Q3 2021 Safe Bulkers Inc Earnings Call
Hopes estimates and variations of such words and similar expressions are intended to identify forward looking statements.
Although the company believes that the expectations reflected in such forward looking statements are reasonable no assurance can be given that such expectations will prove to have been correct.
These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies many of which are beyond the control of the company.
Results may differ materially from those expressed or implied by such forward looking statements.
Cause that could cause actual results to differ materially include but are not limited to changes in the demand for dry bulk vessels competitive factors in the market in which the company operates risks associated with operations outside the United States and other factors listed from time to time in the company's filings with the Securities and Exchange Commission.
The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward looking statements contained herein to reflect any change in the company's expectations with respect that to any.
Any change in events conditions or circumstances on which any statement is based.
Now I pass the floor to Doctor bomb Paris. Please go ahead Sir.
Yeah.
Good morning, guys.
Welcome to the open web.
We discuss the financial results.
Thank you Laura.
We are comfortably.
Okay.
Thank you.
Before.
Okay.
Yeah.
Yes definitely.
Okay.
We need to position and making significant progress on our stock.
Yes.
We have also begun the Rockies and southwest.
Future cash flows.
Yes, Bob I presented the multibillion flight on this pool.
<unk>.
$92 5 million in net revenues.
Sure.
We're going to be going forward.
EBITDA and 40%.
Earnings per share.
We have a logo.
<unk> got <unk> phase III, Nox tier three compliance up Amit.
From Japanese shipyard deliveries through 2022, four and 2023.
First quarter of 'twenty 'twenty four.
32 branches about competition.
At the same time with a full set of vessels.
It can be delivered with 57 3 million outstanding.
Okay.
Yeah.
And.
Thanks.
Seven $3 million outstanding debt.
And we have acquired four secondhand one we've got to be deliberate with $8 1 million.
We believe that by 'twenty 'twenty, four we will be able to renew about one fourth of the fleet.
Three compliant.
With white Oak.
At the same time, some older vessels with younger siblings and visits.
In dental deleveraging we have.
$14 3 million decrease in debt from <unk>.
$16 2 million of gains of 20.
401.
But none of our products.
89, <unk> 2021 at the same time, we've maintained our financial flexibility.
By preserving a healthy cash position over $92 2 million.
$88 9 million in Undrawn borrowing capacity available under revolving credit facility $46 2 million Institute commitment from loan and sale and leaseback arrangements.
And $29 3 million in different incremental rewarding you completed facility appointed clinical information within our grid nuclear facility.
All these are trends, we believe will position the company to a whole new level of competitiveness well ahead of the competition.
We are here for the long run and slide five we show a balance sheet analysis.
Yeah actually represented a 14 days book value, noting the presence that we believe that asset values exceed the book virus considerably.
Let's turn to slide number seven to have a quick look on vessel charter market conditions.
As shown on the top graph the kids market for the year to date continues to outperform pretty good.
Capes lately have been volatile driving the dynamic driving by dynamics, we analyzing our presentation, reaching a 587000.
And currently trading at above $7000 per day.
Year to date average is about 33 8000 as compared to 10000 average for the same period, which was 15000.
Similarly for <unk> the market remained strong throughout this year.
Clients close to $40000 per day.
If it is trading at $6000 with a year to date average of 27 $2000 per day as compared to 9000 for the same period in 2003.
The prevailing energy crashes in the cold storage in China, coupled with the COVID-19 restrictions are likely to support the market.
Turning to slide eight.
Presented development on pricing of certain components, which are leading to get us where.
We have seen a strong demand for commodities across the board during Covid Saint Laurent and they're searching process is followed by the recent correction.
In the case of iron ore as visiting this uplift.
The increase of prices, which is now followed by a correction had been initially driven by the strong demand from China, while in Italy, the seasonal trading patterns are easing the markets.
In the case of corn the slope.
The buyers and the need for coal restarted the commodity prices.
It's simply an effort to control the market as evidenced in lasers is deferred buying anticipating keeping future prices, resulting in a shortened trades at least until the flash report in line with expectations.
