Q4 2021 Star Bulk Carriers Corp Earnings Call
Yeah.
[music].
Thank you for standing by ladies and gentlemen, and welcome to the Star bulk carriers conference call on the fourth quarter and year end 2021 financial results, we have with US Mr. Petros Pappas, Chief Executive Officer, Mr. Hamish Norton President Mr. Nicos, <unk>, Chief operating officer, Mr. Cmos Spiro and Mr. Kristol sped lettuce.
She co chief financial officers of the company at this time all participants are in a listen only mode. There will be a presentation followed by a question that answer session at which time 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 I must advise you that this conference is being recorded today.
We now pass the floor to one of your speakers today. Mr. Atlantis. Please go ahead Sir.
Thank you operator, I'm Christos <unk> co Chief financial Officer of Starbucks carriers.
We'd like to welcome you to our conference call regarding our financial results for the fourth quarter of 2021.
Before we begin I kindly ask you to take a moment to read the safe Harbor statement on slide number two of our presentation.
In today's presentation, we will go through our fourth quarter and full year results cash evolution during the quarter, a walkthrough of our dividend policy and overview of our balance sheet and operational updates and the latest industry fundamentals before opening up for questions.
Let us now turn to slide number three of the presentation for a summary of our fourth quarter 2021 highlights.
The company reported a record performance for a second quarter in a row.
Net income for the fourth quarter amounted to $302 million and adjusted net income of $302 4 million or $2 96 earnings per share.
Adjusted EBITDA was $355 1 million for the quarter.
On the bottom of the page you can see the evolution of our adjusted net income and adjusted EBITDA performance.
During the last eight quarters, our adjusted EBITDA has grown more than 10 times illustrating the strong operating leverage star bulk has only improving dry bulk fundamentals.
For the fourth quarter, that's where our existing dividend policy formula we declared a dividend per share of $2 payable on March 15 2022.
On the top right of the page you will see our daily figures for <unk> for the quarter.
Our time charter equivalent rate was $37406 per vessel per day.
Our combined daily Opex and net cash G&A expenses were based off what they amounted to $5415 per day.
Therefore, our TCE less opex and G&A is around $32000.
Looking at our chartering coverage for Q1, 2022 we have covered 80% of our fleets available days at a daily rate of $26100 per day.
Slide four graphically illustrates the changes in the company's cash balance during the fourth quarter.
We started the quarter with 371 7 million in cash and generating meaningful positive cash flow from operating activities of $296 4 million due to the strong freight market.
After including debt proceeds and repayments capex payments for ballast water treatment system installments buyback in the third quarter dividend payment, we arrive at a cash balance of $473 3 million at the end of the quarter.
Slide five has a walk through of our dividend policy with an example of even the calculation for the fourth quarter of 2021.
As of December 31, we owned a 128 vessels and our total cash balance was $473 3 million.
With a minimum cash balance perturbation.
$2 1 million as of December 31, 2020 one.
On February 16th 2022 pursuant to our dividend policy, our board of directors declared a quarterly cash dividend of $2 per share payable on or about March 15, 2022 to all shareholders of record as of March 2nd 2022.
The ex dividend date is expected to be March one 2022.
Please turn to slide six where we highlight the continued strength of our balance sheet.
Our total cash today stands at $593 7 million.
Meanwhile, our total debt stands at approximately $1 5 billion.
Our working capital stands at approximately $128 million.
Our full year 22 amortization is 207 million.
We have five unlevered vessels and no debt maturities until the third quarter of 2023.
Year to date, our company has distributed dividends of $4.25 per share.
We have fixed 55% of floating interest rate exposure to LIBOR at an average rate of 45 basis points.
In slide seven we demonstrate the inherent operating leverage and cash flow potential of the company and the illustrative free cash flow per share as well as the potential cash flow yield.
For example, with approximately 46700 fleet available days per year.
Based on the guidance 2022, FFA curve star bulk will produce $6 $4 for free cash flow and a yield of 24%.
I will now pass the floor to our CEO Nicos today's schools or an update on our operational performance.
Thank you for yourself.
Let's turn to slide eight we provide an operational update.
Operating expenses, excluding nonrecurring expenses was up $4310 for the 12 months ending in 2021.
