Q3 2021 Seanergy Maritime Holdings Corp Earnings Call

November 2, 2021

Okay.

Thank you for standing by and welcome to the Cinedigm Maritime Holdings Corporation second quarter 2021 financial results webcast.

This press release contains forward looking statements as defined in section 27, a of the Securities Act of 1933 US amended and section 21 E of the Securities Exchange Act of 1934 awesome funded concerning future events.

Words, such as May should expects intends plans believes anticipates hopes estimates and variations of such a worth and similar expressions are intended to identify forward looking statements those.

Those statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies many of which are beyond the control of the company.

Actual results might differ materially from those expressed or implied by such forward looking statements.

Factors that could cause actual results to differ materially include but are not limited to the company's operating or financial results the company's liquidity, including its ability to service its invested with competitive factors in the market in which the company operates shipping industry trends, including charter rates.

Vessel values and factors affecting both the supply and demand future pending our recent acquisitions and dispositions business strategy areas of possible expansions and contractions unexpected.

Capital spending our operating expenses.

Risks associated with operations outside the United States risk.

Risks associated with the length and severity of the ongoing novel Coronavirus, COVID-19 outbreak, including its effect on demand for dry bulk projects and the transportation thereof, and the other factor at least that from time to time on the company's filings with them.

S E C, including its most recent annual report from the 20th.

The company's filings can be obtained free of charge on the SEC's website at www dot.

S E C that golf.

Except to the extent if required by law the company expressly disclaims any obligations or undertaking to release publicly and updates of revisions to any forward looking statements contained herein to reflect any change in the company's expectations with respect thereto or any change in it.

Fence conditions authentic consensus on which and this statement is based.

I would now like to hand, the call over to your first speaker today, Mr. Matis <unk> CEO. Please go ahead Sir.

Okay.

Yeah.

Thank you operator.

Hello, everyone.

Welcome to our earnings call.

I'm excited to announce a record quarter for synergy.

Our best financial results since we launched the company in 2015.

This is attributed to the strongest capesize market and more than a decade as well as to our significant fleet expansion in a timely manner.

During the school, who will discuss our financial results in both major corporate development before providing an update on our view.

Current market conditions and dry bulk market.

First I will start by highlighting that we're now completing our substantial fleet growth from 10 to 17, Capesize vessels, where all but one are already contributing to our revenues in a very strong market.

We expect a final delivery to be completed in November.

Total investment in 2021 for these acquisitions was 193 million and was achieved while maintaining a solid liquidity position with moderate leverage.

Addition to the significant contribution to our cash flow the new acquisitions as well as our total fleet have already increased in a variety of considerably.

In 2021, we have concluded 10, new time charter employment agreements with at least one year period. Each so all of our vessels will operate in period employment with world renowned charters.

Following a multiyear period for our industry, but led to limited new building activity.

Our fleet order book is currently at the lowest level in two decades.

And ahead of the upcoming environmental regulations for the CEO to emissions are expected to reduce the effective vessel supply progressively starting in 2023.

As a result, we believe that the Capesize market is supported by the most favorable demand supply fundamentals COVID-19 citizens facilities.

After several years of hard work synergy because of <unk>.

High quality Capesize fleet with tremendous operating prospects and a sustainable balance sheet to navigate the mixed years very successfully.

Now moving on to a brief summary of our financials.

During the third quarter as soon as it generated gross revenues of $50 million and adjusted EBITDA instead of $2 2 million.

<unk> increased over 146% as compared to gross revenues of $20 4 million and 148% up compared to adjusted EBITDA of $13 million in the same quarter of last year.

Net income amounted to $20 million and $20 7 million in the third quarter and nine months period, respectively.

Cash and cash equivalents as of September 2021 were equal to 52 million compared to 24 million as of the first of December 2020.

Debt outstanding at the end of the quarter was approximately $204 million, while shareholders' equity was equal to $222 million.

Our Capesize TCE for Q3 was $30760 per day, marking a 9% increase compared to 16200 for the same period of 2020.

As of today, we have fixed 69% of the fleet for Q4 at an estimated <unk> of $58440 per day.

Assuming the current bill to pay rate for the remaining of the quarter, our estimated PCI for the fourth quarter would be approximately $35200 per day.

Let us review some of the main developments in more detail.

Within the third quarter, we took delivery of two capesize vessels that we had agreed to acquired earlier in the year.

In July we took delivery of the friendship Capesize built in 2009 net attributable shipyard in Japan.

Vessel has been placed on a time charter with a leading Japanese operator for a period of 17 to 24 months approximately at the floating rate based on the Baltic Capesize Index and.

In August we added the world ship to our fleet of high spec 2012 build capesize bulk carriers also built in a very reputable Japanese shipyard.

The vessel has entered into a 12 to 16 month time charter with a leading commodity trading company at a fixed daily rate of $31750.

Ensuring a very high fixed systems on its capital employed.

We also sold our oldest ship the leadership during the third quarter and has now been delivered to its new owners.

Limits replacement with younger ships improves our overall fleet age profile.

In October we agreed to acquire another capesize vessel.

In Japan in 2010, which will be renamed <unk> chip.

The new acquisition is expected to be delivered within November and will immediately commence employment with a large dry bulk operator at the rate linked to the PCI for a period of about 15 to 18 months.

As mentioned earlier in 2021, we have concluded 10, new time charter employment agreements with at least one year period.

So all of our fleet will operate in period employment with world renowned charters.

15 of our vessels will be employed on index linked charters and two vessels are on fixed time charter rates.

They levels exceeding $30000.

