Q3 2021 Eagle Bulk Shipping Inc Earnings Call
Today's conference is scheduled to begin shortly please continue to standby and thank you for your patience.
[music].
Greetings and welcome to the Eagle bulk shipping third quarter 2021 result conference call. At this time, all participants are in a listen only mode.
After the Speakers' presentation, there'll be a question and answer.
To ask a question at that time.
I didn't want when you touch tone telephone.
As the amount of today's conference call is being recorded.
I would now like to turn the call over to Gary Vogel, Chief Executive Officer, and Frank de Costanzo, Chief Financial Officer of Eagle bulk shipping Mr. Vogel you may begin.
Thank you and good morning.
I'd like to welcome everyone to Eagle Bulks third quarter 2021 earnings call.
Couple of metal remarks today, I would encourage participants to access a slide presentation that is available on our website at Eagle ships Dot com.
No part of our discussion today will include forward looking statements. These statements are not guarantees of future performance are inherently subject to risks and uncertainties you should not place undue reliance on these forward looking statements. Please refer to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks.
And uncertainties that may have a direct bearing on our operating results our performance and our financial condition.
Our discussion today also includes certain non-GAAP financial measures, including adjusted net income EBITDA adjusted EBITDA and TCE. Please refer to the appendix in the presentation and our earnings release filed with the Securities and Exchange Commission for more information concerning non-GAAP financial measures.
A reconciliation to the most comparable GAAP financial measures. Please now turn to slide six.
Drybulk freight rates continued to strengthen during the third quarter on the back of robust commodity demand, which was further supported by the ongoing container spillover trade as well as elevated congestion due to the ongoing supply chain bottlenecks and COVID-19 related port restrictions around the world, but in particular in and around China the Baltic.
Superman Index rose by almost 34% during the quarter to average approximately 34000, representing a 13 year high.
Given our active management approach to trading our fleet and our significant operating leverage we generated record earnings for the quarter with net income totaling $78 million or $6 12 per share.
Not only does this represent the highest net income we have achieved in a single quarter. It also eclipses the company's best ever annual result.
Following our recent announcement on the institution of a cash dividend policy equal to a minimum of 30% of Eagle's net income our board of directors declared a cash dividend based on the third quarter's result of $2 per share.
Separately and as previously reported we executed on a comprehensive refinancing on October one which has allowed us to significantly simplify our capital structure lower interest cost and extend our bank debt maturity to 2026.
Please turn to slide seven.
Our record financial results were driven by our ability to improve TCE performance by 35% quarter on quarter, resulting in a net TCE achieved $29088.
As we've discussed previously given the rapidly rising market environment, we experienced during the third quarter is an inherent lag effect between our TCE performance and the BSI has the majority of our fleet is employed on voyages lasting anywhere from 30 to 60 days and sometimes longer.
Looking ahead into Q4 freight rates have come off with the BSI currently trading under 30000, which is still very conducive to cash generation for Eagle as of today, we have fixed about 75% of our available days for the fourth quarter had a net TCE of $32400 per day bear in mind.
But our cash breakeven levels through the first nine months of the year is at around 11000.
On this basis notwithstanding the recent pullback in rates, we are on track for exceeding this quarter's performance in Q4.
Please turn to slide eight.
In terms of operating performance, we produced a record $91 million of EBITDA or $19400 per ship per day for the three months ending September 30.
This represents an increase of 45% compared to the prior quarter given.
Given the fixed cost nature of our business, we maintained significant operating leverage with essentially all incremental net revenue generated flowing to the bottom line.
Please turn to slide nine.
Asset prices have also continued to increase in recent months with values for 10 year old Supermaxilla upper end, 17% on the quarter and approximately 115% year to date. It's interesting to note that this price strength has occurred on the back of a record number of transactions year to date, almost 840 drybulk vessels.
Has been bought and sold totaling $14 billion in volume.
Please turn to slide 10.
Okay.