Net cash G&A expenses were at $1050 per vessel per day for the same period.
Despite continued adverse COVID-19 related restrictions, which have a direct impact on opex. The combination of our in house management and the scale of the group enable us to maintain very competitive costs being the lowest cost operator, amongst our peers and continuing debate amongst the top three of our listed peers in terms of variety of racing.
On the ESG front star bulk in 2021, plus participated in the carbon disclosure project, the world's leading environmental disclosure platform, achieving the highest score amongst U S listed drybulk companies.
Star bulk will continue focusing on sustainability and integrating it in every process throughout the company.
Slide nine provides the fleet snapshot and some guidance around the use of dry dock and ballast water system installation expenses for the next 12 months and they're relevant total off hire days.
Our expected Drydock expense for the 12 month period is estimated at $30 3 million for the dry docking of 31 vessels with another 19.2 million towards our ballast water capex.
In total we expect to have approximately 787 off hire days for the forward 12 month period.
We anticipate that 97% of our fleet will be fitted with ballast water systems within the first half of 2022.
Both numbers are based on current estimates around dry dock and retrofit planning vessel employment and yard capacity.
On the scrubber utilization trough.
Alba has by now accumulated 109000 days of scrubber operating experience.
With high five fuel spreads having stabilized at levels of around $200 per ton basis, Singapore spot market prices, what are we buying or 60% of our total annualized volume.
We expect we'll have recouped, our scrubber investment in full by the end of the second quarter of 2022.
With an estimated annualized consumption of 800000 tons of HSA fall across the fleet.
The remainder of 2022, and that's a conservative folks hi Fi differential of $150 per ton would be subsidizing, a breakeven by $2600 per vessel per day.
With 94% of our vessels scrubber fitted our continued to increasingly the hi Fi spread can be a significant value generator for our company.
I will now pass the floor to our CEO Petros Papas for a market update and his closing remarks.
Thank you Nicole.
Please turn to slide 10 for a brief update of supply.
During 2021.
The 8 million deadweight was delivered and $5 2 million deadweight was sent to demolition for a net fleet growth of 32 8 million deadweight or three 6%.
Your orders placed during 2021 increased to 40 million deadweight from a depressed 23 7 million deadweight during 2020.
Despite the rebound of ordering activity the new building order book remains at a historical low level of six 8% of the fleet.
Deliveries during 2022 are expected to total 20.
$29 7 million deadweight, and 26 4 million deadweight in 2023.
Present order book for 2024.
Just 11.8 million tons with Japan, quoting new building slots for October 20th went before onwards.
It could be the 'twenty 'twenty four deliveries will face difficult D exceeding 20 million tons deadweight.
Such a supply picture is basically unprecedented in the recent in the recent history of dry shipping.
Increased uncertainty on future propulsion, along with surging shipbuilding costs have helped keep you orders under relative control was the strong increase in container ship orders was filling up shipyard capacity.
Furthermore, the series of global steel prices as well.
Scrap prices to record levels and may make demolition of overage donuts and attractive option during seasonal downturns and especially after the implementation of the E X I see.
Regulations, yes underway, starting 'twenty to 'twenty three.
Port congestion increased to record levels during the third quarter of 2021 .
The COVID-19 related.
Laurent themes China's zero dollars dollars.
Well, let's see another season, those bottlenecks morever increased political tensions and enhanced trade in efficiencies reducing fleet utilization.
Despite the high freight rate environment, the average stemming speeds of the dry bulk fleet decreased by only 2% to 11 seven notes during 2021 strongly augmenting bunker costs as the world Reopens from COVID-19, we expect oil prices to risk.
<unk> continuous upward pressures and support higher scrubber savings. Furthermore, high bunker cost environment, along with new environmental regulations will incentivize slow steaming during the next few years.
As a result of the above trends net fleet growth is projected to collect slightly below 25% during 2022 two.
2% during 2023 and potentially much lower in 2024.
Let's now turn to slide 11 for a brief update of demand.
According to Clarksons total dry bulk trade. During 2021 is estimated to have expanded by four 2% in ton miles.
In the first half of 2021 total dry bulk volumes experienced a strong recovery.
Due to a synchronized global economic stimulus until the gradual reopening of economies supported by vaccination programs.