With respect to our ESG initiatives, we have always been at the forefront of all of the major environmental regulations, and we are intensifying our efforts to meet Imo's decarbonization targets for 2013.

We have recently endorsed the call to action for shipping Decarbonization, a global coalition of over 190 industry leaders and organizations.

In addition, we have signed agreements with deep sea for the installation of artificial intelligence performance systems on our fleet and with Marshall for the screening of selected vessels, which promote transparency of our energy efficiency upgrades.

With a view to optimizing the energy efficiency of our fleet, we have decided in some cases in conjunction with our charterers to install energy saving devices from the entire fleet.

This upgrade program will progress gradually with installation or is this taking place during each vessels upcoming driver.

We want to ensure that the speed of our expanded fleet will not be impacted materially by the upcoming environmental regulations.

Finally, we are investing in the research and development of emission reduction technologies, including biofuel blend trials, which is expected to contribute considerably to the transition to a greener shipping industry.

Since the beginning of 2021, we have concluded new financings and refinancings of $134 million, while at a bank $82 3 million on existing debt facilities.

In the third quarter alone they have agreed to new financings of approximately $30 million, while repaying $12 6 million on our existing financings.

Specifically, we completed the financing of the MV friendship with one of our long term lenders, while it assuming commitment letter from a major bank for our sustainability linked loan secured by the World Chip.

Our weighted average interest rate for the first nine months of 2021 has reduced by approximately 130 basis points over the same period of 2020, and we expect this trend to continue in 2022.

Our finance team is taking advantage of strong market conditions to achieve better financing terms.

Our CFO established local more details in these facilities and its now time to pass the call to him.

We'll come back.

So the market update several please go ahead.

Thank you Sam I would like to welcome everyone to our third quarter earnings call for 2021 lets start by reviewing the main highlights of our financial statements for the third quarter and nine months period that ended on September 32021.

As mentioned briefly by our CEO the exceptionally strong dry bulk market has a direct reflection on our financial performance with less in revenues, reaching $50 million and marking an increase of 146% from the second quarter of two into 'twenty.

Our daily time charter equivalent for the quarter was 37.

$764, a 9% increase compared to $16219 for the third quarter of 2020.

Our guidance for the fourth quarter is higher standing in excess of 55000 and with eight vessels operating under <unk> index linked time charters, we are on track to see even stronger financial results.

Adjusted EBITDA in the third quarter of 2021 was $32 2 million up from $7 8 million in the same quarter of 2020 and net income for the quarter was a record $21 million up by 406% from a net income of $3 six.

In the same quarter last year.

While we note that the 2020 was affected by a $5 2 million gain on debt refinancing.

The increase in the net profit by $17 million over an increase of $14 5000 daily TCE underscores the significant operating leverage of our company.

For the nine months period ended September 32021 will be quoted a daily time charter equivalent of $23449 compared to $10267 in the corresponding period of 2020.

Gross revenue was equal to $100 million, an increase of 130% from $43 5 million in last year's corresponding interim period.

Adjusted EBITDA for the first nine months of 2021 was $51 4 million up 473 million in 2020.

Lastly, net income we recorded in the period was equal to $21 million as compared to a net loss of $16 million in the first nine months of 2020.

Yeah.

Average daily operating expenses, excluding pre delivery expenses improved marginally quarter over quarter to $5865 in the third quarter of 2021 from $5984 in the same period last year.

For the nine months period that ended on September 32021, operating expenses saw a slight increase to $5806 four $5573 in the first nine months of 2020.

As has been the case since the start of the pandemic operating expenses continued to be affected by disruptions in the worldwide operations of our fleet, leaving aside the extraordinary expenses for our aging and successfully completing the deliveries and dispersion crew Inc of newly acquired.

<unk>.

Moving onto our financial expenses disposal proceeds significantly lowered interest both in the third quarter ended the first nine months of the current year.

Focusing on the cash interest expense I E. After netting out non cash charges in the third quarter of 2021, the company incurred approximately $3 million of cutting interest and finance costs down from $3 5 million in the third quarter of 2020.

Bringing to the picture of the positive impact of the new additions in our fleet. The interest expense per operating day in the third quarter of 2021 was $2065 as compared to $3618 in the third quarter of 2020.

For the nine month period that ended on September 32021 interest and finance expense, excluding noncash items was equal to $8 2 million when compared to $11 7 million in the same period last year.

As regards to our solid balance sheet position I would like to take the time to illustrate very remarkable improvement on the leverage side during 2021 or.

On an absolute and relevant terms.

Total debt outstanding was $247 million as of the end of the third quarter of 'twenty 'twenty. One on the fleet of 16 vessels with a total scrap value of $250 million.

This compares with 212 million outstanding debt at the end of 'twenty 'twenty on the fleet performed 11 vessels and we said total scrap value of $160 million.

Debt outstanding per vessel at the end of the third quarter of 2021 was 54 million against $19 3 million at the end of 2020.

At the same time after its market value profession as of September 32021 was approximately $51 4 million up from about $17 7 million at the end of 'twenty.

Also it is worth noting that these figures exclude our increased liquidity reserves of about $52 million compared to about $23 million on our balance sheet at the end of the previous year.

Total shareholders' equity has increased to $222 3 million as of the cities of September of 2021 from $95 7 million at the end of 'twenty 'twenty.

$119 million at the six month Mark back on June 32021.

The increase in vessel values since the start of the year means that the market value for vessel is higher than the book value by more than $100 million also the latest balance sheet date.

The market value of adjusted equity is therefore higher than what is reflected on our balance sheet.

Based on third party broker valuations.