In terms of sale and purchase we took delivery of our final pending acquisition last week the motor vessel Valencia Eagle, we estimate that the nine vessels, which we acquired between November of last year in May of this year have increased in value by over $80 million.
<unk>, we sold and delivered the motor vessel churn of 2003 built Super Max and our oldest vessel in the fleet just ahead of a statutory dry dock.
Our fleet currently totals 53 ships, averaging nine years of age with 89% being fitted with exhaust gas cleaning systems or scrubbers.
As a result of the growth in renewal over the fleet our fuel.
<unk> has also increased significantly over the last five years.
As always we will continue to evaluate vessel S&P and <unk> deals and look to execute on an opportunistic basis with that I would like to turn the call over to Frank who will review our financial performance.
Thank you Gary.
Please turn to slide 12 for a summary of our third quarter financial results.
The continued significant improvement in the charter rate environment drove our top line growth in Q3 with revenue net of both voyage and charter hire expenses totaling $142 4 million.
And net income coming in at $78 3 million, representing a more than eight fold increase as compared to the prior quarter.
Earnings per share for the third quarter was $6.12.
On a basic basis and $4.92 on a dilutive basis. Please.
Please note the diluted share count now includes $2 9 million shares from the convertible bond.
Adjusted net income, which excludes noncash unrealized gains on derivatives of $6 3 million came in at $72 1 million for the third quarter or $5 63 per share on a basic basis.
As Gary mentioned earlier adjusted EBITDA came in at $91 million for the third quarter.
Let's now turn to slide 13 for an overview of our balance sheet and liquidity.
Total cash which includes $25 6 million of restricted cash was $125 6 million at the end of Q3, representing an increase of $41 8 million as compared to the end of the second quarter and an increase of $36 8 million from year end.
The changing cash versus prior quarter and year end. It was driven by cash generated from our strong operating results offset in part by the $25 million our CF paydown.
First of all acquisitions and debt service.
I will cover the movements in greater detail on the cash walk slides.
Total liquidity improved by $51 8 million from the prior quarter to $191 6 million total liquidity is comprised of total cash of $125 6 million and $66 million of undrawn revolving credit facilities.
Okay.
Total gross debt excluding debt issuance costs at the end of Q3 was $472 8 million.
As previously reported we executed a new $400 million.
Credit facility.
On October one.
Placing our Norwegian bond Ultra co bank credit facility and the whole car CF.
New facility includes a $300 million term loan and a $100 million revolver of which 50 million was drawn in closing however, as reported yesterday, we have now fully paid down the revolver and have $100 million of Undrawn availability.
Please now turn to slide 14 for an overview of our cash flow from operations for the third quarter.
Yes.
Sure.
Net cash flows provided by operating activities was $93 million in Q3.
The chart highlights the timing driven variability that working capital introduces to cash from operations as depicted by the difference between the dark blue bars, which are the reported cash from ops numbers and the light blue bars, which strip out changes in operating assets and liabilities primarily working capital.
Although as the chart demonstrates the volatility caused by working capital largely evens out over time.
The difference between the two bars in this quarter can be explained by a significant amount of cash collections in late September.
Please turn to slide 15 for our Q3 cash walk.
Let's focus on the top chart, which covers the cash movements in Q3.
The revenue and operating expenditure bars are a simple look at the operations with the net of these two borrowers coming in at 91 million the same as our adjusted EBITDA moving.
Moving to the right the $18 million for vessel S&P bar represents the $26 9 million cost for the acquisition of two vessels in part offset by the proceeds of $9 2 million on the sale of one vessel.
You can also see that we paid $25 million on our CF and $12 million of debt service in the quarter.
The bottom chart covers cash movements year to date.
Please note in the appendix of this presentation. We include information on to cash and debt movements for the October 1st Global refinancing.
Let's now review slide 16 for our cash breakeven per ship per day.
Vessel expenses or Opex was 5000 and $401 per ship per day, excluding onetime nonrecurring expenses related to vessel acquisitions and sales the termination of our relationship with accruing agency.