However, the performing winter northern hemisphere in connection with the continued industrial production is expected to keep the demand for robot.
We have been speaking the first half.
2021, and are presently subdued, but this is relevant to the seasonality of this trade, which is normally speaking up to the first quarter of each year Lastly, what is not what the noteworthy the breakfast Copa we've guided in the bottom right graph has remained near to each site. He is high.
<unk> build which signifies strong industrial growth backed by the post pandemic economic recovery plan.
On slide nine we present established with the fleet in terms of volumes and future supply.
The top graph, we present the values of five year old Capes and Panamaxes.
Assisted by both exchange.
In the last months is sharp increase of vessels values.
Heavy duty for Capes in particular, the baidu suffered more than 48%.
In the same period in 2020.
<unk> about $6 million per vessels since the launch of <unk>.
Similarly for five year Panamaxes the values of the increased about 59% that sees the same Peter intended to AMD and <unk>.
Have gained about $32 5 million per vessels since 2016 loads.
Yes, Bob assessment is indicative for the average 40 type vessels.
These vessels of course.
These are high specifications have increased demand and can achieve even higher value. Our fleet consists mainly it's up I misspeak vessels with high specifications and many commercial and operational update.
Looking at the order book on the bottom graph, we note that the growth of the fleet for both Capes and Panamaxes. This is Michael.
In case of Capes at little over in the Eagle.
Four 5% will be existing fleet, which is evenly spread until 'twenty.
Between floor for Panama total order book stands at.
Seven eight.
Percent rich.
In the vast majority to be delivered until the 'twenty, two and minimal debt.
Leverage thereafter.
Under the current market should be <unk>.
Conditions at Cvs, both in Japan and China.
We do not expect that order book May increase significantly for the next couple of years.
Occupied with August August decades, such as container since August and there is no space for additional dry bulk orders.
Presently there is no availability for dry bulk new bill.
New building orders earlier that ready to report therefore, the order book is unlikely to increase further the next few years.
Industry in the next slide the slide number 10.
We present.
The profile of the dry bulk fleet in combination with the forthcoming regulations for controlling the greenhouse gas emissions and especially the vessels energy efficiency.
From a recent study for the vessels under the classification of NK about 8% of the dry bulk vessels would require some kind of action or retrofitting to comply with upcoming <unk> excited regulations, such as reducing speed retrofitting with nobody propulsion technology or energy saving devices are you more cautious.
The goal to reduce carbon intensity by 40% we think the next gate up to 2030.
I put it.
As presented in the top left graph about 50% of the Cape size and 53% of Panamax fleet is younger than 10 years of age.
By the time of implementation of value more regulations, the remaining half of the Capes and Panamaxes currently above 10 years of age will be eliminated as non commercially viable and competitive vessels.
Squeezing the supply.
<unk> will be released or not.
Let me remind you at this point that we have extended our fleet in the upcoming obtained an ordered a greenhouse gas EBIT phase III Nox tier three compliant Japanese newbuild with competitive delivery times until 2024.
Turning to slide number 11, we touched upon the current capital flows and repriced, Brent which is the main driver fuel prices has changed during the past period, reaching levels of $85 per barrel.
Our company has.
This is just a clean technology, which allows our ship to be fitted with scrubbers to comply with IMO 2020 regulations will shelter emission by Ben.
As you're aware instead of our more compliant fuel.
The very low sulfur fuel oil the deterioration in the price between very low sulfur fuel oil and high sulfur fuel oil the so called high five.
Related to revenues for the scrubber fitted vessels.
But I think <unk>.
In Seattle for example starts at about $140 per metric ton.
According to future markets are showing the graph on the bottom these prices are sustainable.
23 in the region of about 120.
A dollar spent much phone.
The scrubber fitted post panamax vessels above 7005, <unk>. This brings describe again to about 900000 per year or about 2005 tons per day.
The recovery of global economy, the declaration of mobility and the recovery of crude oil prices may lead to even higher even wider high five differential.
Let me summarize the key market takeaways in slide number 12.
We have experienced.