As was the end of September the market value of the six vessels that were acquired up until the end of the third quarter has already appreciated by approximately $36 million versus the acquisition price and therefore, the accretion that a well timed fleet expansion program has created for.

The shareholders is significant and even without factoring in the benefit of the substantial cash flow that these vessels have generated since their respective deliveries.

Based on the market sluggish for a fleet as by September 32021, our corporate leverage is estimated currently at approximately 43%.

Yes.

I would now move on to discuss the financing transactions that have taken place since shows during the quarter. We financed the friendship so the $30 million total loans by modifying the existing facility with Alfa Bank.

Financing, we have repaired with full years and will bear interest at LIBOR plus 325%. Furthermore, we obtained a commitment letter from <unk> bank for the five year loan of 17 million to refinance part of the acquisition cost of the world ship.

This is a green financing in the industry margin will be reduced depending on the tier two emissions of our vessels.

Good to see our commitment and efforts to reduce the carbon footprint of our operations being recognized by our lenders and I am optimistic that similar agreements will be achieved going forward.

The applicable interest rate is LIBOR, plus a margin of 3.05% with potential improvement depending on tier two emissions.

On both new loans value maintenance close another covenants and in line with our financing agreements and the 14 is a reasonable amount of financial flexibility.

Looking forward. We are currently projecting negotiations to address the loan maturities of those acute by three vessels in full during the fourth quarter of 2022 with total balloon payments of approximately 42 million.

Given our discussions to date.

Favorable market conditions.

And also considering the debt represent only a small fraction of the 100 million aggregate market value of the underlying ships.

We are reasonably confident of achieving a comprehensive refinancing with very competitive data.

Before concluding my remarks, I would like to note once more that during 2020 in 2021, we have undergone a transitional period with important change for the better.

We're already starting to see the positive effect of this reflected in our financial statements, but I still believe that during 2022, we'll be able to see a much clear reflection of the full benefits of lower industry margins and lower cash breakeven in the context for greater scale.

As a result of the above I would expect to see further improvements both on operating and financial expenses in 2022.

This concludes my review I will now turn the call back to some modest who will discuss the market and industry fundamentals Samantha.

Thank you Sabra.

I want to start the market update discussion by reiterating that were very optimistic for the long term prospects of the Capesize market, which is supported by the most favorable demand supply fundamentals of the recent history.

The strong surge in demand for our materials like automotive coal as well as wireless operating inefficiencies related to Covid pandemic played an important part in the recent spike of day rates.

Increase of the rates occurred even though the global fleet average speed has increased by more than 50% in the last 12 months.

We expect demand for dry bulk commodities to continue growing at a healthy pace in the next years and a declining effective vessel supply.

Spot market volatility will always be a significant part of the capesize market.

So annualized vessel demand a bit further in the period from 2022 to 2011 before dry bulk demand is expected to rise by approximately two 5% annually.

Net fleet growth is projected to be around two 1% annually.

On the Capesize sector, we expect demand growth to be driven mainly by long distance cargos like Brazilian iron ore exports and bauxite from West Africa.

High quality out of law has very advantageous environmental qualities in terms of sheer two emissions when 10 in the steel while aluminum demand is also rising.

Energy infrastructure and product development are all likely to continue to generate demand for our materials, such as iron ore coal and bauxite.

As regards to vessel supply I must say that we are in the most disciplined state of the recent history.

This discipline is an embedded result of the upcoming environmental regulations for the CEO to emissions that will come to force in 2023.

Firstly, the new environmental regulations has led to significant uncertainty about the standards of new building vessels and expect to engine and fuel types. This means that the new vessel could become obsolete well ahead with its usual lifespan of 25 years, which makes little economic and commercial terms in order.

In order to make new buildings in great numbers.

The new <unk> will impose speed reductions on existing fleet starting in 2023. This is the most important thing of all days.

The extent of visit reductions defense <unk> and other characteristics of the existing vessels.

Bearing in mind that two thirds of our current fleet has been built prior to 2012, we expect that in some cases, the speed reduction could be very substantial.

We are both factors may lead to a material vessel supply squeeze as the effective available global tonnage will start to reduce.

Going back to my initial point, we have entered a period of strong demand and slower fleet growth and we expect to last for the next few years.

Over the last years.

We have worked vigorously to position synergy in a very advantageous place ahead of the Super cycle.

Our great and homogeneous fleet with extensive market exposure is expected to benefit substantially from this environment.

I'm excited about the progress we've made so far and what the future years will bring.

And with that I would like to turn the call over to the operator and answer any questions you may have.

Please take the call. Thank you.

Thank you we will now begin the question and answer session if you'd like to ask a question. Please press star and one on your telephone.

Deutsche Bank.

One for Greg.

For any questions you might have.

And your first question is from the line of Jay.

Sullivan of Maxim Group.

Please go ahead.

Alright, Thank you all and good day.

Good afternoon.

Hi, Dave.

Hello, Hi, just to start can you can we talk about your October acquisition of the Duke ship, a little bit at $34 million acquisition in Smart just could you just.

Given that ICF, how you look at.

Internal rates of return and where were you stressed that rates go and what gets you comfortable.

<unk> net acquisition.

In October.

Yes of course.

First of all this ship, we don't have any plans for financing. So we've just kind of leave at that three or four now.

So on the basis that there's going to be a cash loan acquisition and assuming for example that we're going to have a let's say a rate of about 25 million to $25000. A day for next year that implies something in the region of a return on invested capital of about 12%. This is what we think it's going to yield thats all.

On a cash only basis, excluding leverage or things like that.

We strongly believe it's a very very decent return at these numbers.

