Q2 2021 Safe Bulkers Inc Earnings Call
Thank you for standing by ladies and gentlemen and welcome to the safe bulkers conference called to discuss the second quarter 2021 Financial results. Today we have with us from safe, bulkers chairman and chief executive officer. Mr. Poulos hajioannou, president dr. Lucas barmparis and Chief Financial Officer mr. Konstantinos. Adamopoulos 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.
You wish to ask a question, you will need to press star 1 on your telephone keypad and wait for your name to be announced following this conference call. If you need any further information on the conference call or on the presentation please contact Capital Link at 2.1, 2, 6, 6..1. 7, 5, 6, 6. I must advise you that this conference is being recorded today. For looking statement. Before we begin, please note that this presentation contains forward-looking statements as defined in.
Ian 27A of the Securities Act of 1933 as amended and section 21. E5 the Securities Exchange Act of 1934 as amended concerning future events. The company's growth strategy and measures to implement such strategy including expected vessel Acquisitions and entering into further time, Charters words such as expects, intends plans, believes, anticipate Hoops, estimates and variations of such words
Similar expressions are intended to identify forward-looking statements.
Although the company believes that their expectations reflected in such forward-looking statements or reasonable, no, Assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks. And are based upon a number of assumptions and estimates which are inherently subject to significant, uncertainties, and contingencies many of which are beyond the control of the company, actual results May differ materially from those expressed or implied.
By search for looking statements factors that could cause actual results to differ materially include, but are not limited to change. In the demand for drybulk vessels, competitive factors in the market in which the company operates risks associated with operations outside the United States and other factors listed from time to time in the company's filings, with the Securities and Exchange Commission. The company expressly disclaims any obligations or undertaking to release publicly.
Any old days over Visions to any forward-looking statements contained. Herein to reflect any change in the company's expectations, with respect their to, or any change in event conditions, or circumstances on which any statement is based and now I pass the floor to dr. Barmparis please go ahead sir.
We are happy to present the financial results for the second quarter of 2021 and synopsis is profitability Fleet renewal at the edge of the technology in the leveraging targeting to create shortly. A company where each net debt is comparable to sit by to steal value of the vessels, creating value for our shareholders, the above our president slide 4, we read 18, 1.6 million in net revenue,
2 million. Okay, big data and 31 cents of adjusted earnings per share. We ordered 8 vessels ghg. EDI phase 3 knocks. The 3 compliant, Japanese new books with early deliveries to in 2022 for in 2023 and 2120.24th at very competitive, prices ahead of our competition.
At the same time we have sold the 6 vessels..3 of weeks are yet to be delivered with forty 7 point 6 million outstanding sale proceeds and acquired to secondhand panamaxes.
We believe that by 2024 we will be able to renew about 1/4 of the fleet with pastry compliant. New beats while substituting at the same time, some older versions with Django second conversations in terms of leveraging we have a 1/125 point 5 million degrees in debt from 6 and 7 point 7. Twenty twenty year and eighty 2 point 2 as of July 23.
You Think You Are?
Same time, we maintain our financial flexibility, right by preserving a strong cash position 100, 15.6 million, and our and wrong. Borrowing capacity available under a revolving reducing the facilities to 67 minutes.
All these actions, We Believe will position the company to a whole new level of competitiveness. Well, ahead of the competition, we are here for the long run.
It's like 5, we show balance sheet analysis. The assets are presented of course in their book by you know, thing that presently we believe that asset values.
Substantially exceeds the book value. Let's turn to slide 7 and to have a quick look on present certain market conditions.
As shown in the top graph The Capes Market or they hear today is outperforming 2020 presently capes are trading at about 32,000 the year-to-date average at about twenty 4 point 8 thousand as compared to 2020 average for the same period which was 9600.
Similarly for Capital markets, the markets remain strong, throughout this year, presently trades at the region of 30 mm with a year to date, average of twenty 3 point 9 thousand as compared to 7 point 9 thousand for the same period in 2020.
Tea Garden Market prospects with strong demand balance, which is marked in healthy and sustainable levels.
Having to the next light. Number 8,
We present the development on pricing of certain Commodities, which are leading indicators for the shipping, The Continuous increase on crisis during the last period is signifying. Their underlying demand the strong demand from China continues to the continues, in the control of COVID-19, we lead to the opening and normalization of other important countries. As for example, India furthermore leading companies such as United States and China.