Strong competitor.
Market dependent came to us with robust volumes of iron ore coal and grain demand for commodities has been exceptionally strong.
The fifth.
And if you could actually are expected to meet that.
Volume and post.
<unk> robust panamax market.
Sure.
China together with COVID-19 restrictions maintain convention in discharge port.
It is a market level.
This sustainability of healthy chocolate leverage.
We'll look at Newmont ethical monetization decisions not favor August most GPS.
<unk> with comparison tankage orders until 2024, and only a few shipyards to develop new entitlement that efficient vessels.
We have seen increased government spending on post pandemic in this program and continued gaining of the global economy, we have experienced a Brent price of Academy, which may lead to even wider high five differential than that of today of about 120.
Got off the phone and lastly, aging fleet and increased environmental restrictions for emissions may enhance the scrapping activity.
Now, let me pass the floor to floor sheer focus they look on a map.
For our financial overview.
Luca and good morning, everyone. Let me start with our chartering performance on slide 14, where we present our quarterly TCE.
Stood at roughly 4400 with some sort of a dollar per de risks our quarterly opex with crude our forecast of six content and pay products per day.
Moving to slide 16, we present, our quarterly daily Opex.
4600 at night for Us and our quarterly G&A, which goes up to $1590.
The aggregate figure for both Opex and G&A for Q4 for Q3, 2021 or 6000.
100, and I'm very bullish demonstrating our focus on lean operations. We believe that this number is one of the industry's lower if not the lowest given the fact that we included in our opex or our Drydocking and good day rate expenses.
Our G&A.
Monitoring Friedland director and officer compensation, and all experienced expenses related.
Ministration of adolescent cohort.
Moving to capital debt profile as seen in slide 16.
Is that a repayment schedule as of September 30th ready to break through one.
As of that date that were hot $186 million in cost and cash equivalents bank deposits are effective class eight.
88, $9 million drawn borrowing capacity available under revolving.
Great facilities and.
And $46 $2 million in secured commitments for loan sale and leaseback agreements.
One of the two newbuild vessels.
Excluding the two vessels are committed for sale, which have not been delivered yet.
Additionally, the boarding capacity in the lesson to three three existing vessels six new builds upon their delivery.
The specter of a theme we present, our debt amortization schedule versus the scrap value of our fleet.
We'll have a smooth debt repayment profile for the next three years gradually deleveraging our company following considerable debt repayments, we have made the previous quarters.
Let's now move to slide 18, with our quarterly financial highlights for the first quarter of for the headquarter of credit guarantee one.
Compared to the same period of last year.
Or is there a note during the third quarter of 2021 and we operated in an improved charter market.
Compared to the FERC the second quarters of this year with lower interest expenses, well, our net revenues of $92 $5 million.
During the third quarter of 2021.
Compared to 51, $151 9 million for the same period a rapid ramping.
The revenues were further increased by the earnings from scrubber fitted vessels and they reduced voyeurs expenses.
During the third quarter of 221, we've had a time charter equivalent of $24427.
Compared to $12575 during the same period of last year.
Net income for the first quarter of rent it went to $155 $4 million.
Compared to $3 $3 million.
Last year net.
Net revenues increased by 78% and 92, and a half million dollars compared to $51 $9 million for the same period in two buckets frankly.
Mainly due to the increased time charter equivalent rates.
Resort for example markets.
Folks are offset by the additional revenues earned by our scrap scrubber fitted vessels.
Daily Opex decreased by 6% to 4006 got it.
Yes.
Compared to $4896 for the same period in 'twenty 'twenty.
And that was affected by reduced ownership base by 3%.
The vessels sales no dry dockings for moving the headquarter of 2021.
And increased crude recreation expenses due to the COVID-19 pandemic.
Daily vessel operating expenses, excluding dry docking and pre delivery expenses increased by 3%.
The $4608 compared to $4469.
Our adjusted EBITDA for the third quarter of 2021 increased to $67 $7 million.
<unk> to $22 $3 million for the same period implemented throughout it.
Our adjusted EPS or the headquarter of credit reservoir was 4%.