On the other hand, the Chinese steel sector went through a strong slowdown.
During the second half of the year as a consequence of emission caps.
Commodity prices and the weak housing market.
Important to note here that the global 2021 demand for commodity imports excel without China, increasing its imports during the year.
It was the rest of the world that produce the 4.2% expansion in trade the mentioned above.
The world economic reopening from COVID-19 is still at early stages with the IMF projected global GDP growth of four 4% for 2022 and three 8% for 2023.
According to Clarksons total dry bulk trade is projected to expand by two 2% during 2022.
Indonesian coal exports ban in January the weather disruptions in Brazil, and the Chinese Winter Olympics have affected trade volumes. During the first months of the year. However growth is expected to accelerate during the second quarter supported by seasonality Chinese stimulus.
All materials materials, restocking needs and improve but nation rates worldwide.
Moreover, regular high commodity prices and are providing a strong incentive to producers well dry bulk cargoes to expand output and exports. During the next few years was just in time stocks may be replenishing on adjusting case basis.
I don't know where trade expanded by one 6% during 2021 and is projected to expand by one 3% during 2020 to.
China's steel production decreased by two 2% during 2021 as the government imposed zinc production curves during the second half is expected to last until the end of the Winter Olympics.
Steel production from the rest of the world increased by 13, 5% during 2021, leading to tighter iron ore supplies and record high place prices.
Brazil iron ore exports have continued to recover from the 2019 disaster and increased by five 1% during 2021, the Chinese government announced last week that the deadline for the steel sector to peak emissions has been delayed by five years to 2030.
This is a positive development for IV iron ore trade.
<unk> during the next five years.
Coal trade rebounded by seven 9% during 2021 and is projected to expand by 2% during 2022.
And India thermal electricity output increased at a higher pace than domestic coal production during 2021, and the combination created a shortage of supply that Bruce power plant spokes, lower an prices to new record highs.
During the last months of the year, China domestic coal production increased in order to help raise stocks ahead of the winter.
No surprises and be less dependent on imports.
The Chinese ban on Australian coal forced power utilities, and steelmakers to diversify in the Seagull cargoes from longer distance sources, such as South Africa, Colombia, The U S and Canada, but also from Indonesia to have experienced longer delays from quarantines.
Coal demand from other major importers like Europe , Japan, and Korea increased significantly during 2020 , one due to recovering demand as well as global energy shortages and record high prices that incentivize the sweets from gas to coal.
Indonesia, and Indonesia implemented the ban on coal exports during January to safeguard the stable supply of the domestic utilities full.
Full year, Indonesia exports are expected to remain at the same levels with 2021 which indicates a significant increase in volumes over the ensuing months.
Grain trade expanded by one 3% during 'twenty to 'twenty, one and is projected to expand by three 1% during 2022.
China's demand for grain is projected to remain strong as the hog herd has fully recovered from the 28th in African swine fever outbreak in that five year plan will be focusing on foot securities.
South American crop yields have recently been downgraded due to the severe drought conditions that they have also led to delays, Nevertheless, north and South American grain and soybean exports are expected to experience an increase during 2022 and generate significant on miles for soup.
Panamax vessel sizes.
Minor bulk trade has expanded by five 6% during 2021 and is projected to expand by two 7% during 2022 .
We expect smaller geared vessels to continue to benefit from the synchronized consumption recovery with minor bulk trades and the spillover effects of the strong container sector.
So this is a steel products and the positive price arbitrage.
By a strong increase of Pacific coast exports to the Atlantic Morever.
Spanning the West Africa bauxite exports will continue to inflate on miles for Capesize vessels.
Finally, our outlook for the dry bulk market due in 2022 'twenty three and 'twenty four remains positive.
Record low order book combined with a lack of yard space uncertainty on future vessel propulsion.
Increases in efficiencies a new Shanghai.
Agents coming into force as a favorable supply side picture for our industry and support our optimistic view on the prospects of the dry bulk market.
Without taking anymore of your time I will now pass the floor over to the operator to answer any questions you may have.
Ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone and wait for the old meta message advising your line is open to cancel your request. Please press star two once again Thats Star one if you wish to ask a question.
Your first question comes from the line of Amit Mehrotra of Deutsche Bank. Please ask your question.
Thanks, operator.
Okay.