I've been preparing for course, but they make plans to boost their economies. These parks are expecting to enhance in Dazzle blows and all together to boost the demand for drybulk. Argos fell.
Only a slight 9 represent the status of the fleet in terms of values and expected expected Supply. On the top graph will present the values of five-year-old, capes, and panamaxes. As a system by Baltic exchange, during the last month, it is evidence of a Sharp increase of the vessels value for capes in particular, the values that have served more than 40 percent since the same deal in 2020 and have gained about
You want million?
Since the launch in 2016. Similarly, for five-year-old panamaxes, the values have gained about 45%. She was saying period in 2020 and have gained about 80 million residential sink 2016, lat.
The above assessment is indicative vessels Japanese even higher values. Our Fleet consists of mostly Japanese specifications, and many commercial and operational upgrades looking on the order book and the bottom graph. We note that the growth of the fleet for both capes and panamaxes.
Excuse me, but it does not exceed the 3% on its here, taking account the expected scrapping. We may conclude that the expected demand for dry but vessels for the next years to come will be significantly higher than the actual supply of s has other card market conditions at CPS both in Japan and China. We do not expect that the order book may increase significantly
for the next couple of years.
With orders from other sectors such as spontaneous and Angus, and there is no space for additional drive back orders. Furthermore, only few Shipyard have developed new environmentally efficient designs, which together with the ongoing environmental discussions. For your mission is expected to discourage new orders.
Turning to the next light, then with that support the current status of shoes and they price it. Our company has invested in the exhaust gas cleaning technology, which allows our ships fitted with scrubbers to comply with IMO 2020, regulations for soccer emissions by Birmingham. Instead of IMO compliant, which is a very low set of fuel oil. The differential in the price between very low Sulphur fuel oil in the highest, the so-called high 5.
Use for scrubber fitted basis, presently they high-five differential in Singapore, for example, such as about $125, per metric tonne. According to Future markets, as shown in the graph, on the bottom, this prices and sustainable through 2023, scrubber feeder post-panamax..7005 can be here. This brings the scrub at game to about 900 thousand per year. What about 2,500 per day?
The recovery of global economies, the restoration of mobility and the recovery of crude oil prices may lead to even high as shown in the top graph, presently the brand price of trading 2 levels at the highest of the last 5 years.
Let's summarize all the key takeaways in. Slide number 11, the order book is minimal and its lowest level. Since 2002. The carbonization discussions, not variable new orders. Most, cypriots are preoccupied with containers, entangled orders until 2024, and only few shipyards have developed new environmentally efficient designs.
We have.
Experience in exceptionally strong, start of 2021 with robust volumes COVID-19 or call in Grain. The market Commodities has been exceptionally strong. During the first quarter, we have seen increased government spending on postpartum Excellence programs, and continuing green of the global economy. We have experienced Brent prices recovery, which may lead to even wider high-five spread. Differential than that of today, about a hundred twenty
$1 and lastly dating of the fleet and they increase environmental restrictions for emissions May enhance the scrapping activity. This gives us support for our process in relation to the back to the market conditions that we Prevail in the following quarters. Now, let me pass the floor to our CFO.
Thank you, Lucas and good morning to everyone. Let me start with a charger in the 4 months since like the team, where would be then that bodily BCE, which stood at 21,$000.98 basis of quarterly, Opex withstood that 4874 dollars.
Moving on to slide 14 daily Opex withstood that 4874 dollars in the quarterly DNA.
Daily DNA would shoot at $1400.48. The aggregate figure of those 2 numbers is 6322 dollars which is the most states are focused on lean operations. We believe that this number is 1 of the interest is low but it's not the lowest given the fact that we include in our affects all our drydocking and be there everyday expenses.
And you know, DNA are managing the fish directors and officers conversation and all expenses related to our Administration.
Moving onto a profile, as seen in slide..516 would be Centauri payment schedule as of the end of June this year.
As of June twenty, 7 point 4 million dollars in cash and capacity available on the evolving security facilities available.
Malaysian to, to you believe, Essence and very financing an existing vessels.
Furthermore, excluding the vessels committed for sale, we had, which had not been delivered yet, we had additional borrowing capacity in relation to 1 and income by the greeting lesson and to, and into 3 new builds upon delivery.
16 will be rent out that amortisation schedule versus the scrap. Value Berkeley will have a smooth debt repayment profile for the next 2 years. Gradually, delivering a company following considerable debt repayments who have made is he is water.