To have an EBITDA, let's say it's in the half.

I think the levels.

Okay, great. Thank you and then better here.

That's pretty here.

Per per year. So then even if you can stretch the rates a little more going out I mean, you still get a internal rate and then do you have.

Assume it's sort of a certain scrap value value in 10 years.

So I mean, what do you have a hurdle rate before evaluating future acquisitions or can you just describe strategically how you look at it going forward as well right now I think we're going to we're going to have a pause on the acquisition.

For a number of reasons number one we have already expanded the fleet substantially by almost 70% in the last 12 months. So that's a very sizeable increase of the fleet by itself.

What you are seeing that the values of the ships are starting to rise.

Im not saying no to win to a quality acquisition in the future.

But that's going to come on to replace older tonnage. So we don't have anything in mind. So for the time being adult thing we would be looking actively for the near future.

For an immediate future for any fleet expansion.

Okay, and then I think going past for Q2, the current quarter and then if rates.

Held above 25000, a day and the cash you generate.

I think the priority turned to possible repurchases or paying down debt or how are you looking at next year.

Yes, we are assuming a population.

Yes, we are fully focused first of all you can assume that theres not going to be any.

Imminent acquisitions, and we're fully focused on.

Distributing.

Sure.

All of those.

Distributions as well as.

Share buybacks. So this is a top priority.

And seizing the opportunity now I need to say that we have not really been so active in the stock buyback front because at the time when the stock started to drop.

At that time, we had entered a blackout period because of the earnings. So we haven't really been active because we when we were in a blackout period now after the earnings that we exited a blackout period, we're going to be very active in supporting the stock through buybacks as much as we can.

Great. Thank you and last one from me.

The leadership you delivered to the new owners on September so the cash in flow from that.

Does your balance sheet as of 930 wrap up that cash.

Well, the first 2 million notwithstanding the balance it is pro forma basically the sale of alternatives. So that includes the cash of the leadership in cyber physical media.

Okay. Okay.

Okay. Thank you. Thank you and have a great labor day.

Thank you David have a great day. Thank you.

Thank you. Your next question is from the line of Martin Auster from H C. Wainwright. Please go ahead.

Yes, good afternoon.

Yes.

A follow up question.

On the capital allocation, you mentioned buybacks and potential asset.

Your what is your view on.

Dividend distributions and buybacks.

I mean, some of the competitors that started now.

The dividend.

And then I was just curious.

Mark.

Yeah.

Yes, that's an excellent question Michael good morning.

We.

We went out we will most likely do a combination of both so we will start with the stock buyback and once we are certain that our dividend policy is going to be sustainable then at a certain point, we will start that dividend policy.

It's nothing imminent, yet I just want to make sure that whatever dividend, we announced it is going to be sustainable so announcing a dividend right now and six months or a year down the road having to discontinue the market is but it's certainly something that we don't want to do.

100% certain debt.

Our dividend distribution is going to be sustainable for many many quarters to come. So we want to fill that 71, CECO Q4, and Q1 goes as you have seen the multiples dropped significantly so we wanted to be.

<unk> been cautious about our dividend plan and.

At the end of the day paying a token dividend just to pay a dividend it's not our style I mean, whether we're going to do it it's gonna have substance and it's going to be sustainable. So this is what we want to bill.

In the meantime, once we exited from there from the blackout period will start making repurchases in order to support the stock as much as we can.

Alright, thank you.

How do you achieve.

<unk>, that's a big question, what our dividend strategy.

<unk>.

<unk> you.

Your own backbone product.

Right. So is that something you would.

10 year, and order and pay a dividend.

What's the thoughts there.

Getting a sustainable dividend.

Yes.

First of all we have.

Reduce the breakeven of the company substantially so we have great room to have.

A sustainable dividend in the future.

We strongly believe that the market is going to be strong for the years to come but in the meantime, there's going to be volatility like we are seeing now rates can go from $8000 down to $30000 and maybe back up again. So in the meantime, we're going to have a lot of volatility and that volatility is not 510 $20000.

It is in the region of $50000 a day, so we're talking about a huge number.

Uncertainty in respect of day rates.

Cash flow as you can appreciate having said that.

We believe that the market is going to be way more positive from the second half of 2022 with a new environmental regulations kicking in in the beginning of 2023, so there's going to be a natural improvement into the market coming from these environmental regulations and one is we have better clarity we will.

We'll have a more sustainable dividend policy, we're not going to wait until then to possibly announce a dividend policy.

Just going to make sure that we're going to have strong cushion for a good dividend distributions to our shareholders. So to answer your question, what we're doing from floating to fixed it's very very short.

It's a very short right I mean, it was good for three to six months, we don't do it for years.

We strongly believe that there is going to be availability for longer period.

Fixtures in 2022 for two years, three years or more at rates in excess of 30%.

35000, Boes, a day and that is going to allow even more distributions for tomorrow.

Alright, thank you.

Let's continue on maybe looking at the short term you mentioned.

Half of 2020.

No not yet.

Javier quite the near term.

When you say bot or.

We think that could be opportunities along I mean, given the volatility in rates.

Well for the first quarter of 2021, which is usually the weakest quarter. We have an average of $27000 fixed on seven ships. So seven out of 17 ships have been fixed at an average of 27000, either on our fixed rate time charters or conversions.

Floating to fixed so we are way above the current rate now for the first quarter. So.

Having said that we believe that the market is going to be stronger from Q2 onwards as it always is and there is no need to continue fixing more now if there is another spike in the market that we will continue doing that but in the meantime, I think.

Relatively well hedged for the first quarter of 2022.

Very good that's all I had thank you.