Oh, hi, thanks, everyone.
I was still hear the operator, there's an automated message sorry about that well first of all congrats on the quarter and the year I wanted to ask about the cash flows for the first quarter. So you have 80% of the first days booked.
Of the first quarter days booked at 26000, a day, obviously, that's a very very solid number relative to your breakeven I'm just trying to understand what that translates it based on our math translates to you know.
A well over a dollar of dividend in the quarter No I know heimish youre going to say, that's my job and not not your job to to come to an estimate but I guess the more the more specific question is I'm trying to understand the moving parts on the cash flow, obviously theres some working capital considerations, there's maybe liquidity or cushion per vessel considerations I'm just.
To understand how should we think about you know the dividend payment and how that translates relative to the TCE that you book in the first quarter.
Well the the working capital is actually working in our favor from <unk> 2021 to.
<unk> 2022, because the rates are down slightly so the working capital basically is released.
I'm not a big effect, but it's it's it's beneficial to cash balances.
And Ah you know otherwise there should be no real surprises.
Got it.
Amit I mean, if there is any sort of.
Globally from our presentation pointing to what potentially the dividend could be you see our cash balance today of 594 million now obviously this comes down by 204 million when we pay our dividend on March 15, and also the debt principal payments for the.
Quarter are normally.
You did towards the end of the quarter, but you basically get a feeling of potentially what the dividend will be.
Right and the debt the debt repayment is included in the 11000 a day. So is it as simple as taking the whatever the TCE is 26 or whatever it'll be less the 11000 times the revenue days in and and you know that's kind of the dividend payment because you're at your your maximum threshold might even be better than that because of the working capital.
Benefit in the quarter.
Yeah.
And correct as you say the threshold the cash threshold effectively stays at the $2 1 million per vessel that it was in our December 31, 2021, So that does not increase from now onwards, right. So we don't have to build anything you know.
Don't have to build that balance for.
So that's that's the benefits for the dividend in Q1 versus Q4, yeah.
So I'd say, it's much cleaner I got it Okay, and then now a couple more questions if I could so.
The the debt Paydown is obviously included in your breakeven, which you mentioned Heimish I know that you've talked about kind of a desire to get to a net debt neutral position and what I'm trying to figure out is you know your stock price is now around $30 per share over.
Over $3 billion of market cap do you have any appetite or do you see an opportunity to accelerate that deleveraging or do you expect it to naturally happen with respect to the debt amortization.
Yeah look we may find opportunities to acquire a basketball or in an accretive way at this point you know we'll see.
But you know, we're basically focused on maximizing the dividend per share and you.
You know basically benefiting shareholders to the greatest extent possible and and we may have a chance to do that.
And I guess they'll shift share deals that were so accretive a couple of years ago. I mean, obviously you guys are more of a platform now your currency is more attractive people may be willing to take even more of a discount for that liquidity is that a fair characterization of the opportunities you're seeing on a ship for share side.
Well I mean, certainly we continue to see opportunities and are you know, they're there may in fact be even even better opportunities to to.
Sell shares for cash and buy vessels for you know an attractive price as well.
Right. Okay, and then last question for me, maybe a little bit out of left field, but heimish I've heard stories of big.
Big retailers using actually dry bulk vessels to move containers and.
And the benefit of that obviously is dry bulk ships can kind of work around that.
But you don't have to we don't have to call that congested container terminals I assume that's obviously, a very niche market, but super interesting. Nonetheless, I was wondering if that's something that that is in fact happening and just given your position as the company's position as the biggest dry bulk I'm sure, they're seeing opportunities to be able to do that as well.
Well I mean, it's happening to some extent, it's primarily happening with small vessels with handy size vessels, particularly handy size vessel with so called box shaped hull no.
And so you know.
We are actively looking into trying to do more like that but you know it's it's a challenge.
Especially with the larger ships.
Benefiting us as it is benefiting all of the dry bulk player.
It's it's taking some capacity out of the market and of course okay.
Pat Cargos moving from containers to small dry bulk carriers also are taking up some dry bulk capacity.
Right now for example, like bag right as an example of that.
Okay Alright, thank you for taking my questions. Congratulations again I appreciate the time.
Thank you Amit Amit.
Okay.
Next question. Please go ahead. Your line is now open.