If you now move to slide 17, we got a quarterly financial highlights for the second quarter of 2021 compared to the same period of last year.
As a general note, during the second quarter of 2015 compared to the second while of eighty 1 point 6 billion dollars compared to 8 forty 8 point 3 million for the same period in 2020 what further increased by the earnings from Scott and expenses.
During the second quarter of twenty 1 would have the times has the equivalent rate of twenty 1 thousand ninety 8 dollars compared to 8 thousand ninety 4 dollars for the same Building 2020.
And I think I'm from the second quarter of this year, which that is 2.4 million compared to a net loss of the 18.9 million during the second quarter of 2012.
Net revenues increased by 69 percent. Twenty 1 point 6 million for the second quarter of Twenty 1. Compared to forty 8 point 3 million for the same period in 2020 mainly due to the increased DC of the fleet as a result of the improve Market, assisted by the additional revenues.
Daily basis and Opex, increased by 3% to 4874 dollars compared to 4 thousand 7 hundred ninety 9 dollars.
This increase was a result of the combined effect of the use drydocking and Provisions, Technical Services. But increased crew deportation expenses due to the COVID-19 for them.
Daily vessel Opex excluding drydocking the expenses increased by 9% to $4050.568. For the second quarter of 2021 compared to 4 thousand 2 hundred and 7 dollars for the same period in 2020.
Not adjusted they be done for the second quarter of 2021 increase to 50.4.1 million dollars compared the 6.3 million for the same period last year.
Earnings per share for the second quarter of 2021 was 31 cents. Calculate the weighted average number of 100.
And .9.100 million, 9 million shares compared to a loss during the same period in 2020, a hundred and 2.7 million sales.
My presentation is light, 18 will be gender. Quarterly Fleet data the average daily indicators, compared to the same period last year. We would like to emphasize that the company is maintaining strong cash position for 1 hundred and fifteen point, 6 million as of July 23. The provide us with flexibility to follow. Our plan aiming, gradually, the new. Our Fleet with a view or forthcoming environmental changes in regulations and further delay.
Where's our balance? Sheets are getting to create value for our shareholders.
Once again, would like to thank God, she favors for the commitment and dedication throughout the staff video. I press at least present in more detail, our financial and operational results that we are now ready to take your questions.
Thank you as a reminder to ask a question. You need to press star 1 on your telephone to withdraw your question. Please press star and to your first question comes from the line of spend stifle from been Nolan from stifle. Please go ahead. Your line is open. Thank you. So I have a couple good morning in the afternoon, I guess the
My first question relates to the new building activity, obviously you guys have been through the Forefront of the Innovations of design but and have always had high quality Equipment from primarily Japan. But they're still conventionally fueled or or use oil relative to some of the other designs that we see a lot. Now, be the
Maybe Alan T or ammonia. Can you maybe talk through the idea of how you decided on your propulsion systems versus, you know, some of the other would seem to be increasingly popular alternative situation, ammonia hydrogen?
Will be under assessment and we strongly believe that this will be the case. And we have let's say this is the new after about at least 10 years from now or even 15. So we have followed a pragmatic approach to tell you the truth. The lmg as you mentioned is not actually
Lucien has a sleep path toward of methane which is I think about a hundred times more grease, greenhouse, gas effective compared to CO2. So it's not clear that if you order an LNG, this LNG will be compatible with the new regulations after a 5 or 6 or 7 years. The second point is that the other fish,
Coast, basically, do not exist there under discussions. And also and we know that because we are in the cph and we participate in such designs, also ourselves and tablet. A the first information. On the other hand, we have followed the pragmatic approach and when we say phase 3, I went I want to make clear that phase 3 is applicable after 2025. It's not, it's not the best that are produced today because today, we have space to vessels wutface 3 vessels, which
Represent 20.
In the reduction of emissions compared to 2008 and not 30%, which is the pastry. So a phase 3 vessels that we order is a vessel that will we start each production between 25 and 30 before the vessels before the shift of to new technologies? Like, I don't know, maybe ammonia or hydrogen? Whatever it prevails, which we come.
I don't believe that there is a question whether you want to invest or not. This is an investment, which is clear advantage to us. We will be, we will have the best vessels compared to the market. We can compete easily on the existing Fleet with extremely low emissions.