Thank you Magnus have a great day.

Yes.

Thank you.

Your next question is from the line of Paul <unk>.

Novel Capital market. Please go ahead.

Hello, Paul.

Paul Your line is open if you wish the state your question.

While we have been disconnected.

And currently no further questions. Please continue.

Alright, well.

Everybody. Thank you very much for attending our call for attending our call today.

Been a record financial results for synergy, we're very optimistic about the long term about the long term prospects of the market and we strongly believe that we are in the historical opportunity right now there will be volatility in the short term, but we are very positive for the long term prospects of the market that being said I would like to thanks.

To thank again, everyone for attending our call and.

You may disconnect the call if you will.

Thank you Beth we conclude the presentation today. Thank you for participating you may.

<unk>.

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Yes.

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Thank you for standing by and welcome to the synergy Maritime Holdings Corporation second quarter 2021 financial results webcast.

This press release contains forward looking statements as defined in section 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act of 1934, Awesome Monday concerning future events.

Okay.

Words, such as my should expects intends plans believes anticipates hopes estimates and variations of such a worth and similar expressions.

Are intended to identify forward looking statements.

Actual results might differ materially from those expressed or implied by such forward looking statements.

To us that could cause actual results to differ materially include but are not limited to the company's operating all financial results the company.

This liquidity, including its ability to service its investors is competitive factors in the market in which the company operates shipping industry trends, including taut alright.

Vessel values and factors affecting both the supply and demand future pending or recent acquisitions and dispositions business strategy areas of possible expansions and contractions unexpected.

Capital spending our operating expenses.

Risks associated with operations outside the United States.

S E C, including its most recent annual report from the 20th.

The company's filings can be obtained free of charge on the SEC's website at www adult S E C that golf.

Except to the extent if required by law the company expressly disclaims any obligations or undertaking to release publicly and updates or revisions to any forward looking statements contained herein to reflect any change in the companys expectations with respect thereto or any change in it.

Conditions or circumstances on which the statement is based.

I will now like to hand, the call over to your first speaker today, Mr. Matsui Sunshine is CEO. Please go ahead Sir.

Oh.

Thank you operator.

Hello, everyone.

Welcome to our earnings call.

I'm excited to announce a record quarter for synergy.

Our best financial results since we've launched the company in 2015.

This is attributed to the strongest capesize market and more than a decade as well as to our significant fleet expansion in a timely manner.

During the school, who will discuss our financial results in both major corporate development before providing an update on our view.

Current market conditions and dry bulk market.

First I will start by highlighting that we're now completing our substantial fleet grow from 10 to 17, Capesize vessels, where all but one are already contributing to our revenues in a very strong market.

We expect a final delivery to be completed in November.

Total investment in 2021 for these acquisitions was 193 million and was achieved while maintaining a solid liquidity position.

Patients with moderate leverage.

In addition to the significant contribution to our cash flow and your acquisitions as well as our total fleet has already increased in value considerably.

In 2021, we have concluded 10, new time charter employment agreements with at least one year period. So all of our vessels will operate impeded employment with world renowned charters.

Following that.

You had a period where industry that led to limited new building activity. The dry bulk fleet order book is currently at the lowest level in two decades.

Looking ahead, the upcoming environmental regulations for the CEO to emissions are expected to reduce the effective vessel supply progressively starting in 2023.

Result, we believe that the Capesize market is supported by the most favorable demand supply fundamentals COVID-19 tourists.

Please go ahead.

After several years of hard work synergy is a high quality Capesize fleet with tremendous operating prospects and the sustainable balance sheet to navigate the mix, yes very successfully.

Now moving on to a brief summary of our financials during the third quarter as soon as it generated gross revenues of $50 million and adjusted EBITDA of $32 2 million, a big increase of 146% as compared to gross revenues of $20 4 million and 148% up compared to adjusted.

The EBITDA of $13 million in the same quarter of last year.

Net income amounted to $20 million and $20 7 million in the third quarter and nine months period, respectively.

Cash and cash equivalents as of September 2021 were equal to 52 million compared to $24 million as of the <unk>.

The first of December 2012.

Debt outstanding at the end of the quarter was approximately $204 million, while shareholders' equity was equal to $222 million.

Our Capesize TCE for Q3 was $30760 per day, marking a 9% increase compared to 16200 for the same period of 2020.

As of today, we have fixed 69% of the fleet for Q4 at an estimated <unk> of $38440 per day.

Assuming the current depressed day rates for the remaining of the quarter, our estimated PC for the fourth quarter would be approximately $35200 per day.

Let us review some of the main developments in more detail.

We have assembled within the third quarter, we took delivery of two capesize vessels that we had agreed to acquired earlier in the year.

In July we took delivery of the friendship Capesize built in 2009 net reputable shipyards in Japan.

The vessel has been placed on a time charter with a leading Japanese operator for a period of 17 to 24 months approximately at the floating rate based on the Baltic Capesize index.

In August we added the world's ship to our fleet of high spec 2012 build capesize bulk carriers also built in a very reputable Japanese shipyard.

The vessel has entered into a 12 to 16 month time charter with a leading commodity trading company.

<unk> daily rate of $31750, ensuring a very high fixed systems on its capital employed.

We also sold our oldest ship the leadership during the third quarter and has now been delivered to its new owners.

Limits replacement with younger ships improves.

Overall fleet age profile.

In October we agreed to acquire another capesize vessel built in Japan in 2010, which will be renamed <unk> chip.

As mentioned earlier in 2021, we have concluded 10, new time charter employment agreements of at least one year period.

So all of our fleet will operate in period employment with world renowned charters.