We are consuming additional lubes given vessels are steaming at faster speeds.
The prices have increased on the back of the rise in base oils.
In addition, due to the COVID-19 pandemic, we continue to face higher operating expenses across several areas, including lodging and transportation costs related to crew changes along with the costs related to the procurement of stores and spares.
Finally, we have increased our spending on spares to preemptively limit off hire as much as possible in what is a very strong rate environment.
Drydocking came in at $917 per ship per day in Q3 $560 higher than prior quarter as we completed two dry docks with an additional two in progress it.
It is worth noting that there are significant challenges regarding COVID-19 protocols and quarantine requirements for ships going into facilities for dry docks and the installation of ballast water systems.
We do not see this abating in the near term and therefore will likely increase off hire times for these events for the foreseeable future.
Cash G&A came in at $1527 per ship per day in Q3 marginally lower as compared to Q2 it.
It is worth noting that our G&A per ship calculations based on our own vessels, whereas we operate a larger fleet, including our chartered in tonnage if.
If we were to include the chartered in days in our calculation G&A per ship per day would decrease to about $1363.
Cash interest expense came in at $1387 per ship per day in Q3, which was marginally lower quarter over quarter, driven by an increase in ownership days and a decrease in interest expense.
Finally cash debt principal payments came in at $1780 per ship per day in Q3.
This concludes my comments I will now turn the call back to Gary.
Thank you Frank Please turn to slide 18.
As indicated earlier on the call.
Si posted a significant increase during Q3 to average approximately $34000 during the quarter.
Both the Atlantic and Pacific markets pushed up simultaneously, which speaks to the broad demand backdrop and the Atlantic rates increased by 51% averaged 34128 and the Pacific rates increased 24% to average 32414.
Relative strengthening in Atlanta during the third quarter can be attributed to the factors. We discussed on our last earnings call specifically increased grain exports out of South America, and a strong market in the med, which was driven by elevated minor bulk exports such as slag cement chipped some salts and steel products.
Painters spillover trade continued to positively impact our markets more specifically and for Pacific and backhaul rates with cargoes such as semi finished steel parcels fertilizer bags bag cement tried chemicals in bags and lumber moving on small and mid sized conventional bulk carriers congestion remained elevated during the period.
With the number of ships at port, reaching a new record of 36% as compared to around 30% pre COVID-19.
Congestion is primarily attributed to COVID-19 related restrictions and general supply chain issues and bottlenecks caused by increased trade flows and exacerbated by shore side labor issues as.
As we look ahead into Q4, we've experienced an increase in market volatility with freight rates trading off their recent multiyear highs.
We believe this downside is due to a number of reasons, including an easing of congestion increased tonnage availability and a decrease of cargo flows.
The increase in tonnage availability appears to be primarily driven from Chinese flag vessels entering the international market. Many of these ships typically operate in the local cabotage trade, which is dominated by China as large domestic seaborne coal trade between north and South China.
Decrease in cargo flows within the Pacific has come about from what appears to be a short term pause in Chinese seaborne coal purchases as well as seasonal decrease in nickel ore cargoes as the Philippines has entered its rainy season.
Looking ahead, there has been no official announcement or indication that China will increase their coal imports in the short term. However, this recent decrease in Chinese seaborne coal buying may end up being a short term strategic maneuver to help cool pricing.
Year to date, the BSI has averaged roughly 26900, although we expect to see elevated volatility in the near term we remain constructive on freight rates given the positive underlying fundamentals. Please turn to slide 19.
Fuel prices continue their upward momentum as demand for oil products increased across the spectrum.
<unk> and <unk> are now trading around 450 and $590 per ton respectively.
The fuel price spread between <unk> and <unk> took a dip in Q3 on the back of elevated relative demand for <unk> has a power generation plants switched from consuming higher priced gas to cheaper residual oil. However, we've recently seen a normalization relative prices.
With spot fuel spreads now trading around $140 per ton a new high since the crude oil collapse in mid 2020.
