Q3 2021 Atlas Corp Earnings Call

November 9, 2021

[music].

Welcome to the Atmos Corp, third quarter 2021 earnings conference call I would like to remind everyone that this conference call is being recorded today November nine 2021, I would now like to turn the call over to Robert Kleiner head of Investor Relations at Atlas Corp. Please go ahead Sir.

Thank you Bonnie good morning, everyone. Thank you for joining us today to discuss Atlas Corp. Third quarter 2021 earnings you should our earnings release yesterday evening after market close we will refer to our quarterly earnings release.

The earnings presentation and earnings supplemental workbook today in this conference.

So all can be found on the investors tab on our web site Atlas Corporation Dot com.

I would like to remind you that our discussion today contains forward looking statements and I draw your attention to the disclaimer on slide number two media company earnings presentation.

Please note that we report non-GAAP measures, which we believe provide investors a clearer understanding of the performance of our businesses. The earnings release contains supplemental financial tables and information pertaining to our quarterly earnings report and includes definitions of non-GAAP financial measures and reconciliation of such non-GAAP measures.

Closely comparable U S GAAP measures.

These definitions may also be found in the appendices at the back of the earnings presentation, which we may refer to in our call discussion and can also be found on our website.

Please turn to slide number three.

On the call with me today are being Chen President and Chief Executive Officer of Atlas Corp. In Grand Talbot, Chief Financial Officer of Atlas Corp.

This on the call during the Q&A session and Seaspan as Chief Commercial Officer, Peter Curtis and Seaspan, Chief operational Officer Torsten Peterson.

We're also pleased that David Sokol will join us on the Q&A session as well our chairman of the board.

Following our prepared remarks, we will open up the forum to a question and answer session.

I am now pleased to turn the call over to Atlas Corp, CEO <unk> Chen.

Yeah.

Thank you Ralph and good morning, everyone. Thank you for joining our call.

Today, I will focus on that differentiation of our business model market dynamics and recent achievements of Seaspan and APR energy.

Then I'll hand over to Grandpa boat to present, our Q3 2021 results and financial update.

Please turn to slide four.

Now, let's turn to Atlas third quarter performance highlights I'm very pleased to report continued strong performance in the third quarter of 2021.

We continue to benefit from a robust container shipping market and deployed apr's assets in new contracts and regions.

In Q3, Atlas deliberate robust revenue growth of 17% adjusted EBITDA growth of 29% and adjusted earnings per share growth of 107, 4% compared to the same quarter last year.

All of Seaspan vessels were chartered for the full quarter, achieving a utilization rate of 99%.

That's up to 15% of our fleet is exposed to floating index rates, we were able to benefit from the current market high.

This together with our continued strong cost control drove our strong Q3 performance.

APR executed two grid stabilization projects and achieved a Q3 utilization of 92%.

It is also in progress of building a pipeline of quality long term growth opportunities.

During the quarter, we continued to deliver quality growth through our customer partnerships.

Driven by our customers' demand Seaspan strategically added 25, new builds to its fleet in Q3.

We have now invested in total of 70, new built vessels in the past year backed by 11 five years of average charter term and generating 11 points rebuilding U S dollars of gross contracted cash flows.

We also continued creating consistent value for stakeholders across all aspects of our business.

We paid our 65th consecutive dividend.

Divest our ESG goals by issuing our inaugural sustainability report.

Executed ongoing improvements to our capital structure and continue to add new talent to our team, including board member Katy weight and API CEO Benjamin Church.

I would now like to talk about some of the operational drivers of our third quarter performance.

Please turn to slide five.

That's one of our key competencies and Differentiators consistent operational excellence continues to drive our organization's performance.

<unk> achieved an asset utilization rate of 99% in both Q3 and since its IPO in 2005.

This is evidence of consistently delivered industry leading excellence.

Especially as it has been maintained throughout the unprecedented global pandemic.

Despite the difficult operating environment Seaspan also successfully managed the fleet of 132 vessels with best in class operating safety.

With a historically low average monthly L. T I F of 0.37 over the last 12 months.

And over 5800, I repeat 5800 crew changes made year to date, despite all logistic restrictions.

Our excellence in vessel operation in chartering is indeed, a competitive differentiator.

We partner with our customers to understand their needs and overcome their challenges through creative win win solutions.

For example, we analyze their vessel size needs fuel adoption plans and supply demand forecast to craft, our solutions and foster deeper partnership.

Another example of this partnership is six months forward fixing of 60 charters year to date with our customers.

This has resulted in zero childhood wrote off in 2020, one with just six in 2022 and 19 in 2023.

I'm proud of our team's execution on our Newbuild program and power project deployment. We recently took delivery of the MSC Carol the first of 512200 Teu new builds about two months ahead of the schedule.

This marks six best successful delivery of a total of 110, new builds in its 20 year history.

We anticipate the remaining four sister vessels to follow the same ahead of the scheduled delivery with two vessels the MSC Elena and MSC Rushee me expect it to be delivered in November.

Our teams fears execution and decades of expertise and ensure the long term consistent delivery of best in class vessels.

APR successfully completed two mobile turbine deployments in Q3, including a third consecutive annual project in Mexicali.

Please turn to slide six.

The container shipping market continues to experience favorable conditions. Thanks to a strong recovery in the trade volumes combined with ongoing supply chain disruption, which has absolutely no impact to our business.

Global trade has rebounded and surpassed pre COVID-19 level across all trade lanes attribute it to stronger than expected improvements in global economics.

Pent up purchasing demand economic stimulus and changes in consumer spending patterns.

The charter market is also thriving that charter rates are at historical highs due to a lack of tonnage across all vessel classes.