Calculated the way risk weighted average of $119 9 million shares.
Compared to zero during the same period in 'twenty threatening calculated on a weighted average number of 102 2 million shares.
Launching our presentation on slide 19.
So our corporate fleet data at average daily indicators compared to the same period last year.
We would like to emphasize that the bulk of it is making maintaining a healthy cash position of $92 2 million.
So rent October 20th reservoir.
Which provide us with flexibility as we move through year end nearing our targeted leverage.
Making significant progress in our fleet renewal strategy and contracting previous time charters to provide better visibility to our.
Future cash flows.
Our press release presents in a more tepid, our financial and operating results. We will now take your questions.
Well now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone keypad and wait for the automated message advisors. Your line is open. Please state your first and last name before you ask your question.
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Well now take the first question. This is from the line of Chris Wetherbee from Citi. Please go ahead.
Okay.
Thanks, Chris.
Chris.
Okay.
Hey, guys good morning.
Alright got it alright.
I just wanted to.
Yes.
And what's.
In your view around.
The inability of the current vessel values.
Secondly.
Obviously, it's come up off the bottom.
How much did that do you think.
Okay.
So activities. Thank you <unk>.
Sorry, guys.
Yeah Yeah.
Okay. Yeah, I just wanted to I just wanted to ask first off about vessel values.
They've obviously come up off the bottom.
Which is solid which is good to see but like how much of that do you think is driven by the input prices versus sort of a stronger sort of market sentiment around longer term outlook I'm, just trying to sort of get your understanding of where you think sort of the perception of like the long term.
What what's being priced and prudently for long term in the market at the moment.
Yes. The sound is very thoughtful we didn't get the question, but anyway, I presume you're asking about the long term.
Both sets of the markets.
And if that's reflected in the vessel values are reflects just essentially commodity pricing and the vessels value at the moment.
And look the commodity prices are on an increase.
We see this.
There is demand for.
Commodities or it is something we have seen drops in the in core prices with.
The Chinese government.
Intervention to cool down the.
Part of the market.
And.
I don't know oil prices have.
Slowed down.
Two months because overall.
No.
Or reducing the steel output.
<unk> environment on our results before the Olympics.
I think overall the demand for commodities certainly the minor launched is really healthy.
We see it.
We see it from the rates.
Being enjoyed by the smaller size of vessels.
Uh huh.
And so panamaxes as well as Panamaxes.
The demand is.
Very strong.
But we believe commodities.
Oil would be would be kept.
Our strong levels.
And the most likely oil prices social will increase further.
Got it.
And sort of the strength of the market it seems that the.
Vessel values aren't necessarily reflecting a strange.
It's Tony.
It could be in Asia, and Europe found which makes it really difficult to slowly.
Slowly.
Yeah.
As you know.
I'll turn the call.
I'll follow up separately and just turn the call over to.
From a big increase overall Cape size.
Uh huh.
Right.
Approaching a 100000 under lots of data so there hasnt been a collection, but is looking us huge.
If we exclude this extra 30000 $40000.
Paul on the cadence for two or three weeks in the spot market.
The rest of the market, we can say that has been a fairly stable because.
We still enjoy after the connection.
So around $30000, a day or non collateral vessels.
For us this is a healthy market and good luck.
Have a correction on we'll call it a collection of what when the market reaches 50000 limits of date.
So I don't expect ship prices could be affected by this volatility because.
Ness of vessels that are not gonna, let them cheaply because they have seen the workflow.
Earnings you can make in the last nine months.
And.
Right now Youll see another set total which they have very low freight rates that should prices are going up for many reasons. One of them is the steel prices and other one is the expectation that the market will change and not a sector.
We are seeing what is happening on the container ships in the container market.
But the market is very healthy and very strong I don't I don't expect the asset prices to correct to give us.
Opportunities to step in and buy.
<unk> vessels like.
In the first quarter 2021.
So.
Absolutely.
Not go higher but I don't I don't expect them to go.
Okay, so from a capital allocation standpoint.
Yeah.