With 89% of our fleet fitted with scrubbers, the price differential between <unk> and <unk> as an important value driver for our business. Our current fuel spread levels, we generate around <unk> hundred dollars per ship per day and incremental value across our fleet equating to about $32 million of value per annum.
Please turn to slide 20.
Net fleet supply growth increased slightly in Q3.
A total of 100 dry bulk new building vessels were delivered during the period down about 20% quarter on quarter and 5% year on year, partially offsetting this a total of just nine vessels were scrapped during the same period more or less unchanged as compared to the prior quarter.
Slow level of trapping is not surprising given the strength in the underlying spot market.
In terms of forward supply growth. The overall order book stands at just six 5% and it's even lower for the Super Max Ultra Max segment.
For 2021 dry bulk net fleet growth is expected to come in at three 5%.
This assumes scrapping of roughly $5 8 million deadweight tons down about 2 million deadweight tons from previous guidance and only about one third of last year's amount again. This is primarily as a result of a stronger rate environment for 2022 dry bulk net fleet growth is expected to be just one 5% given.
The rapidly depleting order books and somewhat higher scrapping.
A total of 92 Drybulk ships were ordered during Q3, the same as the prior quarter and largely in line with the quarterly average over the last five years.
Although we expect some level of ordering to continue we still believe it will be somewhat muted, giving new building price levels, both on an absolute basis and on a relative basis to secondhand pricing.
Malone deliberate time, given the lack of yard slots and.
Ever increasing uncertainty around future carbon pricing and regulations regarding emissions. Please turn to slide 21.
As we've spoken about before and you can note from the slide Drybulk demand is inextricably linked to global GDP.
Global growth expectations for 2021, we're slightly lowered to five 9% down 10 basis points since our last earnings call for 2022, the IMF is estimating global GDP growth of four 9%.
Please turn to slide 22.
Dry bulk demand growth has been revised downward slightly since our last earnings call with 2021 growth now estimated at four 1%.
This has been driven by downward revisions in iron ore and grains, but offset in part by increases in coal and minor bulks, such as steel cement scrap and nickel ore.
It's worth noting that minor bulks, where eagle derives about two thirds of its demand from is expected to come in at 5% This year.
For 2022 demand is forecast at one 8% for dry bulk overall and two 4% for minor bulks.
<unk> to look at this in concert with the expected low fleet growth numbers had mentioned a few months ago.
Notwithstanding near term volatility we are optimistic about the prospects for continued global growth, which is being supported by massive amounts of stimulus.
This positive demand picture combined with a record low order book supports our constructive view on market developments looking ahead.
In closing we are energized about eagle's strong position following our multiyear fleet renewal and growth initiatives as well as our new comprehensive financing and on the back of these we're looking forward to continuing to execute for the benefit of our shareholders with that I'd like now to turn the call over to the operator and answer any questions you may have.
Operator.
With the prepared remarks are completed we will now open the lines for a question. If you would like to ask a question press. The Star then the one key on your Touchtone telephone to withdraw your question press the pound key.
Our first question comes from Randy given with Jefferies. Your line is open.
Powder, Gary Franking, Kosta How's it going.
Good morning.
Good morning, Sir.
Congrats obviously on the the record quarter very strong rates there looking at your <unk> 'twenty one quarter to date rates 32000, plus very strong again now looking at the BSI deaths averaged closer to 38 plus thousand a day for the last six weeks one of your peers without <unk>.
<unk> I think they've booked around 65% at 37000, a day. So I know, it's hard to beat a rising market right, but what's the rest of the underperformance due to lower hedges via your FSA book and I guess with that recent drop here in the last week and he <unk> have you been more active.
Trading those for <unk>, 'twenty, one and even 2022.
Yeah.
So that's.
Pat There first of all I'm, not sure who you're referring to but I think it's important when you compare TCE between companies.
When you look at the.
<unk> makeup and whether you're talking about a fleet of <unk>.