Port congestion around the world, particularly in the U S and China, which is a large contributor to the historically low of 0.7 idle fleet.

Land freight is also experiencing its own challenges with logistics difficulties limiting container distribution from the ports.

Seaspan continues to take advantage of this market upswing and working with our customers to develop long term solutions through strategically.

New builds which all backed by long term charters and forward fixing the charters at improved rates for long duration.

Please turn to slide seven.

Market consensus does not expect these conditions to persist as.

Supply chain issues are resolved and Newbuild order book.

<unk> over the next four years rates I expect it to normalize to a more balanced equilibrium.

While many of our peers take advantage of the current high rates through these short term chartering at the expenses for long term cash flow certainty.

Seaspan continues to focus on building long term customer partnership with.

You know the focus on creating sustainable value and quality growth.

We prioritize predictability over the short term gains through long term charters with quality counterparties.

Which is why our business model is resilient in all market conditions, such as the trade war and current pandemic.

Our 17th vessel Newbuild program is a perfect example, contributing $11 $3 billion of gross contracted cash flow over weighted average charter duration of 11 five years.

The Atlas business model is showcased by a set of industry, leading matrix such as our $17 9 billion of gross contracted cash flow.

Nearly 2 million Teu fleet.

Average charter duration of seven five years and average age of fleet of four seven years. These are unique in the market and Insulates us from market volatility and it provides long term predictable performance.

Please turn to slide eight.

Our competitive differentiation in the market is clearly demonstrate it.

When analyzing seaspan history of being a trusted partner to the world's leading liners.

<unk> has partnered with this customer for over 20 years defining the industry's future pathway.

We've built a reputation based on our operating excellence and Newbuild expertise supported by our track record of developing the most fuel efficient designs and new vessel classes.

We continue leveraging our expertise in the third quarter with the addition of 25, new builds of 7000 Teu vessels.

They are all backed by a weighted average charter duration of 11, two years producing over $4 billion of gross contracted cash flow.

We've seen strong demand in our 7000 Teu segment as they are well positioned to replace and to redefine the aging 4000 to 9000 Teu segments.

This segments currently makes up approximately 40% of the existing global capacity, but represents less than 8% of the Newbuild order book.

Please turn to slide nine.

We continue to focus on optimizing our best in class III composition and portfolio of top customers year to date, while we continue to develop our fleet in the high demand 10000, Teu and larger segments more recently, we strategically expanded our presence.

In the 7000 Teu segments.

We also continue to deepen and diversify our customer base amongst the top 10 liner companies.

<unk> partnered with Zim through numerous new builds and deepened our relationships with our existing customers.

Seaspan is pleased to partner with industry, leading customers, who have proven their credit quality through record earnings and ample liquidity.

With several also recently receiving rating upgrades.

While the industry has financially strengthened we have reduced the concentration of our top three customers by 19% over the past three years.

This results in further increasing our credit quality profile.

Please turn to slide 10.

I would like to summarize with this slide which illustrates the progress and transformation Atlas has achieved under the leadership of this management and their dedicated teams.

Recapping on our year to date progress through Q3 of 2021.

Gross contracted cash flow increased by $12 8 billion.

These are long term predictable cash flows secured by quality customers.

Fully delivered fleet grew by 58%, adding 17, new built in four secondhand vessels.

Increase the Teu capacity by 83% to nearly 2 million teus on a fully delivered fleet basis.

This is approximately four five times larger than the industry average.

Decreased our fleet average age by two nine years to four seven years less than half the average age of our competitors.

And increased our fleet remaining charter duration to seven five years more than double the average duration of our competitors.

These metrics are truly unique and substantially exceed our nearest competitors.

No other company has deliberate performance with the consistency and transparency as Atlas has.

These results are continuous evidence of Atlas is unique and highly differentiated business model within our markets.

We are confident to extend our leading position and return increasing value to all stakeholders.

I will now turn it over the call to our CFO Grant towboat.

Thank you Bing and good morning, everyone. If you could please turn to slide number 11.

Yeah.

Our Q3 results were strong and continued to reflect the high performance about saying.

During Q3 Atlas achieved performance relative to Q3, 2020 revenue growth of 17% to $451 9 million.

Adjusted EBITDA growth of 29% to $322 2 million.

<unk> growth of 42, 9% to $248 million.

And <unk> per share growth of 36, 8% to 93 per share.

Adjusted earnings per share diluted was <unk> 56.

An increase of 107, 4%.

And then on closing liquidity was up by 123, 8% to.

$957 1 million.

We're pleased to report strong asset utilization of 91, 9% from the third quarter.

Driven by previously announced grid stabilization projects in Mexicali in California.

Both of these projects have now concluded and we are actively working on redeployment of the turbines.

We continue to demonstrate the resilience of our business model by delivering strong performance through all market conditions.

While the industry is impacted by operational challenges presented by the pandemic.

Ongoing supply chain disruption.

Our revenues remained unaffected as we focus on supporting our customers and the efficient execution of their business.

Both businesses remain well positioned for the future, giving our team the confidence to reaffirm our 2021 financial guidance, which we increased following a strong performance in the first half of 2021.

Please turn to slide 12.

We continue to show. These metrics is there improvement showcases the substantial progress. This organization has achieved over the past four years.

Atlas has had a relentless focus on continuous improvement operational excellence creative customer partnerships.

And quality growth, which are bound by disciplined capital allocation and driven by our financial strength.

Our improvements in the quality of our fleet and operations enhances our service to our customers provides predictable performance and extends our industry leading position in the market.

This quality growth has been delivered alongside considerable increases in our unencumbered asset base and available liquidity.

Continuous improvements in our capital structure.

We have managed down growth effectively from a credit perspective, as we continue to pursue an investment grade credit rating and lower our cost of capital.

