please go ahead Sir.
Thank you Ed and good morning.
Ladies and gentlemen.
We are pleased to announce the results of another profitable quarter.
The marketed balance that we got into the second half of last year has continued dogs today from favorable supply and demand dynamics.
Strong demand for goods restocking of inventories and the balance container vessel market, how bolt had its the charter market risk levels that we have not seen for a decade.
Since the beginning of the year, we have agreed to acquire in total 15 secondhand vessels and we have taken delivery of our last 2 new buildings, which have commenced day I think you had to others.
Employment already secured for the new acquisitions together with a new buildings delivered is expected to provide incremental contracted revenues of more than any other kind of mid $30 million.
Since our previous quarterly earnings release, which other out of total of 17 secondhand ships at increasingly high leverage from higher wood.
A total of 23 ships coming off charter over the next 18 months, which is a favorable position should the current market conditions continue.
Finally on the financing side.
We have recently concluded the issuance at least single day first shipping unsecured bonds on the office exchange for other than we do in Europe.
Just on an exceptionally high demand the bond was price at the low end until they get trained with a 2.7% coupon for a 5 year period.
Based on these recent developments with our increasing long term cash flow cell liquidity mine low twenty's. Please to recommend to the board of directors to increase our second quarter 2021 dividend by 15%.
Our balance sheet together with cash flow from operations and liquidity position provides us with the ability to increase the dividend without any impact on our growth plans moving now to the slides presentation.
Yes.
On slide 3 you can see a comparison of options more than 47 years from the shipping industry uninterrupted dividend payments is going public strong sponsor support never has to restructure our debt smoothed debt repayment profile fully aligns interest steady management, its ownership and high growth potential with no legacy debt restrictions.
On the next slide slide 4 share you can see the resilience of our business for the steady revenue net income being a highly volatile shipping environment.
On slide 5 you can see the highlights my husband with recommend to the board a 15% increase in the quarterly common dividend effected from Q2.2021.
Adjusted net income for the quarter was $38 million and the adjusted EPS 31 cents.
In the previous week, we concluded the issuance of the first I'll say good bond on the opposite change the Denver just 5 years. Since you took the exit from these high demand <unk> price at the low end of the hit rates are 2.7%.
On further diversifies, our funding sources with highly competitive pricing levels.
Moving to the next slide we have been quite that people on the ICP market. In total we have a cloud 17 vessels was north of $760 million.
This agreement on a contracted revenue from the equity issuance amount to approximately $830 million.
We have also agreed to share in 3 of our vessels serious I would expect it to be concluded within 2002 Edgewater.
On slide 7 you can see our new financing arrangements since the beginning of the year.
Total we have concluded financing agreements of about $430 million in new financing commitments amount to $237 million all vessels acquired in 2022 on have either been financed or have binding commitments with their financing.
We do maintain a strong balance sheet with liquidity of about 140 million book and there was a 60% market value based on leverage I thought on 40% and non meaningful debt maturities until 2025.
On slide 8.
We have chartered in total 12 vessels in 2022 on at higher levels on the previously had good ones.
On top of all these.
These 5 secondhand vessels with deliveries expected to occur within 2021.
Or long term charters.
Other dimension, we have a total of 23 ships coming off charter over the next 18 months, which reported income statement ablation with garden market conditions continue.
On the market, but other markets has continued to rise on the Basel force of supply and demand fundamentals time charter rates on further increased in 2022 on the.
Net fleet remains at levels close to 1% we have based on reported the second consecutive quarterly dividend in April insiders have been participating in the drip and since inception in 2016 have reinvested north of $100 million.
On the next slide you can see that first quarter 2021 results during the first quarter of the year. The company generated revenues of 127 million and that doesn't pick up from 38 media. The first quarter adjusted Ppas as already mentioned on as stated on our adjusted figures take into consideration on the following non cash items.
Other happy news accounting gains or losses from asset disposals prepaid lease rentals from changes in the fair value of equity Securities.
Moving to the next slide.
On slide 11, we are discussing on our capital structure, our leverage is comfortably at around 40% EBITDA over net interest is at 5.8 times when our covenants have a minimum requirement of 2.5 times coverage.
On slide 12, we are showing that having contribution for our fleet, 96% of our concept of other contracted cost comes from first class charters like Maersk MSC Evergreen Cosco Yang Ming and Hapag Lloyd today, we have 3 billion in contracted revenues and the remaining time charter duration of about 4.2.
Yes.
On the last 2 slides, we're discussing the market.
The other days have continued to improve since the second half of 2020 when rates have increased on average by 300% books rates have also reported trends due to favorable supply and demand dynamics.