Strictly Super Max and ultra Max or blended fleet, including tapes.
We definitely have the hedge position, which we disclosed in our Q of FSA and cargoes, but.
Which which impacted us that's part of our risk management as.
As we look forward and you will see it in our Q this quarter as well, we felt a bit more of a hedge book going into next year using FSA as well, having said that it's dynamic and we can take advantage of that.
The volatility around it. So we we think it's also important to look at the look at the TCE quarter on quarter.
And I think we're quite comfortable with our TCE performance relative to our peers on a normalized basis as I said, especially when you take up the fleet makeup, but beyond that I can't speak unless I know specifically you know what I'm, just thinking about who you're speaking about.
Sure No problem, and then I guess with that <unk>. It seems like Theres been some extreme volatility here in recent weeks is that a lot of physical paper trading or just kind of.
Financial trading around that to increase that volatility.
Well look I think the volatility there's always a question you know as a tailwind and a dog or the other way around but I mean, if you look at the physical market. There has been extreme volatility on the physical market as well.
We take advantage of that and it gives me an opportunity to talk about it.
We prefer to use derivatives to hedge hedge of our book and even after the quarter, we sold a derivative contracts as a hedge for next year are the highest one we did was at 26000, we bought that back. This week, we unwound the hedge if you will we call dynamic hedging we unwound that hedge.
$10000 less.
And that that benefit accrues to the benefit of.
Of our shareholders. It doesn't mean that we wont unwind our whole hedge book, but dynamically. We can we can go in and out of that market always with having a physical ship.
Against it all with it.
All with a view to creating value.
And adding to the TCE for the fleet so.
We're building our hedge book as we go forward, but it's not a straight line up because as I said, we've taken advantage of the volatility in the market.
Got it Okay. I guess last question for me your debt now extremely low congrats on that recent refinancing and everything.
Your shares have fallen from 55, two I guess under 40.
It looks like they'll be back above that and in the hour here, but over the past month trading well below NAV. So with your ample free cash in the coming months, how you decide on either further debt repayments share repurchases or maybe doing something with the converts.
Yes, I think youre.
You're right we've come in everyday and look at what we can can do and what the best use of capital is if we go back.
Five weeks ago, when we announced the board authorization for share buybacks, we've actually been in a blackout period the entire time.
Up to earnings here.
Having said that just to be clear, there's not a specific authorization to go buy a certain number of shares but clearly we're aware of where we're trading.
Got it.
It's a decision as we go forward. The last focus has been to pay down the revolver to zero and obviously, that's now done so looking at whether its share buyback like you said, possibly something on a convert or putting cash on the balance sheet.
Further debt repayment is something that we need to we will need to look at.
Having said that I think.
The opportunity to say I think.
Capital allocation is vitally important I think the real exciting thing here is what's behind it.
Business that supports it and whether we pay out 30% or even more of a pay down of $50 million of buyback shares.
Every dollar that we generate is for the benefit of our shareholders and the real story here in my mind. If you'll allow me is that we generated 91 million of EBITDA was 53 mid size ships.
That's almost 30000 TCE with a fleet with no case.
Those are ships that cost twice as much as ulcers shifts that really have averaged 8000 more than the mid sized fleets. This year.
As we talk about volatility, although we've experienced significant volatility for our market on a relative basis.
It's significantly less so I think it speaks to the I think the segment that we're in within dry bulk the mid sized segment and the strength.
Leading and I'll leave it at that.
Okay.
Makes sense and good options to have here with the with ample free cash so thanks again.
Thank you.
Thank you. Our next question comes from Magnus <unk> with H C. Wainwright Your line is open.
Hey, good morning, Gary Kosta and Gary.
Frank.
Just.
Question on like a follow up question on the capital allocation you didn't mention any.
Vessel.
Acquisitions had been very active in the last five years renewing the fleet what.
What's your view on.
Buybacks versus buying ships I mean based on our estimates stock is now trading at a 30% discount to NAV just curious if you have any.