Please turn to slide 13.

During the third quarter, we continued our focus on strengthening and optimizing our balance sheet.

Specifically, we completed the Upsized $750 million five 5% Blue transition notes offering in the U S high yield market.

Which was well over subscribed by top global institutional investors and priced to reflect our substantial credit improvements.

This was our note issuance in this market something we've worked tirelessly towards and is a key element of the evolution of our capital structure.

During the quarter, we redeemed the remaining $300 million FX.

The FX notes.

This completes the restructuring of the debt position with Atlas.

Similar to when we exchanged $300 million of Fairfax notes, the 7% preferred shares last quarter.

This quarter's completed redemption comes with a debt discount extinguishment of $71 million.

So I'd like to reiterate this is a noncash charge and represents the accelerated amortization of debt discount, which would have previously been recognized as interest over the tenure of the nuts.

Full redemption of 600 million of Fairfax notes highlights the continued support by removing that with preferential terms, which enables us to simplify and create additional flexibility in our capital structure.

The FX continues to be a key and supported investor and the Atlas group.

Furthering our progress towards achieving an investment grade rating, we were upgraded recently by Kroll Bond rating agency to double B plus.

Along with the double B range of ratings from Fitch and standard <unk> Poor's.

These agencies, commonly referred referenced <unk> improvement and business risk management.

Our increasingly diversified customer base and funding sources as key drivers for their writings.

I also highlighted that our increasing unencumbered asset base and proportion of unsecured debt with supporting factors.

We continue to assess opportunities to strengthen and simplify our balance sheet as we progress towards an investment grade credit rating.

Please turn to slide 14.

This slide contains details the progress of funding for our 70 new builds.

We received considerable interest from the financing community to participate in these transactions and have leveraged our extensive banking relationships to title of these financings TWA requirements.

We're happy to report that we have secured $5 $3 billion of financing on attractive terms and an additional $1 6 billion of financing is in advanced stages and on target to close before year end.

This diverse and attractive portfolio of 10 financings is evidence of our industry, leading agility creativity and overarching operational excellence.

Our financing team has been meticulous in delivering competitive costs tenors and flexibility across these facilities to meet our capital structure objectives.

This has been delivered well ahead of our planned timelines and securing financing of this quality in magnitude in such a short timeframe is a testament to atlas's dominant position in the capital markets.

Yes, the capital and World class execution from the <unk> team.

This is a key element underpinning our growth strategy.

Pleased with secured based competitive financing ahead of schedule.

Please turn to slide 15.

And our Q2 results, we presented a slide similar to this one.

This has now been updated to include all set with the Newbuild vessels announced Tonight.

Which resulted in an additional 839000 teu.

And $11 3 billion of gross contracted cash flow.

Now that the delivery process is underway we've updated the table to include details of that.

Delivery status and we.

Planned to provide ongoing updates on the programs progression quarterly.

To date, we've received the first about 70 new builds.

12200, Teu vessel was delivered approximately two months ahead of schedule and.

And we forecast that the other four sister vessels will also be delivered ahead of schedule.

Please turn to slide 16.

This slide illustrates the superior returns delivered by this leadership team along with our teams around the globe have achieved dramatic growth and financial performance over the past four years.

This has been achieved through a diverse set of market conditions, which is further evidence of our resilient business model that delivers value through all market cycles.

I'd like to highlight that adjustments mics performance metrics are one off by nature and are excluded to assist the market in understanding the underlying performance of our business.

Our organization continues to focus on delivering consistently strong performance.

Look forward to demonstrating this through our updated 2022 guidance, which we will present during our fourth quarter earnings call.

Now please turn to slide 17, and I will provide my summary comments before opening the line for questions.

I'd like to leave you with four key takeaways.

First Atlas continued delivering quality growth driving a $17 9 billion long term gross contracted cash flow balance with industry, leading counterparties.

We do this by deepening our relationships and developing win win solutions to meet customer needs whether that be through new builds secondhand acquisitions forward fixtures general re chartering or daily operational excellence.

Second the delivery of our Newbuild vessels and associated financings are ahead of schedule.

With secured $5 3 billion of funding ahead about planned schedule and $91 6 billion of financing remains outstanding which were well advanced and expect to close before year end.

We also took delivery of our first 12000 to 12200 Teu vessel ahead of schedule.

Expect that to be the case for the other four sister vessels.

Third, we're making significant progress on our journey to achieving an investment grade credit rating.

The team continues to strategically optimize our balance sheet, we're now achieving double b range corporate ratings from three credit rating agencies.

One of which was an upgrade to double b plus in the third quarter.

And thirdly, and finally, our financial performance is on track to achieve the updated 2021 guidance that we shared with the market at the end of Q2.

Given our continued quality growth in the third quarter and multiple newbuild vessels expected to be delivered ahead of schedule.

We're confident in surpassing our previously stated long term guidance.

Not only is our team's confidence in our future.

But we have also recently had a strong indication of confidence from the Washington family and affiliates.

Recently purchased two 5 million shares of Atlas.

At an average price of $15 34 in September.

This is a great signal and vote of confidence from our smart and capable investor and.

And we continue to appreciate the support.

The original founding shareholder.

Thank you for your interest today, operator, we'd now like to open the lines for questions. Thank you.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the patchy and please standby, while we compile the Q&A roster.

Your first question is from Chris Wetherbee of Citi. Your line is open.

Hey, guys. Good morning, James on for Chris just wanted to.

Sort of your view on the broader appetite for new builds there is.

Like I guess, the best way to think about it is there is a lack of supply chain fluidity and it certainly didn't deteriorate and more recently in rates.