On the last night Slide 14.
The truth is at 2.1% from Mackay of 12% the same period, 1 year ago. The order book has risen to 218% it would be northern Cal wherever that today close to 2 years to build a new shape and new Brit external orders will be delivered from 2023 onwards. This concludes our presentation and we can now take questions.
Thank you operator, we can take questions now.
Thank you as a reminder, if he would like to ask a question. Please press Star then 1 on your telephone keypad and wait for your name to be announced if you wish to cancel your question. Please press Star then 2 Thats star 1 to ask a question. Our first question today comes from Chris Wetherbee with Citigroup.
Please go ahead.
Yeah, Hey, thanks, good afternoon guys.
Hi, good morning.
Hey, maybe I could start on on leverage and I wanted to get a sense of kind of where you are on your comfort zone in terms of you know whether it's debt to EBITDA or however, you want to look at sort of your leverage metrics.
How much more capacity do you have do you thing to take on some incremental debt to reinvest and potentially grow the fleet.
Yes, the levers a day based on the financial governance as agreed with our lenders and this is an average based on the on market values of the vessel is as mentioned below 40%.
This is also due to the fact that.
We have long term contracts and the cash flows.
From a you know those shapes are factored in the leverage calculation. So we take it to other inclusion valuation of which is I think the.
The right thing to do in container shipping so based on the other base that day, we are below 40% leverage the day I.
I think we do have a lot of capacity to grow.
The thing is that asset values are at very high levels, and we normally don't like buying at the peak of the market that now charter rates and those of other values are at historically high levels. So.
This is something to consider but from a leverage perspective and from a capacity perspective.
Where they discuss on balance sheet assets to commercial bank debt.
The ability to lever it up I think we have more than enough capacity.
Okay. Okay. No. That's helpful. I appreciate that and then maybe.
Just a question about the general sort of fleet development on the order book do you have a helpful. Slide on our chart on slide 14 that shows that debt.
Order book has risen as a percentage of the total fleet.
I know it takes time to get these ships, but when did you start worrying about GAAP number or is that something that we do need to consider as we go out if we see a significant amount of incremental ordering what do you think sort of the right number is and maybe how long could we see the cycle play out if we sort of maintain a more rational approach to adding capacity into the market.
And new ships into the order book.
Yeah, it's a.
First of all the lever is the order book today at around 18%, although it's come up I have to remind you that are broadly in line.
The period 2007, 2008 day Containership order book it was at around 60%.
So it may be considered debt has gone up significantly from the 910.11.
But percentage we had last year however.
However, we do feel that it's still manageable than say looking at it from a he taught it from a historical perspective, it's debit and not at peak levels now.
As you mentioned it takes 2 or 3 years to you know have a vessel delivered.
Most ships that have been or the or sort of a substantial number of ships that have been ordered.
They are on long term charters, but it remains to be seen what the demand and supply dynamics will be inc.
You're saying, we never broke out the market.
This is our principal and the company is being ground based on our Das Cup.
Capacity and liquidity however.
I have to say that historically and 18% order book I don't think it decided.
Saturday prohibitive.
<unk> levels.
You know what we've seen in the past.
And for.
For the next couple of years, we know what the supply will be the supply that will come on to the market and definitely the consensual.
Finalist.
That day, we will have very favorable supply and demand dynamics over the next year or over the next couple of years.
Okay. Okay last question 2 really quick if you put on an order into the order book now what what are you receiving your vessel how long is day to get 1.
It depends on the vessel and from the shipyards, but I think now most probably like 2021 are the most probably deliver it would be 2024, but I mean.
It's not black and white, it's got to do with the shipyard has got to do with it with the characteristics of the vessel but.
But I would say generally that the deliveries now it would be 2024 going forward.
Okay. That's helpful. Thanks for the time I appreciate it.
Yes.
The next question comes from Ben Nolan with Stifel. Please go ahead.
Hey, Greg.
Yeah.
I have a couple I wanted to start on the bond.
First of all congratulations on that.
It's a historic.
Offering but.
The brakes were fantastic frankly, and and so just wanted to dig in a little bit on that I was curious how if you have any color on how much of a how much of it was placed with traditional institutional investors or were there sort of.
Maybe perhaps some more.
Private capital debt that was investing in at something.
Really curious if this is something that can be replicated either by you or others or if you think of this as maybe just sort of.
Available just to you maybe just on the Simpsons.
Sure first of all the allocation it was close to 70% for retail investors.
And the rest was the institutional investors.
The bond was.