Desire to expand or looking at the fleet acquisitions, given where the stock is.
Yes, Thanks Magnus.
Think we we're always looking at opportunities, having said that asset values have moved up pretty significantly and as I said in the prepared remarks, the nine ships that we acquired.
They are appreciated by over $80 million.
We feel we're in a fortunate position, we've been able to not only renew the fleet, but grow it by about 20%. So we don't feel pressure to participate in further.
At this point and clearly you don't have a need for further renewal, having said that if there are opportunities, where we can better accretive <unk> long term period market, which as of today. It doesn't do but the long term FFA markets, our purion market justify being able to write down that asset significantly then we.
We would be interested but as I said at the moment, it's not a priority for US we just don't feel a need there so given the choice between the two at the moment, we would think that a buyback of of securities where the shares are convert is more attractive than assets.
All things being equal at the moment.
Good good to hear.
The second question I have is related to the Opex.
So a big jump there in the third quarter I guess, you explained it with the buying inventory lubes and also COVID-19 related expenses.
What should we expect going forward that's a normalized.
Opex is.
Around 5000 them against the first nine months was about 5100.
Will it have a five in front of it or do you still think we can be below 5000 going forward on a normalized basis.
I would say for the fourth quarter, it's gonna have a five in front of it.
Love to under promise and over deliver but it.
It's not just one thing here.
It's repatriation of the cruise is costing more money everything everything we talked about and you know the more expense foods is a good story right. The ships are moving faster because the rates are in the <unk> and so that's just really an effect of when you. When you run an engine faster you need higher routes. In addition, as I said the base oils.
Our higher so pricing is up and that's true across the entire industry. So for now I think it's gonna have a five in front of it and obviously over time, we expect things will normalize, but it's an extraordinary.
The environment globally that we're in and there are a lot of benefits for dry bulk at the moment, but opex is clearly one of the negatives.
Right and just last question on chartering strategy.
You know its tough to beat the.
The index in a rising market, but.
The recent pullback create opportunities for your active chartering strategy.
And maybe you can elaborate a little bit on that because I know in a falling market I think historically you've done better.
Yeah, absolutely look we think in a normal market I think our active management platform will show its true colors. I mean, the market has really gone vertical here and no question, we had some FFA hedges in place too.
As the market rose to protect and we didn't expect the congestion factor. If you will to really propel rates to where they went in the last month. So those hedges had an impact, but having said that volatility we welcome it.
Talked about it on just a hedge that aligning our hedge and the value we can create around that but it is also true around the ships that we re charter in the cargo. So we welcome volatility a little extreme at the moment, but it's something that we think we're able to create value for and obviously the proof will be in the pudding. So we'll have to see how we.
How it develops over the next quarter or two.
Great well, that's it from me and congrats again on a great quarter.
Thanks very much.
Our next question comes from Omar.
No.
With Clarksons Securities. Your line is open.
Hi, guys. Thank you good morning.
Good morning, guys, just maybe one I wanted to follow up on the discussion.
Capital deployment.
You guys have had a pretty solid quarter in this upcoming ones looking good too and a pretty good dividend right off the bat here.
But how are you guys thinking strategically as.
As we wind down this year and as we look ahead into 'twenty two.
Last year, it's been pretty transformative you acquired ships, obviously, well time prices refinance your debt stack and now you've gotten to this point of the dividend.
How are you guys thinking about priorities now have you do you have a series of strategic priorities as you look into next year about what what to do or is it now more about just hunkering down you have the 53 ships you've got the dividend and it's just moving forward.
Yes, so I wouldn't say, it's hunkering down, but but it's delivering for our shareholders and so if that means keeping staying at 53 ships or as I talked about in the past we're likely to sell our two older ships. So and go forward with 51 owned ships in.
And obviously charter in around that and deliver real value for our shareholders and that's an outcome, we'd be really happy with but having said that it's not it's not the hunker down and say, we're not looking for opportunities.