Hi, guys that Omar knockdown from Clarkson.
But thanks for thanks for the presentation just had a couple of follow ups and maybe touching a little bit odd.
The question.
Maybe just kind of from a step back our perspective, you know how do you guys how're.
How do you guys approach 2022, now and beyond in terms of Companys strategy at.
At least in relation to how you approach that would be 'twenty. One are you guys are obviously quite acquisitive last year early last year and definitely before that you've got the dividend now underway for the past several quarters, culminating with the $2. You just declared a valuation wise. Your stock has done very well has now gotten to a premium valuation. So just wanted to maybe just kind of how do you.
Approach strategically the company as you look out here over the next 12 to 24 months.
Yeah.
Okay.
Yeah.
Well I mean, yeah.
Basically.
Strategically.
We will protect the dividend.
Our dividend is very important to us and to all the shareholders.
And we will try to build value in the share and we will try to delever.
As we've been doing and so I mean, basically it's a continuation.
Of the strategy. We had you know we will favor growth when we can do it in a way that's good for the shareholders.
Yeah also basically preparing for the future.
When we will move to Green fuels. This is a very important part of our or our strategy and we have to think how we're going to deal with that.
Okay. Thank you.
Yeah.
Hey, Mitch anything else to add.
No. That's gonna say, we we've got a lot of people are devoting a lot of time to wide de carbonization.
Very good.
And I guess Petrus, you talked a bit about the market and indefinitely.
A bit of a unique one at that obviously 'twenty one was a very good year and the best year for Drybulk since the financial crisis, but.
Well, we didn't get much support from the Chinese industrial markets, obviously iron ore was basically flat and you couldn't really.
On China, being active or consistently active and yet the small ships really led the way and what kind of seeing potentially something like that again at least for the first month and a half of <unk>.
Two is this kind of a this is a sustainable.
Wait for the Drybulk trade to be purchase in your eyes.
For the smaller mid sized vessels continue to just plough higher and then stay firm despite inconsistency of out of the Chinese iron ore trade.
Okay.
Actually actually.
First don't forget that our they have their communist party celebration towards October and November and usually China wants to show excellent results.
Great GDP growth.
Every five years. So this is and very important incentive I think for them to fire off their economy. We have started seeing signs of that they've got the the IRR or deserve a ratio by a few basis.
Points.
We think that they will cut taxes as they will be.
Giving out a more loans going forward than they will support infrastructure.
So we actually believe that our China will rebound.
Right now the first couple of months. It was the Olympics and we wanted to have the blue the Blue skies. So so that's why it went slower also.
What's important.
Is that the steel production emission level limits are pushed back to 'twenty therapy.
A few months ago, the limit was 20 to 25.
That is going to incentivize investor.
Activity.
The one thing I I personally wonder about is the Covid strategy there following.
This zero Covid the policy.
I'm not sure whether it will create any issues for their economy.
I understand from our chairman who was a visiting our.
China being being the president of the Greek Olympic Committee and the European Committee that.
They are developing.
Vaccines against the Omicron.
And they hope to be able to deal with that now if they don't deal with that.
We will have the advantage of off hires and and unless efficiency if they manage the deal that's on the other hand it may.
Uh huh.
Incentivize more trade. So overall, we are actually much more positive about China this year than last year.
Okay.
Got it thanks, Petro said, sorry, just to that's that's very helpful.
Just one further question for me just wanted to ask about the you know the ATM you made a you made.
Comment on the in the release that you haven't touched on which makes sense in your impact you bought back stock during the fourth quarter.
How do you think about the $75 million ATM now.
You know the stock has gradually been evolving here and towards the premium to NAV. You again do you just punch that ticket is.
Is it as simple as you've got now a premium valuation do you start to tap into that ATM or is that just for you know down the line.
Well you know, we whereas as we stated we haven't used it so far we we will use it when it's good for the shareholders basically and if we can you know buy ships at.
The price that looks attractive relative to the value we get for our shares and it's accretive to the dividend accretive to our earnings accretive to our cash flow per share and.
Probably also allows us to reduce the average age of the fleet will use it and that will be good for everybody.
Okay. Yeah, just wanted to just to hear from you how you approach it and it's not just as simple as a premium to NAV means you you issue stock and then eventually maybe you find the esports compared them hand.