Everybody else, and while the others will wait to see what the technology will come after 10 years from 2025.
I've yeah II mean. I appreciate that. Although what we do sometimes see is people that order ships that maybe are fueled by whatever is your, the, the alternative, but have the ability to be converted relatively easily. It is, is there any ability of of the new builds that you have to to convert to alternative fuels relatively easily?
If you can give me 1 name. And once you've got a design and we can discuss. So let's not say about work. Let's say about the reality show, I don't believe presently it is in principle, everything can be converted. So an LNG, for example, can be converted, but it has huge convention cost. You need to have a different systems for a storage etc. Etc. So we don't want to play this game of at that.
Noah, just the follow. What is the best available technology? Right, I mean, after 2025 to 2030 and between 2025 and 2013, good May order the technology that will be available for the next decade but if you have a message that I can tell you, whether you say it's correct, tradable right now or even exist.
Gotcha. Okay, that's helpful. And then lastly for me you guys have been pretty active very active under that ATM program that you have. Can you maybe talk through the thinking behind that? I mean obviously you are ordering new ships but you're also selling older ships and and making a lot of money on the existing Fleet. So it doesn't look like you really need the money at the moment. What's the, what's the thinking behind the activity on ATM program?
Look at the idea is very simple.
We have designed to company that wants to create value for its shareholders. And I tell you that about the majority shareholder is, is the family that owns our management and hajioannou family. So the design we have described how we look at company that will be able to be very profitable in the future and also
The same time, be able to pay dividends to the shareholders, we don't want the company, which is over leather. So this is the 1 point we want to company which has low leverage about say 3035 percent to the assets. Second we don't want a company which has a fleet an old Fleet that after 2023 and following I mean 2025 Etc, we have to pay the best will not be able to compete especially when you have Chinese versus will not.
May be able to compete with in the market, and have to pay environmental touches either in Europe, or United States or have a to do to withdraw, your plea teacher in a category e or you have to do additional Investments within 3 years. If it's in category D and to a don't be all such questions. We have substantial programs. We want a company that has basically it's
backbone has surely phase 3 vessels. We have also about 10.11 aircraft ships, which were both in the previous chapter 27.2015. And so, this is the second point. So if you have a company with
Company, solid company low emissions. This company can will be able to generate the best profits after 1 year from now and we'll be able to pay also dividend a certain point of time. We don't want to create a company over levers and pay dividend now or do that all this respect. We have to fix the 1 is replacement and you are strategy.
If you basins, and the prices in which we sell very good and the second point that we are doing is that we have also the ATM which again at the end at the back of our mind at certain point of time, hold companies from time to time access the public markets, 1 way or the other. So it's not a big deal for us to have some equity in injected in our
Balance it weeks. Basically it
As you can see the prophets, we always beat the prophets, because the market is very good, and with new technology ships, we will continue to do that. So, basically, this is an investment for the future of the company. And of course, when we do all this job in the right way, as we have designed, then we will be able to continue.
Then we will be able to do or totally water our shareholders in the future.
ER okay. That's how bright and and since you brought it up you talked about wanting to pay dividends. How close are you to that at this point? I mean you're making money and begin. The balance sheet is, is stronger. Is that something that we, you know, you think is a 12 month or less kind of an event
We would be closure, we had if I met out here, if I may, the good Market has started only 6 months ago around February was still 6 months into a good Market. Its most important for the gas company to deliver image and renew it split.
First and then to consider the dividends because now we have work to do and this is what we are doing and we are not staying still, we prove it quarter after quarter, both the deleveraging policy and Fleet renewal policy. So there will come a time will come for the benefit of all shareholders.
Hello, yes, it did you hear that? Yes, thank you sir. You know, I mean, we expect this Market should last a year or 2 more and the order book is so small, in dry bulk. All the yards are fully booked until first quarter of 2014 with major activity in containers and before that we
Major life activity in tankers but we have no activity in bulkers. So we expect a strong Market with all the regulations that they are coming in front of us to Prevail 4 more 4 more years 1 or 2 years more from now. So company to reinstate the dividend has to do it. After you finish off with your deliveries in priority and your Fleet renewal product like
Right, right, thank you for that.
At. Yes, thank you.
Thank you. Your next question comes from the line of Randy. Giveans from Jeffries. Please go ahead. Your line is open.
Gentlemen. How's it going?