Taken out like higher do you think that's a headwind isn't necessarily the new building ordering in the near term and once that clears do you think there is an appetite for significant fleet growth just trying to get understand your outlook.

In terms of sort of the new buildings longer term. Thanks.

Yeah.

Hey, good morning, James.

Yes, that's a good question in terms of the new building.

Believe that we talked about during the last quarter end.

In general what we say back then as demand and supply in general are balanced over the past quarter I believe that.

Newbuild.

The continued but the pace is slowing down. We however added 25, new built with the demand from the our customers from two leading global liner customers. All these new builds are backed by long term contracted.

Contracted cash flow, specifically I think they adds about 4 billion U S dollars gross contract cash flow and with the average of 11.4 years of duration.

But from the overall industry perspective, I think the Newbuild actually steel is in control, meaning that there is very.

Most to non speculative orders.

That means that any new build that is fine.

<unk> put in over the past quarter. They are all coming from the real demand and going forward I do see that the market continues to be under control, meaning that I think they are still some interest.

Interest specific interest in new built but they are in the different segments. They're in a different time frame in terms of delivery, but I see that overall, the newbuild demand, a very cautious and very I think a.

Very much under control in terms of the supply chain.

Supply chain.

Congestion.

I think absolutely. This is really it depends on two things one is the glue.

Global coordination and control of the of the of the pandemic.

Currently the supply chain congestion is largely caused by the uncoordinated standards amongst the different countries.

That's the that's the one thing and the other condition is depends on actually how the COVID-19 is going to be.

Under control.

Meaning that with the vaccine with the different.

Different ways to too.

To protect.

The people and I think that's going to have impact in terms of how quickly we will be able to return to some kind of normality.

In terms of headwinds as I said it earlier that.

Overall, I think the market consensus and still believe that the current.

Strong market will last at least until I would say that the first quarter to second quarter of 2022, some optimistic views its going to be last until the end of 2022 but.

But eventually I believe that.

The market will go back to some kind of normality.

I think.

At that time actually Seaspan business model. It will comes to really differentiate in the marketplace in a way that as we mentioned earlier.

We actually have.

Little.

Charter wrote off for the next three or four years. Specifically for example, we have zero for 2021, we have six vessels for 2022 19 vessels for 2023 and 31 vessels for 2024. This assumes that we do not do any for <unk>.

In between.

At September 30th two the next four years, but in reality, we actually have already forward fixing some of the vessels in between.

And as.

As I mentioned earlier also regardless of the headwinds, it's very important to highlight that.

With our existing fleet, we have already forward fixing 60 of them and that's why we have very little rolled off in the next years, but at the same time, our newbuild all of these newbuild as I said before 70 out of that one has already delivered ahead of the schedule to it.

To be deliberate this months again, it's going to be ahead of the schedule and also the remaining two it's also expected to be deliver ahead of schedule in Q1, Q2, 2022, but all of our Newbuild vessels are backed by long term contracted cash flow meaning.

That none of them are speculative and all these.

Our new build has backed by long term charter so from a headwind perspective, I think seaspan is actually best positioned if and when the market happens and I think that that is really the highlights of our business and we are very pleased with what we have achieved.

Got it.

So does that clarify it given the congestion that has a lot of.

Sort of a longer term visibility do you think thats been a headwind to.

Additional newbuild orderings and sort of sustained fleet growth and sort of attached to that once it clears do you expect another round of sort of orders to come through.

Well I think it really depends on how quickly the.

<unk> debt.

That is from the line of side that they would like to.

Place or increase the capacity of the fleet.

As I mentioned earlier today the.

Mental a change in the container shipping industry is the.

<unk> gave up the market in a way that.

The line the company very much consolidated they are they are in general very disciplined.

That discipline in place I would anticipate even with the.

With the.

Returning to the normality.

I believe that the growth of the new built a will be primarily driven if that's going to be happen I wouldn't be thinking that that would be driven by those.

<unk>, our new built vessels that with better design.

With different fuel.

Intakes that type of vessels in other was primarily it's going to be driven by those.

Carbon reduction initiatives and environmentally improved.

Newly designed the vessels, but I think that will be still be under.

Under control it would not be in the speculative manner because the industry is very much transparent and demand has to come from the line of companies.

Got it and then just real quickly just wanted to touch on.

It'll structure and your asset <unk>.

You've mentioned, the unencumbered assets and Unsecure debt, how should we or unsecured debt how should we think about sort of the mix of those in terms of target percentages absolute just kind of wanted to understand how youre thinking about that and that's all for me. Thanks.

Yes, I think on the on the unencumbered assets there isn't an absolute target there.

It's a matter of just continuing to grow that base.

<unk> is providing.

Unsecured assets in the business to which we can.

Use unsecured credit.

Lines on the unsecured mix, there's a number of targets out there.

We are progressively working up to 35 plus percent.

Obviously, it's a matter of balancing it out.

Over time.

As we've discussed before Chris.

Journey to investment grade.

It is not an imperative that we have to do tomorrow, and we've got to balance out a number of different things here, which is also continuing to fund our growth.

Continuing to return capital to our shareholders and maintaining all of our debt covenants.

So that's.

Finally tune balanced and we're confident about our ability to manage those attributes as we move towards an investment grade rating.

Over the next few years.

Thank you.

Yes.

Thanks for your question.

Your next question is from Randy <unk> of Jefferies. Your line is open.

Alright, now, bringing DRAM how's it going.

Very well. Thank you. Thank you Randy.

Good Alright, I guess look at the New building program you have 69, new buildings to be delivered or all of these going to be new vessels over some b, maybe a replacement for older vessels I guess put another way any updates on potential vessel sales to raise liquidity given the strong secondhand market.

Okay.

Yes.

Randy to answer your question all of the 69 Newbuild vessels are brand new vessels.