Okay.
He hasn't had yeah.
Great well, thanks, very much thanks, Petros I'll I'll turn it over.
Thank you Omar.
We will now take our next question. Please go ahead. Your line is now open.
Howdy team Star bulk, it's Randy <unk> from Jefferies How's it going hi, Raffi.
Hi, Randy.
Two questions for me obviously, you just gave the court date rate guidance, which is above expectations. Frankly can you give some color on that on a per or maybe asset class basis I'm just trying to get a sense for maybe your new castle Max kind of scrubber premiums.
But for which the.
Asking about new castle, Max Scrubber premiums.
In general that's one of the specific question, but seeing if you can provide a little more color as a breakdown per asset class instead of 80.
80% of 'twenty.
Foreign results are on one Q1, one <unk> to date, yes.
Okay Q1 actually.
We are with covered 61% of our Cape of our Cape fleets and above.
About 24300.
Okay.
If covered about 96% of our Panamax fleet at about 25800.
And we have covered 85% of our superfluous fleet.
At about 27, and a half thousand.
So the coverage is about about 81%.
And about 26000, just a bit below that and this is a net figure which includes scrubber benefits.
Sure.
It's generally speaking the forward market for the scrubber.
The scrubber spreads.
Yep got it all right Hey, that's fair. Thank you for the granularity there and then kind of bigger picture questions. It's been touched on earlier, but the dividend above $2 a share great to see that great to see the share buybacks doing the right things here now going forward, assuming you do love to eventually grow the fleet it seems like the second.
And asset values have softened in recent weeks, despite the FFA curve rising so how do secondhand acquisitions compare to new buildings at these levels.
Second half the new buildings.
Right.
And in your buildings are more expensive than our than.
Second. Unlike for example, I was asking yesterday that Japanese how much would well then you got some max costs.
You got some mics and when they had the earliest delivery.
Probably the earliest deliveries and 24, beginning 'twenty five and the price would be above 70 million.
No.
China would probably be somewhat cheaper than that I would probably venture to think 65 or thereabouts.
And.
Five year old and new Castle, Max today would probably be around 50.
<unk> do.
In China.
A few more million in in in Japan.
It's for a Japanese vessel.
Yeah, neither one of those ships would burn ammonia.
Oh, Yeah, we're talking about a.
Normal if you will.
Vessels, if we are to talk about LNG are having also the island.
But are there and the ability.
That would probably add between 10 and 13 14 million on the price.
So so you'll see that for a for a five year all the vessels. The differential was about one thing about <unk>.
17 8 million.
Sure.
And then I guess briefly since you opened that can of worms, and any thoughts on LNG dual fuel versus ammonia versus traditional fuel. If you were to place a newbuild order.
We are.
First of all we're not minded to place new building orders.
Okay. If we were to we would have to research. These very carefully on on a well to wake basis, well to propeller basis to make sure that.
LNG there right are is the right solution, even on an interim basis.
I think that our strategy as we see it right now is to Kip to keep our fleets.
Within the parameters.
Hmm.
Within the environmental parameters over the future of the CIA I ones.
And once we know what the new fuels are and when there's enough although enough infrastructure for them and enough. Once it is then we may decide.
Which way to go but that's not for tomorrow. This is probably for between 25 and 28th so yeah. That's that's actually.
Shipping yeah, Yeah, you're right in the meantime, we're obviously focused on decarbonization through.
Better bottom paints to reduce health filing hole cleaning robot energy saving devices.
Route and speed optimization and then we're also looking at carbon capture.
Which is it looks like it may be more practical than we would've thought even a few months ago.
Yeah.
No that's fair.
Nice to see the shares about $30 I was I was confident it would get here. This year just didn't think it would be there soon so congrats again.
Thank you.
Thank you.
We will now and the next question. Please go ahead. Your line is now open.
Hey, this spin off of one was confident that we'd get to 30 by now.
But.
I wanted to delve in a little bit those rates again for the first quarter really well, they're better than what I was thinking that would be can you maybe talk to as you look at that what maybe is the split between spot versus time charter contracts.
In other words do you have much time charter contract in there and is there any should we think that there'll be some spillover into the second quarter or the back half of the year.
