Q2 2021 Pangaea Logistics Solutions Ltd Earnings Call
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Good morning, My name is Ashley and I will be your conference operator today at this time I would like to welcome everyone to the Pangaea logistics solutions second quarter 2021 earnings teleconference.
Our hosts for today's call and Mr. Ed Coll, Chairman and Chief Executive Officer, and Mr. Gianni Delsignore Chief Financial Officer, today's call is being recorded and will be available for replay beginning at 11, a M. Eastern standard time.
A recording can be accessed by dialing 888 to seven and 65315 domestic or for you to 220 to 232 international.
All lines are currently needed and after the prepared remarks, there will be a live Q&A session.
I would like that to your question during the Q&A segment. Please press star one on your phone.
And if your question has been answered you may remove yourself from the queue at any time by pressing the power he.
And you ask you please pick up your handset for optimal sound quality.
It is now my pleasure to turn the floor over to MS. Emily Blunt with Prosek partners.
Thank you Ashley and thank you for joining us for this mornings second quarter 2021 earnings conference call for Pangaea Logistics solutions with US today from the company are chairman and CEO, Mr. Ed Coll, and Chief Financial Officer, Mr. Gianni Delsignore before I turn the call over to Ed I'd like to read the Safe Harbor statement.
This conference could contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 about Pangaea logistics solutions forward looking statements are statements that are not based on historical facts such forward looking statements are based upon the current beliefs and expectations of Pangaea logistics solutions.
Management and are subject to risks and uncertainties, which could cause the actual results to differ from the forward looking statements such risks are more fully discussed in Pangaea logistics solutions filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks Pangaea logistics solutions.
And does not assume any obligation to update the information contained in this conference call also please recall that a supplemental slide presentation will accompany this call. Those slides can be found attached to the 8-K that was filed with the last evening's release, which is available on the investors section of W. W. Dot and yeah, Yeah last dotcom.
And your company filings or on the SEC's website at SEC Gov, now I would like to turn the call over to Pangaea logistics solutions, Chairman and CEO, Mr. Ed Coll and.
Thanks, Emily and thanks to all who have joined US today I Hope you and your families are healthy and safe.
This morning, I'll try to provide and update on their operations and the overall market before turning the call over to Gianni our CFO to provide a more detailed overview of the second quarter to 21.
Well then open the line for questions.
We hope that you've had time to review our press release and accompanying presentation, which were issued last evening.
Our second record second quarter results were record breaking and extremely active quarter for both and operating and investing perspective benefitted from the continued increase in the dry bulk market for the first half for 2021.
As we've seen freight rates rise to levels not seen and over a decade.
For our quarterly results.
Who've considerably year over year as our average net TCE earned $21053.
And increase of almost 100 per cent compared to the second quarter 2020.
And we generated net income of $19.2 million compared to a net income of $3 million and the second quarter of 2020.
As we've said in the past our client focused business model and that prioritizes cargo helps us to maintain profitability and volatile markets.
And I can quickly to such changes.
Our earn TCE for the second quarter was the highest earned and many years the rapid rising.
Resulted and no T C E premium over the market average for the second quarter.
This is a normal consequence of a rapidly rising markets and spot fixtures for become old quickly and our contracted cargo tends to lag and instead of leads.
And this kind of market as you can see both are still profitable and this is mark.
We are also excited to take delivery.
Of the first tour for ice class New building vessels during the second quarter.
The timely deliveries expand our industry, leading ice class capabilities to meet our clients' needs and will be fully deployed during.
During the summer Arctic shipping season.
Third and fourth vessel will flow in late Q3, and early Q4 and.
And be ready for the ice season next year.
And we're also happy to report the successful delivery and financing of three secondhand vessels as part of our fleet renewal and expansion, bringing our total owned vessels to 'twenty for.
After the delivery of our final two ice class new buildings later to share.
The bulk courageous spoke valor and bulk promise and two are available one days and are timely steps and our effort to improve our average fleet age.
Johnny will discuss the financing arrangements and niche acquisitions.
Collectively we're encouraged by the steps, we've taken to blur to deploy our capital.
Focus on Asia, and capitalize on and improving dry bulk market.
To generate and return shareholder value.
During 2021, and we reinstated our dividend increased at three and a half cents.
Which we have continued through this quarter.
As we look ahead and we're encouraged for the fundamentals and the dry bulk market with historically low order book stable demand outlook, and Mark and disrupt the disruptions from the container and commodity trades all in favor of the ship owner for now.
Our T C earnings continue to improve heading into the third quarter.
As of today.
And we performed 20.530 shipping days through August nine and and average TCE rate of approximately $27000 per day.
We will continue to be operating as opportunistic as we have seen and delivering the best in class services for our clients looking to acquire new vessels when opportunities arise and developing new business that complements our platform.
We look forward to updating you of developments from the coming quarters.
With that I'd like to now turn the call over to Johnny to provide some additional details on our financials and Johnny.
Yeah.
Thank you Ed and thank you all for joining us on today's call.
Before walking through our financials I'd like to expand on the vessel acquisitions and highlight our results for the quarter and.
As Ed mentioned, we are excited about our recent acquisitions, which resulted in one of the more active periods for Pangaea and recent years.
And we took delivery of the first two newbuild vessels and two secondhand vessels, the bulk courageous, which was financed for $12 million payable over seven years.
Interest rate of LIBOR, plus 275 per cent.
And the bulk dollar which was financed for $13.3 million payable over seven years with fixed interest rate of 3.29 per cent.
And July we took delivery of the third secondhand vessel, the bulk promise, which was financed for $12.8 million payable over six years, when and interest rate floating at LIBOR plus 230 per cent.
Collectively net.