Thank you, fine, I guess 2 questions for me here, looking at your chartering strategy, you clearly have a lot of your days already booked for the back, half of the year. Has your charting strategy changed at all given the the kind of current market strength. And then also, what are your quarter to date spot rates achieved thus far? It seems like the vast majority of your third quarters already booked. So, just trying to compare 3.
You 21 verses the 21,000 a day you earned into q21.
Yes. Look first of all regarding the period chapters. As I said in previous calls the period chapter is for the time still controlled by the major Charter is to the show called FFA Caravan the FFA, the forward rate agreements and which for the for what years, I've not touched levels for 20,
We opened before. So you cannot really utilize 3 or 4 or 5 year Charter says that like we see now on container business. So the company prepares to work in the spot Market or short period or or up to 1 year because you can get the maximum benefit during those periods. I expect as a spot Market improves in the following quarters but chocolate.
We'll come out and meet higher Freight rates for 2 or three-year periods. But at the moment, we only see sensible numbers for the up to 12 months, period. Beyond that if you stop talking for 2 year period, the chapter is ask heavy discount. So I don't see what is the point for a company to invest in 2 years when you you are doing the year..1 let's say at the high twenties and the year at the low teens.
No point to pick say yes to upload things and make average of twenty 1. Twenty 2 thousand dollars a day because you can get it done the year 1, and then keep the shoot in the spot Market.
So we don't we don't believe there will be order booking 22 or 23 to spoil the party from that point of view and we still believe that Supply will be strong because we see handysize rates at $30,000 a day which is supramax 8000 dollars a day. We should come so much of the same and capesize at the same. We never before, remember and decides at least $30,000 a day, even in the, in the good times of the of
2010-2011 that we have strong Market. The handysize were running $16,000 for the or 17. So it means now the my no bulk is moving and it's moving with the with the Valkyries and know from containers. And this is boosting a lot base of the market and the strength of the market.
So I believe that the 2 or 3 years shark as we have to wait a little bit longer before people goes come as far as the other question. You said about the third quarter and the numbers are increasing. Yes, this is this is true but the market the levels are having increased from q1 so it's reasonable to expect that the numbers will be hiring in the third quarter as it looks now we only we only we are only through the first month of the third quarter.
But it's higher than what it was in the second quarter till now got it. Yeah, I was just saying, I know what with your recent chartering activity, almost a hundred percent of the third quarters. Are you bought? But all right. Well, looking at your balance sheet, you know, you have, obviously, a very robust cash balance a hundred and, you know, fifteen million dollars, plus all the cash.
Double from the asset sales. How are you looking at? Kind of current and renewal looking at further Acquisitions, make your plans on that. We have a new buildings. This we have sold, 6 older vessels. So these are coming. These are coming in as a replacement. For the older versions. I don't expect, we can find reasonably
New buildings from now on it will be very difficult. The type of ships we want from Japan so will mostly concentrate on more than 700 position. So we we are to sell a vessel built in 2005. Will try to replace it with a 10 year. Younger website built in 2012..13 14. We tend to concentrate on Acquisitions. We have a couple of
Till Sunday, negotiation, we are going to conclude in the next few weeks, you know? I mean, I think it's a prudent strategy to continue that way. Because also in the shipyards will see that they, they are cost has gone up the steel prices going up, or they are increasing their prices. So for us also, deliver is that is 25 years away. Now, it's looking looking a bit far away.
We have to wait for when you shoot some notes upon. Now, some time for new technologies to to evolve if the this maybe in hydrogen best selves or ammonia vessel. So other things or LNG, I don't know.
No 1 knows, what fuel will prevail and what technology will prevail. So, we're happy. We've got this 8 questions to replace ships. We already sold and the priority for us is to keep renewing the fleet and to deliver as a company and we are doing that very fast as you have. We have demonstrated in our last 2 quarter earnings, we have solid profits is looking good. Then let's let's
Make the company also practice.
Investors to join in and enjoy the good retention the next quarter's, but are coming.
Yeah.
All right. Well, hey that's it for me. Thanks again.
Thank you.
Thank you as a reminder. If you would like to ask a question. Please press star 1 on your telephone keypad.
There are no further questions at this time, I will hand the call back to you.
Thank you very much for attending this conference call where we presented our of quarter results and we are looking forward to discuss again with you in the next quarter. Thank you very much again and have a nice day.
Thank you. Thank you. That does conclude today's conference. Thanks participating. You may now disconnect