We just we just don't feel pressure that we need to do to do more in terms of growing our renewing the fleet. So we feel we're in a pretty privileged position at the moment. Obviously this market has helped us to deliver both the.
The debt Paydown in this dividend.
We intend to take advantage of that and will continue to continue to maximize it.
As we go forward.
Thanks, Gary.
And maybe just kind of switching towards.
Capital repayments regarding the.
The converts versus the shares is there something that stands out between both of those that would be more appealing bind the converts versus the shares.
Any thoughts on that.
Yes, sure I mean.
One benefit of a buying the convert is it doesn't take flowed out of the out of the current market in terms of share.
Share liquidity and that's something that we're clearly cognizant of.
Given the daily share volume.
Having said that the convert is far less liquid.
And it's a lot easier to buy back shares in the open market. So those are probably the two biggest things otherwise.
Definitely.
High correlation between the two obviously given given the nature of the convert instrument and.
But as we go forward, we're clearly going to look at the pros and cons of both of those and it's not necessarily a one or the other either.
Got it.
Okay. Thanks, Gary I will turn it over.
Thank you.
Okay.
Thank you. Our next question comes from Greg Lewis with <unk>. Your line is open.
Thank you and good morning, everybody.
Yeah. Good morning, it seems like capital allocation has been picked over pretty well.
I guess I would just ask you know you did highlight the two older vessels that youre thinking about potentially selling how should we think about the use of those proceeds.
Okay.
Yes, I wouldnt see their use of those proceeds any differently than <unk>.
Cash from operations frankly, those ships are worth kind of mid upper teens, I'd say at the moment and.
They are unencumbered as well when we did the financing we purposely kept them out with a view that they'll likely be monetize before the next special survey Drydock. One is in mid 'twenty two in one and very early 'twenty three.
At the end of the day cash is fungible and we don't we don't see a difference there or a need to re re circulated into buying assets, having said that.
Just like cash from ops, if we see an opportunity then.
And then they will use it for that.
Okay, Great and then just more of a big picture macro question as I'm looking at slide.
'twenty two.
Yes.
Yes.
Coal the coal growth forecast for 'twenty, two as you know I guess, it's between 1% and 2%.
Are you seeing things in the market that potentially lead you to believe that that number could be higher or following kind of a rebound in 'twenty one.
Whether it's.
Is the supply.
Hi capabilities from the miners just not there and the reason I ask is because as we think about coal prices, which are firm as is other commodity prices on a relative basis call still seems.
An attractive energy source relative to the other ones I'm just surprised that that number is not higher.
Yes.
2021 has taught US anything it's that is is that trying to project.
Demand is special, especially coal demand we are seeing the changes in velocity this year a pretty extreme.
In terms of supply even with the growth this year the significant growth. This year next year well next year still is a number below where we were in 2019 pre COVID-19 on our global coal basis marginally below so in terms of supply I don't think that that's the issue we're seeing significant.
And those coal trade flows.
This year, especially because of obviously the.
China, Australia issue around coal, but there is still significant growth in intra Asia.
Whole from Indonesia, China and Indonesia.
Vietnam, and India and those are trades that were particularly in so I think from a from a mid size dry bulk segment I think it's more positive in terms of volumes for next year.
But in terms of.
Trying to projected exactly I think there is there is upside in that but you know I think there's also downside in it in that it's very hard.
The fuel mix and price mix and while we've seen this year.
Understood. Thank you all very much alright.
Alright, thank you.
Thank you and our next question comes from.
Hey Man Smile.
Investor's edge your line is open.
Hey, good morning, everyone. Congrats on a fantastic quarter all around.
Thank you good morning.
So.
Great question, so far not a whole lot to add I just wanted to do a little bit of housekeeping on the FSA is just to clarify I think you said youre going to include those in the 10-Q, which would help a lot. It looks like you added about 10 or 11 ships at a quarter about 1000 days quarter over quarter is that fair and is that kind of the rate you expect.
To do going forward and always doing about 10 to 11 ships per quarter.