Proceeds we've deployed $15 million towards these timely vessel acquisitions, adding to our owned days and expanding our operating leverage as efficiently as possible.
Turning to our second quarter financials, starting on page six of our presentation for you.
And continued improvement and the market during the second quarter resulted in increases in both voyage revenue and time charter revenues.
Voyage revenues increased approximately 76 per cent and charter revenues, which are opportunistic and more closely tied to the market increased approximately 695 per cent.
The optionality of our chartered and strategy allows us to expand or contract our chartered in fleet and in turn selectively release excess ship days and to the market under spot time charter arrangements.
Our TCE rate earned increased 96 per cent to 21000, and and $53 per day for the second quarter of 2021 compared to 10733 for the same period of 'twenty for money.
Charter expenses paid to third party ship owners increased to $62.6 million from $15.2 million, a 312 per cent increase due to increases in market rates to charter in vessels.
And an increase and charter days as part of our nimble strategy.
And which we eliminate limited our exposure to the market and reduced our chartered in fleet and 2020 due to the impacts of COVID-19.
Unrealized gains on derivative instruments was $6.3 million for the second quarter of 2021 compared to $1.4 million for the same period of 2020.
As we've discussed we utilized Ford free agreements and bunker swaps to selectively hedge our exposure to the market on a long term cargo contracts and forward cargo bookings.
While this locks and future cash flows the mark to market gains or losses can lead to fluctuations and the company's reported results on a period to period basis, while settlement of the position and execution of the physical will occur at a future date.
Net income for the quarter was $19.2 million or <unk> 44 per share compared to net income of 3 million for seven cents per share for the same period and 2020.
Moving on to the balance sheet and cash flows on page seven of our presentation. We ended the quarter with $40.6 million of total cash and cash equivalents, following and active quarter of operating investing and financing activities.
The decrease in cash from year end was primarily due to cash used in investing and investing.
Thing activities for vessel acquisitions.
Further as Ed mentioned, we have declared another three and a half cent quarterly cash dividend.
With that I will now turn the call back over to Ed for any additional remarks before we get to the Q&A portion of the call Ed.
Thank you Johnny.
And our customers our business partners and our shareholders for their continued commitment and partnership and we look forward to updating you further in the coming quarters I'll now open the floor for questions.
And at this time, if you would like to ask a question. Please press star one on your Touchtone phone.
With all of your questions at any time by question and that that oaky.
Once again that is star and one and then we will pause to allow any questions. Thank you.
And well take our first question from Liam Burke with B. Riley. Please go ahead. Your line is open and thank you and good morning, Ed Good morning, Johnny.
Good morning.
And you've had a pretty.
Active acquisition program on our fleet, both on the new builds and on the on the secondhand.
Part of your strategy is on for fleet renewal is there any thought given to some of your older assets, where you would divest for them and take advantage of high asset prices and the market.
Well, it's it's a constant.
Question, but the reality is is this the the older ships.
If you were to sell and you would get.
The premium.
But it will not be better than trading them. For example, if you would.
And so.
And 2000 and rebuilt vessel.
<unk> got $10 million for it.
But at current rate levels, you can make trading at <unk> 7 million and one year.
So they it doesn't go dollar for dollar so.
I think the the way we look at it is there and sort.
And sort of cash cows and.
And then we won't get.
The dollar for dollar.
Trade off with that and if you need the ships on the water the owned ships and <unk>.
So to just sell and older ship.
And trade into a and newest ship.
At the moment that doesn't work and also in the state of this market the.
The second hand market is extremely difficult to purchase ships and.
And the levels are extremely high even if you can find something to buy which is not very much quality available.
And the market to buy anything the secondhand values are.
Creeping up against them.
New building prices.
And this is situation where are we where we are at the moment and the and the key and we've been fortunate with the ships that we bought.
Their their values are up quite a bit.
But and but they're earning really good money.
And we.
And we'll see what we're always evaluating it but now is the time that we should be.
I'm, just earning the operating cash flow or for those ships, because youre not going to get.
The value at a better.
And of selling and maybe if we could if we could buy our own for ships, we probably shouldn't be doing that but you know you don't want to buy anyone else's junk either.
No.
And it's just.
On the rising rate environment and your your fixtures for the quarter are pretty strong and does that change your strategy between balancing between time charters and spot.
And how do you balance that and a rising rate environment do you want to fix more on a time charter basis.
Well I think we view the whole business and this and this way I mean, we this is a good opportunity for us to build or our general business, including terminals and logistics. It gives us more opportunities and that space just to.
To to say it.
And the time charter fleet is.
Yes.
Yeah.
Working within within the market and.
You know if you do a fixture.
Good day.
And it looks really good you know two weeks from now it may look low.
So, but it's a good problem to have.
And that and that sense, so and the owned and the owned ships for opportunistic we look at things all the time to add to the mix. If it makes if it makes sense and you know what we also then look at is debt.
The futures and.
And it's you know we've been doing some work on futures because.
And the future market, it's sad and very extreme discount to the spot market and and so it's actually easier to ship.
By futures.
And at much discounted price and buying.
A ship.
So.
Try to take advantage of those.
Those situations and we.
We have contracts that's the base of our business, it's a good opportunity to expand them at.
Higher levels and.
And that's what we look to do.
Great.
Thank you Ed Thank you.
Yeah.
And as a reminder, that is star and one for your questions. We will pause another moment to allow any further questions for you.
And there does appear to be no further questions and I will turn the call back over to you and Mr. Cole for any additional remark.
Well, thank you very much to everyone for listening in and.
We wish everyone, a happy summer and be safe. Thank you.
Thank you and this does conclude today's program. Thank you for your participation you may disconnect at anytime.
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