6.6 times oversubscribed.
And.
The initial use range it was between 2.7 and 3.1% and based on the book with Hot.
Well, obviously, we price at the low end of the range of 2.7%.
This is a fully unsecured bond.
Which is.
Pretty typical structure for shipping Barnes and discuss.
5 year.
Maturity.
Are we.
We started with a load.
On <unk>.
So 100 million euros, which you say standard.
$20 million because it was the first to pure shipping going on.
Issued in the Greek market people were not that familiar with shipping well you know more or more particularly would go some other or with.
With container shipping so we were a bit reluctant and cautious.
But finally, I think that day as a result.
Speaks for itself however.
The main point here is apart from the low coupon, which is historically low and I think it is extremely competitive. However, you look at it is that are we are we have been able to diversify our financing sources. This is definitely something that in the future.
Replicate and hopefully even better terms.
Considering that our.
It was fully subscribed within the first 24 hours and we had the book growth North of 650 million euros.
Within 3 days with marketing.
Great that's helpful.
If I could shift gears a little bit.
I was going through the filings and in line.
I recall that I was reading that you guys had been given some equity as part of the same restructuring a number of years ago.
And then also they are doing a secondary offering today I was curious if you guys still have an equity position in that and and I wasn't able to find sort of what what that is but was curious if that is a meaningful number at all.
Youre talking about Z I'm, sorry, I couldn't hear you clearly.
Yes, yes.
Yes, I mean, we do have about 1.2 million shares.
And then if you look at our adjustments to the P&L.
Uh huh.
Weeks out.
We have adjusted base now that the zoom you say public a.
At the end of the first quarter, we thought the dry day gain or sort of some income.
In our P&L because of the valuation of those shares.
And this is something.
He sort of cover.
However, adjusted.
And.
The adjustment was slightly below 26 million.
Right, how do you think about debt position longer term.
I don't know I mean, they I mean this value of $26 million. This reflects the stock price as of the end of the first quarter, where their stock was trading at around $20 and other stock is trading double or more than double so it's come up but I mean, we are patient.
So we are in Ohio to share so we will see what they were.
We're going to do with other assets.
But as I said, we're patient there is we don't need more liquidity now I wish I mean generally we're not we're not sellers.
We will take our diamond considered when is the optimal time based on our.
Thoughts.
To see what we're gonna do without assets.
However in.
In the third 1 center of adjusted EBITDA.
Adjusted EPS is just say slipped out.
With other the adjusted EPS.
It will be much higher but we thought that it is fair because this is send non operating item, which is another debt is on our balance sheet for some years now.
We felt that it is fair to have a.
An adjustment that would have been 31 cents of EPS based on pure operational performance.
Right. Okay. That's helpful. And then lastly from me, obviously you guys.
We're buying and selling assets.
Even recently on that.
Basically doing both so and it may even with the high asset prices I think you can look at the time charter rates and see that you're generating substantially more than what you're paying for the assets and less than <unk>.
3 years and in many cases into debt.
The math works pretty well on that basis, but.
I'm curious where are you where you stand right now like are you, a better buyer or seller or or both or.
Are you getting close to being at a point, where you might just be on the sidelines for a little bit on it.
Any color there.
Yeah look the equity.
Just as we did I mean, most of them or if not all of them were concluded during the first months of the year after that day.
The other drivers of charter rates are they all day.
Sort of extremely high levels.
So after that we stopped and now we are much more cautious.
It would be difficult for us to sort of replicate the same acquisition. We did in January February March of 2021, we're now onto the values are so now we take our time.
Is that.
That level of environments in terms of artist items in charter rates.
We're gonna be much much more cautious.
Or would they go down we do have a lot of liquidity, we know that we have to invest internally and generate returns.
But we're now offers valuable EBIT was very high at 8.
Those deals now by default they are becoming more lever operations on the inside right.
Also financially because we attach endeavors.
On the same percentage of level $6.70 per cent whatever that is it doesn't matter to us too much guy assets value, which we don't like so now we're going to take our diamond.
Consider and think what is the best way in order to invest our liquidity because.
Just on the charter rates that you've seen and without any new business, our liquidity and the cash balance is going to be climbing up every single quarter going forward. So they just self interest.
Alright, perfect I appreciate the color there Greg.
Okay. Thank you.
This concludes our question and answer session I would now like to turn the conference back over to Mr. Greg <unk> for any closing remarks.
Thank you very much for being here with US a day and we're looking forward to.
Speaking to you again during our next quarterly results. Thank you.
Thank you. This does conclude our conference for today. Thank you for all participating.
Okay.