There really <unk>.

New vessels.

In terms of.

Are we looking to sell any vessels as I said before we are opportunistically looking at opportunities the challenge of selling the vessels at the current market is that.

All our vessels are under long term contract. So we need to take into consideration of our customer relationship that the needs and also at the same time and I think that with the long term contracts already in place that we have to be very selectively and looking at the right counterparty with the <unk>.

Right opportunities then we would also consider selling of those vessels two of those selective counterparties, but that will be very much opportunistic.

If I just add to that Randy as we have discussed before this is just a matter of economic evaluation.

The market is high in terms of vessel valuations. So it is tempting to recycle certain vessels in the fleet, but at the same time, we've got customers that have got some very high demand at the moment the tonnage.

Therefore, when you run the economics itself.

Difficult to justify style when you can actually put them back on contract term.

Then it comes down to customer relationships and making sure that we look after our customers and take the right economic decision.

Okay Sir.

And then you have $5 3 billion in debt financing secured for the New building program. Another I think you said $1 6 billion in the advanced stages.

So you'll have $6 9 billion against the $7 6 billion in assets. So that's I guess, 90% financing on the new buildings not overall are there certain kind of leverage ratios required for an investment grade rating and with that investment grade rating or I know the pursuit of that any dividend constraints. During this time.

It seems like the dividend might be kind of capped here for the next few years during the delivery period is that fair.

Yes.

Specific covenants Randy from the ratings agencies in relation to this but.

There is a number of different ways to view, our business, whether you're viewing as far as the shipping business, our leasing business, which gives arise.

Views and perspectives from the rating agencies.

As you correctly pointed out on our Newbuild financing, we're looking at an average LTV of around 90%. So that's an average.

There is some 10 different packages involved with <unk>.

Vessels.

And Thats, a fairly complex package of 20 or so different counterparties that we worked with and there's.

Some very exciting elements in there, but we're just working with the Counterparties to organize press releases around us, which we will do in <unk>.

Due course.

Obviously.

The part of our journey to investment grade is actually right.

Using more unsecured capital and then using that to pay down secured capital.

Over time, we will be progressively looking to access the market again.

To rise.

Relatively cheap capital sort of the high yield market for example, and then use that to recycle.

<unk> secured capital.

But the package that we've put together here is.

It is very very competitive and has some very unique elements to it.

So I'm hopeful in the next few weeks that we'll be able to communicate more details around the uniqueness of these financings.

Randy it's still there operator.

Yeah.

Your next question is from Benjamin Nolan of Stifel. Your line is open.

Okay.

Hello, everybody. My name is Makayla Rogers from Stifel, asking a question on behalf of Ben Nolan I. Thank you all for the update and our question revolves around APR is there any update on how you are thinking about the long term strategic positioning of APR.

Pre COVID-19 the plan was to grow the ghastly and focus more on long term contracts is that still the idea and is the market getting back to the point at which that as possible. Thank you.

Thanks, Mikhail <unk> great question.

Okay.

I was just going to say on the kailua that.

Our strategy Hasnt changed there.

As Youre aware, we had a very successful quarter last quarter with the turbine deployments. So our top priority is still to make sure that the current asset fleet is fully utilized or maximized as much as possible.

But as we've stated previously our ambition is to pivot the business to include more longer term fixed price contracting for power generation and supply.

Through both gas turbine business, but also through renewable energy.

And as you are aware.

Got it.

New management in place and we are currently working on building out that pipeline of opportunities.

And I would say that yes, the market has shifted and there's certainly a lot more opportunities in the market. We are seeing today than we had previously.

And we are building a robust portfolio of opportunities, which we're working on maturing at the moment.

Thank you very much very helpful.

Thanks Nicole.

Yeah.

Your next question is from Omar <unk> of.

Clarksons Securities Your line is open.

Thank you Hey, guys. Good morning, I just wanted to.

I just wanted to follow up on <unk> comment obviously, one of the biggest topics in the industry today is the disruption and delays in all of the port logistical issues and wanted to ask.

In terms of as operators of the ships.

There anything Thats liners have asked you to do recently to help alleviate some of the logistical logjams is there anything that could possibly be done from your side just looking for any color you can give on that.

Yeah. Good morning, Omar I think the one thing that has been constantly I think we see increasingly from the line of.

Companies that the demand for the for the ship owner and operator is the quality of service reliability given the current challenge of.

The logistics.

And I think as we mentioned earlier.

We actually have been able to achieve a very high utilization rate of our vessels in this quarter is 99% as I mentioned that year to date, we actually.

Changed our crew in the number of 5800 <unk> and that is very very significant in a way to alleviate that would provide that kind of a reliable service to our line of customers, while they dealing with a lot of port and logistical.

<unk> as you also know.

There are several incidents is that's been happening over the past 10 months and many of these incidences just due to the quality of the that the ship management and the operators that caused a lot of additional.

I would say a difficulty or challenges for the liner customers. So thats, what the one areas IC that hasnt been consensus consistently demanding from our customers from our liner customers and also increasingly in.

In the period during this.

The logistical challenge of time I don't know Peter if you have anything else to add.

Thanks.

Yes Mara thank.

The essentially the.

The unwinding of the disruption.

Would take some time.

Excuse me.

And that the impact really.

Several times before.

Is that it doesn't impact us.

In regards to our employment.

The.

The real influence that we can provide to our customers.

As things stay as is.

Operational excellence.

What we've seen.

Probably the past six months.

An increase of speed.

Our vessels, which of course demands reliability.

That's essentially the primary area that we can support.

Yeah, and the one the other aspect of this is also something that we have been always been very proud of is the low the ability I think our vessel actually last months achieved the maximum blow the ability of I think 10000, teus, meaning a vessel of 10000 Teu actually load up 10000 boxes.