15 of our vessels will be employed on index linked charters and two vessels are on fixed time charter rates.

They levels exiting $2000.

We have recently endorsed the call to action for shipping the Carbonization, a global coalition of over 190 industry leaders and organizations.

With a view to optimizing the energy efficiency of our fleet will have decided in some cases in conjunction with our charterers to install energy saving devices from the entire fleet.

This upgrade program will progress gradually with installation or is this taking place during each vessels upcoming dry docks, we want to ensure that the speed of our expanded fleet will not be impacted materially by the upcoming environmental regulations are.

Finally, we are investing in research and development of emission reduction technologies, including biofuel blend trials, which is expected to contribute considerably to the transition to a greener shipping industry.

Since the beginning of 2021, we have concluded new financings and refinancings of $134 million, while the bank $82 3 million on existing debt facilities.

In the first quarter alone, we have agreed to new financings of approximately $50 million, while repaying $12 6 million on our existing financings.

Our weighted average interest rate for the first nine months of 2021 has reduced by approximately 130 basis points over the same period of 2020, and we expect this trend to continue in 2022 as our finance team is taking advantage of strong market conditions to achieve better financing terms.

Our CFO established will offer more details on these facilities and it is now time to pass the call to him I will come back.

The market update several please go ahead.

Thank you so Marty I would like to welcome everyone to our third quarter earnings call for 2021 lets start by reviewing the main highlights of our financial statements for the third quarter and nine months period that ended on September 32021.

As mentioned briefly by our CEO, who the exceptionally strong drybulk market had a direct reflection on our financial performance with less in revenues, reaching $50 million and marking an increase of 146% from the second quarter of <unk> into 'twenty.

Our daily time charter equivalent for the quarter was 37.

$764, a 9% increase compared to $16219 for the third quarter of 2020.

Our guidance for the fourth quarter is higher spending in excess of 55000 and with eight vessels operating under <unk> index linked time charters, we are on track to see even stronger financial results.

Adjusted EBITDA in the third quarter of 2021 was $52 2 million up from $7 8 million in the same quarter of 2020 and net income for the quarter was a record $21 million up by 406% from a net income of $3 six.

In the same quarter last year, while we note that the 'twenty to 'twenty figure was affected by a $5 2 million gain on debt refinancing.

The increase in the net profit by $17 million over an increase of $14 5000 daily TCE underscores the significant operating leverage of our company.

For the nine months period ended September 32021 will be quoted a daily time charter equivalent of $23449 compared to $10267 in the corresponding period of 2020 gross revenue.

<unk> was equal to $100 million, an increase of 130% from $43 5 million in last year's corresponding interim period.

Adjusted EBITDA for the first nine months of 2021 was $51 4 million.

Up from $7 3 million in 2020.

Lastly, net income we recorded in the period was equal to $21 million as compared to a net loss of $16 million in the first nine months was 2020.

Average daily operating expenses, excluding pre delivery expenses improved marginally quarter over quarter to $5865 in the third quarter of 2021 from $5984 in the same period last year.

For the nine months period that ended on September 32021, operating expenses saw a slight increase to $5806 four $5573 in the first nine months of 2020.

As has been the case since the start of the pandemic operating expenses continued to be affected by disruptions in the worldwide operations of our fleet, leaving aside the extraordinary expenses for arranging and successfully completing the deliveries and the special crew Inc of newly acquired.

<unk>.

Moving onto our financial expenses, it exposes us to see significantly lower interest both in the third quarter ending the first nine months of the current year.

Focusing on the cash interest expense I E.

Netting out non cash charges in the third quarter of 2021, the company incurred approximately $3 million of cash interest and finance costs down from $3 5 million in the third quarter of 2020.

Bringing to the picture the positive impact of the new additions in our fleet. The interest expense per operating day in the third quarter of 2021 was $2065 as compared to $3618 in the third quarter of 2020.

For the nine month period that ended on September 32021 interest and finance expense, excluding noncash items was equal to $8 2 million when compared to $11 7 million in the same period last year.

As regards to our solid balance sheet position I would like to take the time to illustrate very remarkable improvement on the leverage side during 2021.

On an absolute and relevant terms.

Total debt outstanding was 247 million also at the end of the third quarter of 2021 on the fleet of 16 vessels with a total scrap value of $250 million.

This compares with $212 million outstanding debt at the end of 'twenty 'twenty on the fleet performed 11 vessels and with a total scrap value of $160 million.

Debt outstanding per vessel at the end of the third quarter of 2021 was 54 million against $19 3 million at the end of 2020.

At the same time offer its market value profession as of September 32021 was approximately $51 4 million up from about $17 7 million at the end of 'twenty.

Also it is worth noting that this reduce exclude our increased liquidity reserves of about $52 million compared to about $23 million on our balance sheet at the end of the previous year.

Total shareholders' equity has increased to $222 3 million as was said before September of 2021 from $95 7 million at the end of 'twenty 'twenty.

100 <unk>.

$19 million at the six month, Mark but on June 32021.

The increase in vessel values since the start of the year means that the market value of our vessel is higher.

Value by more than 100 million also the latest balance sheet date.

The market has lagged your adjusted EPS, therefore higher than what is reflected on our balance sheet.

Based on third party broker valuations.

As was the end of September the market value of the six vessels that were acquired up in.

Until the end of the third quarter has already appreciated by approximately $36 million versus the acquisition price and therefore, the accretion that a well timed fleet expansion program has created for the shareholders is significant and this even without factoring in the benefit.

The substantial cash flow that these vessels have generated since their respective deliveries.