Balance sheet looks very good youre going to generate a lot of cash flow here at current market rates.
What.
What is the priority going forward reduce debt or potentially buy back stock or something.
I'm kind of dividend to shareholders.
If we see on the.
On page 17 that we put.
The projection of the.
Debt for.
At the end of the here and for the $4 million at couple of years.
Okay.
Sure exactly.
Leveraging fully see our deleveraging 40 feet is almost.
But that will almost be ended by the year end and then we will go through the formal.
Principal repayment show that that will be about.
For the guidance and 50.
Next year.
Back to this cannot provide you of the vessels, which is 378 according to the pricing today over this fee and this.
Makes us to feel very comfortable about the leverage of the company because the debt that we have basically reflects what is the.
Baidu connect.
Having done that and also having completed the U S.
RPG.
Our strategy in terms of Walgreens.
We have all that much of what we could do an intensive review of our second hand vessels that might be some opportunities.
However, we have done the big volume I think in terms of Capex in <unk>.
Ma'am.
Leverage with Iot.
Becoming lower show the new cash that is generated in the future.
<unk> will give us opportunity.
A mixed year wants you to be able to reward.
Our.
Shareholders. However, we need to point out two things.
We want to be built in our cash flows.
Which can be established through period time charters and we want to March it markets to be to continue to be profitable.
Profitable levels.
It is let's say to date.
Okay.
You've done a couple of three year charters.
Is there an appetite there or more of those from your side on that front from the charter side.
This chart as well available in early October when the credit markets.
The spot market, which getting levels fall below $50 $50000 per day on the Capes are sold charters came along with this proposal.
And with this trial, because we consider it prudent to secure this.
This business above that for right now we don't see the charters available because of the recent volatility of the last two weeks about show, but this will come back in the market one of the things settle down as I said before.
Market, along 30000 normal immune checkpoints is not an unhealthy market.
This pace for the whole of next year.
Yes, I hope so too that's all I had thanks for answering my questions.
Thank you.
Thank you well now take the next question is from the line of Randy given from Jefferies. Please go ahead.
Hello, gentlemen, how's it going.
Fine.
So I guess just following up on some of the recent refinancings.
What is now your kind of expected interest expense and maybe weighted average interest rate for next year and then your debt <unk> for 2022.
And they come with a solution that can be shown.
Slide number 16, basically we have a very low interest rates as you know we have hits.
Our kids shops.
Very good levels.
Or more.
85% of allowed that.
Immune against.
All of our volume increase.
All right.
Great.
Tom.
AP.
84% 84.
That is.
March losing some of that up to 2020, so I think that.
The.
The numbers are very Cobra platform for next year.
The principal payment is only 35 million, which are which.
Sure.
Increased spending in 'twenty to 'twenty $3 million to $63 million.
Joining us.
So some of this elevated level.
Numbers okay.
For the company.
So the exact calculation that we consented to you after this call.
So I'm sorry to succeed.
Yeah.
If you strip page 16, you can follow up the numbers.
Got it Okay and then just.
For the remainder of the ATM I think Theres 25 remaining.
Do you plan on using this imminently and how does that fit.
Is it based on a.
And kind of NAV basis.
What would be the reason to or not to kind of further execute that ATM.
Look we actually could be a game from time to time, we don't have anything steady.
Do the ATM.
Continuously or Danny Brian for show.
You may see us coming out with new market and show them. Some portion we can start to dig in.
Yet and discontinuing some CHS substantial amount of our book actually shared about $25 million, which we have not executed we don't know exactly based on the market conditions on the passion of the Spokane and how weight with the problem of course.
The cash liquidity and the casualties, yet and we don't feel in that aspect.
Thanks Peter.
The ATM.
At any price.
Got it.
Alright, well that's it for me thanks, so much.
Thank you.
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Thank you.
Two all in.
Very happy to discuss again with you today and we're looking forward to discuss again once more in our next quarter.
For.
Thanks have a nice day.
Thank you that does conclude the conference for today. Thank you for participating and you may now disconnect.
Okay.
The animals.
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Yeah.
[music].