10000, Teu boxes, so in that in a very I would say hi.

High demand environment that the load ability difference will provide.

Additional capacity to our customer so in a way to help them to alleviate the demand.

A shortage and that is also something that differentiates the.

The debt that the owners in the marketplace like ourselves where we have.

Reliable quality of service at the same time with these type of load ability I think it also helped alleviate their demand.

Thank you that's very helpful.

Color.

Follow up question and you also talked about this in your opening.

<unk> opening remarks, and also in the Q&A just about the charter appetite for new buildings and just want to understand from your perspective, given your very involved and at the forefront really up a lot of the new buildings <unk> been very active and you've got deliveries coming in 'twenty three 'twenty four.

As it is today do you get the sense that liners are taking kind of a wait and see approach for the 25 and 26 deliveries or is there still a good amount of demand. There are just all in the planning phases.

What do you think about that.

Yes.

As I said earlier I think the we do work regularly with line of customers.

And in General I think line that customers are looking into the new build opportunities from the size from the fuel propulsion systems and from the design. This is something that is constantly in dialogue and this is where we provide a lot of our own insight views as well.

<unk> been able to work with all of the stakeholders, whether it's a shipyard whether it's the class society or the.

<unk> customers.

Generally.

I believe that line that customers are very cautious about the new built because right now you'd be looking at the slots, mostly the slots will be only available in 2025 and beyond so therefore realistically if you put in any order most of the orders has.

To come for delivery in 2025 that is about four years down the road at the same time I think as steel theirs.

This is certain.

Uncertainty about how the demand is going to look like and what are the potential or the fuel systems fuel sources could be used for the new built so overall I would say it's cautious and.

Wait and see but there are some.

Your line is still looking at potentially.

Some new builds as they are pretty certain about certain directions with the design and also the fuel are they going to adopt.

Great. Thanks, Thanks for that.

Has it on them.

Thank you.

Your next question is from Ken.

Bank of America. Your line is open.

Hey, Ben Graham and team congrats on being well positioned to take advantage of the market.

I noted some accelerating you accelerated your targets back in <unk> and rates have risen kind of exponentially. Since then yet you didn't really tweak this year's targets. Even at this point you mentioned, maybe you look at 'twenty two next quarter, maybe give your updated thoughts on this year as we close out the year and then thoughts on that three year.

Outlook, given the market exposure.

Sure. Thank you. Thank you can you are right.

We are not raising our guidance for 2021, but we strongly reaffirmed our increased 2021 full year guidance, which is published in Q2 earnings.

However, the increased guidance is very certain as we have all revenue.

<unk> as I said for 2021.

According to our policy.

As Graham.

Graham mentioned earlier, we will provide a.

Our revised guidance for 2022 at our Q4 and also at our Investor Day, We will provide a revised long term projection for 2022, all the way to 2024 and beyond.

The reason is that we are not adjusting it because.

Our policies as the only adjusts twice a year, but.

As we as we mentioned earlier that the.

Our significant.

Both over.

Over the quarter is really driven by.

A variety of factors one is that we have three ahead of the scheduled newbuild deliveries and we have 15% of the index space TC rates, we have 99% of the fleet utilization, we have 60 forward fixing and also while our.

Crew changes, obviously, the logistic wise the costs have increased but that cost has been offset it by.

Our continued operational excellence in driving down the processes in automation, so net net our opex only March.

<unk> increased immaterial increase over the quarter and looking forward.

Obviously, I'm not providing the long term.

Projections here, but the one thing that I highlighted earlier, our business is very well positioned or is best positioned in the coming years. If you believe there are headwinds in those years simply because as I said, we have very little charter that's going to be rolling off okay.

As I said again I repeat we have nothing for 'twenty. One we only have six for 2022 and we have 19 vessels for 2023, we have 31 for 2024 that is as of September 30th. This is assuming we don't do any any.

We're fixing but and at the same time for all those new built that is.

60, 70, new build all of them are backed by long term charter so in terms of our business both in the in the current year next year and the year. After is the most certain business because the way our our our business model because the way our car.

Tract is structured is exactly counter those economic and industry cycles and Thats why we are very certain about our future performance in the years to come despite the fact of the market volatility or some general economic cycles.

Great. Thanks.

Oh go ahead.

No I was just going to add.

As Bill mentioned and we've discussed previously we do have.

<unk> portion of our fleet, which we have on shorter term contracts and for our shorter term is actually still three to five years. So it's not like spot.

And those contracts some of them are on context, and some of them are broker rights and they reset on three and six months sort of risks. So I know we've discussed previously about the uptick in the market and when do we see it.

That portion of our fleet and you're definitely seeing that in Q3 of this year.

So there's been a significant uptick in the rights for that portion of the fleet.

And the details of all of that is included in the supplemental data that's a loaded up on the website for Q3.

Great. Thanks.

Thanks, guys.

If I can do a follow up on the APR.

You had some projects that ended.

Graeme you threw out there.

In the quarter. They were more short term. So can you talk to us about utilization expectations as you move to the fourth quarter and then maybe you mentioned David So it goes on the line. So David since you acquired APR within the <unk> family and now Atlas Corp.

Every move has been to add more container ships, which obviously, great timing and great for the company.

But what is the point now of having the conglomerate why not spin out APR to allow the refined focus sounds like management has turned over a couple of times there to allow our refined focus given really the truly disparate entities.

Seaspan now kind of establishing itself funding.

Yeah Ken.

Great question, well, let me start with the fact that the focus of our board and our management team is to build an organization that lacked historically.

The small kind of owner operator support mechanisms.

The shipping sector, if you look back five and 10 years.