Based on the market sluggish for a fleet as by September 32021, our corporate leverage is estimated currently at approximately 43%.

The financing we have a terrible full years and will bear interest at LIBOR plus 325%. Furthermore, we obtained a commitment letter from <unk> bank for the five year loan of 17 million to refinance part of the acquisition cost in the world ship.

This is a green financing in the industry margin will be reduced depending on the tier two emissions of our vessels.

It is good to see our commitment and efforts to reduce the carbon footprint of our operations being recognized by our lenders and I am optimistic that similar agreements will be achieved going forward.

The applicable interest rate is LIBOR, plus a margin of 3.05% with potential improvement depending on tier two emissions.

On both new loans the value maintenance close another covenant and in line with our financing agreements and affords synergy a reasonable amount of financial flexibility.

Looking forward. We are currently projecting negotiations to address the loan maturities of those secured by three vessels in full during the fourth quarter of 2022 with total balloon payments of approximately $42 million give.

Given our discussions to date.

Favorable market conditions.

And also considering the debt represent only a small fraction of the 100 million aggregate market value of the underlying ships, we are reasonably confident of achieving a comprehensive refinancing.

The competitive data.

Before concluding my remarks, I would like to note once more that during 2020 in 2021, we have undergone a transitional period with important change for the better.

We're already starting to see the positive effect of this reflected in our financial statements, but I still believe that during 2022, we will be able to see a much clearer reflection over the full benefits of lower industry margins and lower cash breakeven in the context of greater scale.

As a result of the above I would expect to see further improvements both on operating and financial expenses in 2022.

This concludes my review I will now turn the call back to some modest who will discuss the market and industry fundamentals.

<unk>.

Thank you Sabra.

The strong surge in demand for our materials like automotive coal as well as wireless operating inefficiencies related to Covid pandemic plays an important part in the recent spike of day rates.

This increase of the rates occurred even though the global fleet average speed has increased by more than 50% in the last 12 months.

We expect demand for dry bulk commodities to continue growing at a healthy pace in the next years and a declining effective vessel supply.

Spot market volatility will always be a significant part of the capesize market.

So annualized vessel demand a bit further in the period from 2022 to 2011 before dry bulk demand is expected to rise by approximately two 5% annually.

Net fleet growth is projected to be around two 1% annually.

In the Capesize sector, we expect demand growth to be driven mainly by long distance cargos like Brazilian iron ore exports and bauxite from West Africa.

High quality iron ore has very contagious environmental qualities in terms of sheer two emissions when 10 in the steel while aluminum demand is also rising.

Energy infrastructure and product development are unlikely to continue to generate demand for our materials, such as iron ore coal and bauxite.

As regards to vessel supply I must say that we are in the most disciplined state of the recent history.

This discipline is an embedded result of the upcoming environmental regulations for the CEO to emissions that will come to force in 2023.

In order to make new buildings in great numbers.

The new <unk> will impose speed reductions on existing fleet starting in 2023. This is the most important thing of all days.

The extent of visitor deductions depends on the age and other characteristics of the existing vessels.

Bearing in mind that two thirds of our current fleet has been built prior to 2012, we expect that in some cases, the speed reduction could be very substantial.

We are both factors may lead to a material vessel supply squeeze as the effective available global tonnage will start to reduce.

Going back to my initial point, we have entered a period of strong demand and slow fleet growth and we expect to last for the next few years.

Over the last years.

We have worked vigorously to position synergy in a very advantageous place ahead of the Super cycle.

Great and homogeneous fleet with extensive market exposure is expected to benefit substantially from this environment.

I am excited about the progress we've made so far and what the future years will bring.

And with that I would like to turn the call over to the operator and answer any questions. You may have operator, please take the call. Thank you.

Thank you we will now begin the question and answer session if you'd like to ask a question. Please press star and one on your telephone.

Yeah.

This is Andrew on for Anil.

Questions you may have.

And your first question is from the line of.

Sullivan of Maxim Group.

Please go ahead.

Alright, Thank you all and good day good.

Good afternoon.

Hi, Dave.

Hello, Hi, just to start can you can we talk about your October acquisition of the Duke ship, a little bit to $34 million acquisition and not just could you just.

Given that idea of how you look at it.

Internal rates of return and where were you stressed that rates go and what gets you comfortable completing that acquisition.

October.

Yes of course.

First of all this ship, we don't have any plans for financing. So we've just kind of leave at that three.

For now.

So on the basis that it is going to be a cash loan acquisition and assuming for example that they're going to have a net pay rate of about 25 million to $25000. A day for next year that implies something in the region of 10.

The rest of capital of about 12%. This is what we think it's going to yield thats on a cash only basis, excluding leverage or things like that.

So we strongly believe it's a very very decent return at these numbers.

To have an EBITDA, let's say three and.

Turning to hybrid.

Okay, great. Thank you and then better year conservatively.

Thats per year.

Per per year. So then even if you can stretch the rates a little more going out I mean, you still get a internal rate and then do you assume a sort of a certain scrap value value in 10 years.

What is do you have a hurdle rate before.

Are you waiting future acquisitions or can you just describe strategically how you look at it going forward as well right now I think we're going to we're going to have a pause on the acquisitions.

For a number of reasons number one we have already expanded the fleet substantially by almost 70% in the last 12 months. So.

It's a very sizable increase of the fleet by itself.

We're also seeing that the values of the ships are starting to rise.

I am not saying no to end to our quality.

Position in the future.

But that's going to come more into replace older tonnage. So we don't have anything in mind. So for the time being adult thing we would be looking actively for any future.

For the immediate future for any fleet expansion.