Yes, I don't have the specific number I mean, we took a number of delivery of a number of.
Acquisition ships over the last few quarters and some more fully in the quarter. Some towards the end and we just took delivery of the <unk> angle last week. So that was the only ship that delivered post third quarter.
But we don't see significant.
We don't see any more theres no more ships that we've acquired from an S&P basis to add obviously the number of days that we had from a chartering basis is.
Slightly.
Excuse me the number of charter in ships have been fairly static lately.
But otherwise we don't expect things to change very much.
Okay, certainly makes sense and when you say, 75% fixed at 32004 hundred I think getting to what Randy was talking about are you already incorporating the FFA loss for Q4 into that or do you need to add that Additionally on top.
Yes.
A pro rata basis, the number of ships that we have six so if you think about it if you're 50, 50% into the quarter then it would be 50% of the FSA days.
We've done plus all of the physical fixing our ships and cargoes and things like that.
Got it so there's a little bit obviously the spot last time, there's going to be a little bit more drag from the final <unk> and I am sure. We will see that obviously in the 10-Q, turning real quick to the convertible that I think everybody is pegged on this everyone sees that there's this enormous opportunity.
<unk> is the it depends on what analysts and what data source, but I mean $70 a share is a number that seems reasonable.
You're trading at a 45% discount you haven't great balance sheet. So not only is it price and add Youre also looking at enterprise value to gross asset value.
The discount rate. So the convertibles are out there, but you don't have a call provision right. So there's nothing you can do to force those in.
How would you go about mechanically if you were trying to do repurchase via that route do you just have to reach out directly to the holders and work something out is there some sort of formal tender process you can do what would that potentially look like.
Yes.
We could buy them in the open market or Alternatively, we could make a proposal to holders.
No more formal in.
Certain certain amount.
Type of proposal, but we are able to buy five converts in the open market as well.
I look forward to seeing what you do there Gary I know anytime you talk to me you know I want to talk about repurchases and with a 45% discount to NAV. It just it's screaming so I'm really really happy to see the $50 million program and I look forward to next quarter's results.
Thanks, Chad I appreciate it.
Thank you and as a reminder, if you would like to ask a question press. The Star then the one key on your Touchtone telephone.
Our next question comes from Liam Burke with B Riley. Your line is open. Thank you good morning, Gary Good morning, Frank.
Hey, Liam.
Gary can I go back to the macro.
Versatile fleet, obviously, you're carrying major bulks as well as the miners.
How do you look at the volatility of the iron ore trade affecting the fleet and how you look at that.
Business going forward.
Yes, I mean, if theres, one cargo that doesn't directly impact us.
Of all the the major Baltic it's iron ore right. It's a it's a fairly small part it was about 10% of our cargo mix, but frankly, it's not some of the major trades not Brazil, China, It's not Australia China.
So it's really not as significant for us having said that as iron ore prices come off then.
<unk> the smaller cargoes in the trade that we tend to do become less less <unk>.
Attractive so you'll likely see as iron ore prices have come off us doing less iron ore going forward, but again, it's a relatively small part of our cargo mix. So.
Directionally negative with lower pricing, but but but not significant impact for us.
Okay, and then you talked about selling the older vessels.
How does adding new assets fit into the mix or is or just asset values here.
Yeah.
I touched upon it before.
They are quite high and we feel quite satisfied where we are having said that if the forward markets whether its the derivative markets are the long term period markets are supportive to write down asset prices to levels. We believe are attractive in terms of Walter our depreciation and we'd be interested.
But just to go out and buy assets at this point, we don't feel the pressure to do so.
And I don't think you'll see us doing that.
In the immediate basis, just where where rates are relative to where asset prices aren't great.
Alright, thank you.
Thank you and I'm showing no further questions at this time I'd like to turn the call back to Gary Vogel for any closing remarks.
Thanks, Operator, we don't have anything further so I'd like to thank everyone for their time today and wish everyone. A good day.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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