Very.

Short term oriented trying to take advantage of price spikes and trying to avoid when possible. The trough that occurs that is not a game that we want to play and so the team led by banking and Graham and torching in operations et cetera have recognized that our liner companies.

<unk> long term support and we want to be a company that is sustainable over the decades in the future not just a year or two and that transition has really taken place and it started.

In mid 17 2017 mid 2017.

It is really unfolded with clarity of the last year and a half as these new builds have come up.

I'm, a long I emphasize that before getting to your question with with APR, because if you look at Seaspan today, and we are intending to do something similar at APR, but if you're looking to expand today.

It's long term contracts nearly $18 billion of long term contract known in this industry has ever even approach numbers like that.

And these these charter links run as long as 18 years.

With financings that match those long term charter rates.

Tourists and Peter and the team have moved operational excellence.

Literally unheard of levels in the past.

Long term injury rates down below four.

For many of the industry numbers like two to five are not uncommon.

On time delivery for our customers.

Got you are extraordinary numbers.

Again, the business is built around.

Taking risks that we can manage and not taking risk we can so the port congestion for instance.

What youre seeing on the West coast.

Not a problem we can manage its ultimately a political subdivision problem. If you will.

And so we don't take those risks. So the fact that there is a lot of congestion is affecting a lot of shippers and that's unfortunate people trying to move product getting them ready for Christmas et cetera.

But our economics don't change because we get paid whether the ships are waiting in line to get to the port or whether they are being unloaded and reloaded in the port.

Emphasizing the fact that.

Driving the company to be built to last to get our credit.

Where it needs.

Needs to be on a long term basis, which dramatic improvement has taken place.

So APR.

Besides its something that we wanted we wanted to do the same with <unk>.

Unfortunately from from what's happened through Covid.

A month after we closed on APR globally, Covid largely shut down emerging markets.

Largely shut down developed markets.

So it has taken us longer although I will say that the team. That's in place now is highly focused doing an excellent job.

Both keeping the short term utilization rate high and.

Moving to longer term contract they've got a significant backlog of opportunities that are now being progressed.

They've got significant opportunities that we are analyzing in terms of the renewable fields.

Around the world.

It's going to take time, just as it took time to get Seaspan to where it's clearly a differentiated organization in the shipping industry.

It's going to take us time for APR to get where it needs to be having said that yes.

They have substantially outperformed our own expectations for 'twenty.

'twenty one.

And we expect continued performance in the future, but to get APR to the level of Seaspan.

It's going to take time.

Haven't been shy about that we version investors to look at Seaspan on kind of a flat basis going forward, Rob sorry, APR on a flat basis going forward because we do.

We don't want to over promise and under deliver.

But but the same kind of dynamics are going to take place on the energy side. When you see such dramatic transitions in energy policy, taking place globally.

And some very inconsistent energy policies that also provide the opportunity so getting rid of.

People are frankly wouldn't make sense from our perspective, we still look to long term have multiple platforms, where we can run high quality businesses and the infrastructure world.

<unk> continued to grow them and make them.

Sustainable and very built to last rather than just short term oriented so long term our long answer to your question Ken.

Really from our board's perspective, notwithstanding the fact that we view the stock is substantially undervalued.

We've all been around enough to know that when when you perform at this level consistently long enough.

People pay attention and we certainly have.

Two large shareholders that believe in the future of the business.

And in our management and board does as well.

Great. Thanks, David Thanks, Ben I appreciate the time.

Yeah.

Thank you.

Your next question is from Michael <unk> of BMO capital markets. Your line is open.

Hi, Martin and.

Good morning, Hey, guys.

So we've been touching on this a little bit, but looking out longer term and the shift towards.

Carbon free container shipping.

Do you expect this to eventually drive another wave of the new building.

When might that be kind of a 2030 timeframe further out.

Thoughts there.

Okay.

Hey, good morning, Michael.

Ill answer that question and Peter feel free Peter Torsten feel free to jump in.

So to that is I don't think so because if were looking at the carbon free initiatives. It is true that the vessels has to improve from two aspects. One is from the vessel design to improve the efficiency. The other one is looking at the fuel.

Selections at the way. We're looking at is is that ultimately it's going to not going to be one solution. It will be multiple solution into two categories. One will be in the areas of like gas. The other one will be in the liquid so if you're looking at the new build that we have done out of the <unk> we have actually.

These two categories.

As LNG. The other one is the conventional one which is using the liquid liquid fuel.

And these vessels to potentially could also be.

Modified.

To take the future.

Green fuel whatever those fuels.

So.

As the industry today's steel trying to looking forward the final solutions deal I believe that.

Even though there's no exact solution, yet, but I think in the past, it's probably there and in terms of the Newbuild assets I would say still would be in these two categories and also I think.

If that is the case I would think there are some more.

Potential retrofits of those vessels that could be used for.

Future future.

Future fuel, whether it's our highest origin methanol ammonia or.

Any other potential fuels and the other part is looking at.

That.

Carbon neutral is to looking at potentially.

The seal to capture on the vessels so there's many different ways.

I think that similar to what we're looking at initially looking at the high sulfur input in the.

The scrubber or burning.

Low sulfur fuel so in general I would think that they will be the new builds and those new builds will take whatever the new let's say that fuel our possibilities going forward, but I do not anticipate a massive.

A wave of a new build of vessels adopting whatever the new solution, which today, we still do not have.

Being out.

Add on to that Michael.

That's a good question.

I think building on what <unk> mentioned about the.

The future in terms of fuel choices, which.

<unk> will precipitate some degree of.

Of new built into the future.

Bearing in mind that the liners.

Today, our very disciplined I worked with him the alliances which are very disciplined.

So we don't see any of the.