Okay, and then I think going past for Q2, the current quarter and then if rates held.

Held above 25000, a day in the cash and generate.

I think the priority turned to parcel repurchases or paying down debt or how are you.

Sure.

Yes, we are fully focused.

Yes, we are fully focused first of all you can assume that there is not going to be any.

Imminent acquisitions, and we're fully focused on.

Distributing.

Shareholders.

Distributions as well as.

Share buybacks. So this is top of our priority.

And seizing the opportunity now I need to say that we have not really been so active in the stock buyback prong because at the time when the stock started to drop.

At that time, we had done the blackout period because of the earnings. So we haven't really been active because we when we were in a blackout period now after the earnings that we exited a blackout period that we're going to be very active in supporting the stock through buybacks as much as we can.

Great. Thank you and last one for me.

The leadership you delivered to the new owners on September so the cash in flow from that.

Does your balance sheet as of 930 wrap up that cash.

Well the first 2 million notwithstanding the balance it is pro forma basically the sale of <unk>. So that includes the cash of the leadership inside of physical media.

Okay. Okay.

Okay. Thank you. Thank you and have a great rate per day.

Thank you Dave have a great day. Thank you.

Thank you. Your next question is from the line of Martin Auster from H C. Wainwright. Please go ahead.

Yes, good afternoon.

Yes.

A follow up question.

On the capital allocation you mentioned <unk>.

Back and potential.

What are your what is your view on.

Dividend distribution versus buybacks.

I mean, some of the competitors that started now.

Now the dividend.

Got it.

Period.

Mark.

Yeah.

Yes, that's an excellent question Magnus and good morning.

We.

We went up we will most likely do a combination of both so we will start with the stock buyback and once we're certain that our dividend policy is going to be sustainable then at a certain point, we will start that dividend policy.

It's nothing imminent, yet I just want to make sure that whatever dividend, we announced it's going to be sustainable so announcing a dividend right now and six months or a year down the road having to discontinue the market is but it's certainly something that we don't want to do 100% certain debt.

Dividend distribution is going to be sustainable for many many quarters to come. So we want to fill that 71, CECO Q4, and Q1 goes as you have seen the market has dropped significantly. So we wanted to be a little bit cautious about our dividend plan and at the end of the day paying a token dividend just to pay a dividend it's not our style I mean, whether we're going to do.

It's going to have substance and it's going to be sustainable. So this is what we wanted to do.

In the meantime, once we exited from there from the blackout period will start making the purchases in order to support the stock as much as we can.

Alright, thank you.

How do you see sustainability I guess Thats, a big question with our dividend strategy you have.

<unk> you.

And excellent product.

Great.

Is that something you would.

10 year on order and pay a dividend.

What's the thought there are getting a.

Stable dividend.

Yes.

First of all we.

We have reduced the breakeven of the company substantially so we have a greater one to have.

It's been about dividend in the future.

We strongly believe that the market is.

<unk> going to be strong for the years to come but in the meantime, there's going to be volatility like we are seeing now rates can go from may $2000 down to $30000 and maybe back up again. So in the meantime, we're going to have a lot of volatility and volatility is not 510 and $20000. It's in the region of 50000 barrels a day.

So we're talking about a huge number.

Uncertainty in respect of day rates and.

And cash flow as you can appreciate having said that.

We believe that the market is going to be way more positive from the second half of <unk> with a new <unk> and <unk>.

Government regulations kicking in in the beginning of 2023, so there's going to be a natural improvement into the market coming from these environmental regulations and one is we have better clarity.

We will have a more sustainable dividend policy, we are not going to wait until then to possibly announce a dividend policy.

We're just going to make sure that we're going to have strong cushion.

For a good dividend distributions to our shareholders. So to answer your question, what we're doing from floating to fixed.

Very very short.

It's very short right I mean, it was good for three to six months, we don't do it for years.

We strongly believe that theres going to be availability for longer period fixture.

Fixtures in 2022 for two years three years or more at rates in excess of.

35000, Boes, a day and that is going to allow even more distributions for tomorrow.

Alright, Thank you address that concern.

Continue on maybe looking at the short term you mentioned.

Half of 2020.

Mark.

Javier quiet the near term.

When you say bot or.

We think there could be opportunities to go along I mean, given the volatility in rates.

Well for the first quarter of 2021, which is usually the weakest quarter. We have an average of $27000 fixed on seven ships. So seven out of the 17 ships have been fixed at an average of 27000, either on our fixed rate time charters all conversions from.

Floating to fixed so we are way above the current rate now for the first quarter. So.

Having said that we believe that the market is going to be stronger from Q2 onwards as it always is and there's no need to continue fixing more now if there is another spike in the market that we will continue doing that but in the meantime, I think.

Relatively well hedged for the first quarter of 2022.

Very good Thats all I had thank you.

Thank you Magnus have a great day.

Yes, Sir.

Thank you.

Your next question is from the line of Paul <unk>.

Noble capital markets. Please go ahead.

Hello, Paul.

Paul Your line is open if you wish the state your question.

It's probably been disconnected Ella.

And there are currently no further questions. Please continue.

Alright, well.

Everybody. Thank you very much for attending our call for attending our call today.

Panetta Corp.

Actual results for synergy, we're very optimistic about the long term financed about the long term prospects of the market and we strongly believe that we are in a historical opportunity right now there will be volatility in the short term, but we're very positive for the long term prospects of the market that being said I would like to thanks to thank again, everyone for attending.

Our coal and <unk>.

You may disconnect the call if you will.

Q3 2021 Seanergy Maritime Holdings Corp Earnings Call

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