Any reason for some of the more sort of volatile.

Or.

Number of years ago. So.

On top of that we also believe that the.

<unk>.

The growth of the fleet.

Is still sustainable in regards to global GDP growth.

Have a look at the because of global GDP.

Not really volatile of course, we've heard a few shocks.

2008, nine and more recently, but generally theres, a theres a consistent growth.

Containerization of Zee.

The meaningful globalization will follow suit.

So.

The fundamentals, we believe will require.

Replacement of vessels.

<unk> to the to the fleet capacity.

And then last but not least is when you look at <unk>.

<unk> trades.

It's not just.

Many of those tend to think of the main east West trades like Asia Europe the transpacific.

These two combined called daily 25% of global news.

The other trades.

Growing significantly.

Asia for example.

Regional trades off well over 35% of global trade.

And as these different trade loans growth and the ports associated with those trade lanes.

Improve the facilities.

So there's demand for.

Additional vessels and vessels of different types and sizes.

To note 7000 Teu recently.

25 units, so I hope that provides some color.

<unk>.

That's helpful.

If I could just add another comment to Peter's comment I think it's important to think about when you think about container shipping.

Standpoint.

You start with the fact that there is no more efficient way to move goods around the world.

From a C O two perspective than shipping today already.

Now, there's definitely going to be changes in fuel types and efforts are significant efforts, both were making and others are to become more efficient and to find solutions in the future.

But I think the industry is now gone through a couple of years.

Thinking about this problem along with governments that are represented in this in this discussion.

And it's becoming clear that.

There is some uncertainty as to what the right fuel is for say 2050.

To get to full carbon neutral.

But that makes sense in the sense that it's already in the industry that is highly efficient.

There is no way to move products around the globe anywhere near as efficiently as container shipping does.

Which.

Speaks to its rapid growth.

Over the years.

But this transition to what the ultimate solutions will be whether they're they're methanol or hydrogen or others. It's going to take time in the meantime, as being said enormous efficiency improvements are being made shifts to lower lower carbon fuels are being made.

But that ultimate transition is going to take time for the the technology to exist both to produce the fuel storage and use it efficiently. So.

There will come a time, obviously when there'll be a lot of either retrofits or new builds that use those fuels.

But there are certainly not two or three years out.

Okay. That's helpful and also kind of on that same topic.

As we over time move towards.

Better to efficiency.

Is there further opportunity for consolidation in the lessor space as maybe some of the smaller players who are less sophisticated.

Can't offer the same solutions.

That's absolutely right because.

As as the further requirements on the C. O two emissions that will put a lot of pressure on the lessor is to be able to have won the team their human resources the expertise to work with.

The industry participants to customers to develop the solution. The other part is also need to make the investments both the human capital and financial capital and also a.

That business.

That business platform.

Required for those that who are able to meet these.

Challenging requirements. So for those owners that will just provide the vessels and I think they would have a difficult time to be able to provide that kind of them solutions to the customer whether it's from a human capital expertise perspective vessels from a capital perspective.

Perfect. Thank you.

And no further questions I would like to turn the call over to the presenters for closing remarks.

Yes. So thank you everyone for taking the call and thank you for the questions.

We are now closing the Q3 earnings call and if you have any further questions. Please feel free to reach out to Graham myself. In addition to Rob. So we look forward to meeting you all in the next quarter. Thank you all.

Thanks, everyone.

And this concludes today's conference call. Thank you for participating you may now disconnect.

Yeah.

Thank you.

Okay great.

Yes.

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Okay.

Yes.

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Okay.

Yes.

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The amendment.

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Welcome to the Atlas Corp, third quarter 2021 earnings conference call I would like to remind everyone that this conference call is being recorded today November 9th 2021 I would now like to turn the call over to Robert Kleiner head of Investor Relations at Atlas Corp. Please go ahead Sir.

Thank you Britney good morning, everyone. Thank you for joining us today to discuss Atlas Corp's third quarter 2021 earnings.

You should our earnings release yesterday evening after market close we will refer to our quarterly earnings release company earnings presentation and earnings supplemental workbook today in this conference call can be found on the investors tab on our website Atlas Corporation Dot com.

I'd like to remind you that our discussion today contains forward looking statements and I draw your attention to the disclaimer on slide number two media company earnings presentation.

Please note that we report non-GAAP measures, which we believe provide investors a clearer understanding of the performance of our businesses.

The earnings release contains supplemental financial tables and information pertaining to our quarterly earnings report and includes definitions of non-GAAP financial measures and reconciliation of such non-GAAP measures to the most closely comparable U S. GAAP measures. These definitions may also be found in the appendices at the back of the earnings presentation.

<unk>, which we may refer to in our call discussion and can also be found on our website.

Please turn to slide number three.

On the call with me today are being Chen President and Chief Executive Officer of Atlas Corp, and Graham Talbot, Chief Financial Officer of Atlas Corp.

In us on the call during the Q&A session and Seaspan as Chief Commercial Officer, Peter Curtis and Steve <unk>, Chief Operational Officer Torsten Peterson.

We're also pleased that David Sokol will join us on the Q&A session as well our chairman of the board.

Following our prepared remarks, we will open up the forum to a question and answer session.

I am now pleased to turn the call over to Atlas Corp, CEO <unk> Chen.

Yeah.

Thank you Rob and good morning, everyone. Thank you for joining our call.

Today, I will focus on that differentiation of our business model market dynamics and recent achievements of Seaspan and APR energy.

Then I'll hand over to Grand Towboat to present, our Q3 2021 results and financial update.

Please turn to slide four.

Now, let's turn to Atlas third quarter performance highlights.

I'm very pleased to report continued strong performance in the third quarter of 2021 well.