Yeah.
Yeah, Okay well.
As we said we're about 80% covered.
We are covered at somewhat higher levels than that.
For a fraction of the 80%.
But generally our intention is to keep the fleets.
Spot as we can because we are expecting.
Our stronger markets right after.
Chinese Olympics are over.
Right Okay.
Oh, we are certainly seeing a stronger market specifically in the handy or anything.
Altra, Maxim below or but the.
Hey, Mitch you said earlier that priority number one is to protect the dividend to me. It seems like the the easiest and best way to do that is to take volatility out of the equation.
Is most obviously done through time chartering.
Vessels, but you could also say well you know what about locking in more of the interest rates are taking you know other aspects of the volatility out.
How do you how do you factor those two things wanting to protect the dividend, but while at the same time, you know having market exposure.
Yeah.
That's that.
That's obviously a is that that's one of the central dilemma of running a dry bulk company because if you. If you reduce volatility you probably also reduced the average profitability.
And so yeah, there's a trade off between being willing to accept volatility it at high average rates and getting rid of volatility and maybe suffering from lower average rates basically what we hope is the solution to that is reducing balance sheet.
Average.
So that we can deal with operational volatility, while having you know, perhaps a lower total volatility in our results.
But you know it's.
It's always a dilemma.
And then if I may add discrete on the interest rate side, we basically locked.
55% now of the outstanding indebtedness.
On the base rate at levels of around 45 basis points.
And Thats locked essentially for the next two and a half years. So we are protected.
To a big extent from volatility in base interest rates.
On the on the chartering side us as Amy said I mean, we were there to cover the smaller vessels for the first quarter, because we felt that the market.
Would be weaker but from where we stand right now dry bulk fundamentals, we feel confident about the market and therefore as Petro said going forward are we were mostly spot.
But if we see rates that we consider to be very strong for the next quarters. We may we may had some some more.
But our usual strategy is during the last four months of each year to try to cover the first three or four months over the next year because seasonally Q1 is our is weaker than our than the rest of the quarters.
Alright.
Okay and that's that's all very helpful. And then and then lastly for me you know him as she talked about the the possibility of using your shares either generating cash from the sale of shares are using ishares to do acquisitions. So long as her with a caveat that whatever you do it's going to be accretive.
<unk> two <unk>.
And and then you were just talking about wanting to focus on delevering the balance sheet as much as possible to protect against volatility does it do.
Does that effectively mean that if you are out in the market to do acquisitions or anything you would do would probably.
Probably need to meet a threshold such that it comes with very little or no debt and then is still also accretive is that the right way to think about it.
Well first of all we're not very leveraged now so it's not that much of a stretch to buy a very low leverage you know ship and have it be accretive to the dividend. So yeah. I mean, basically we want it to be accretive and we do want it and we don't want to build leverage so.
Okay.
Yeah.
You've hit the nail on the head.
Ben Let me, let me come back to the previous question I'm, just a bit regarding hedging.
If you look at the order book and actually 'twenty, two 'twenty three and almost.
24 are closed.
We're looking at an average.
Supply of a maximum 25 million tons per annum for three years. This is below.
This is about two 7% of the existing fleets.
And and then we are starting to face the environmental regulations, which will.
<unk> applied some vessels to be scrapped others would have to slow down space and let's not forget that one not in the slower speed equals about 6% less supply and theres going to be vessels going to dry docks in order to do all these good things that <unk> mentioned earlier.
So we think that's where it's coming up to a great market for the next.
A few years, which is mostly supply led and also environmentally leads so we fear less.
Keeping effluent.
Our fleet more spot than potentially at other times in our AR and our company's carrier.
Alright, well.
Thanks to all of you I'm done with my questions now I'll turn it over thank you.
Thank you Ben.
Okay.
Please go ahead. Your line is now open.
Okay.
Yeah, Hi, this is Magnus fear HC Wainwright congratulations.
On the quarter and also joining the 3 billion dollar market club, it's a very exclusive club in dry bulk shipping.
Thank you Magnus.
First.
Most of my questions have been answered, but I was just curious.
Since you mentioned that potential acquisitions going forward.
With 128 vessels, where I mean is there a limit on how many ships you can manage or you know.
It's Uh huh.
150 to 200 vessels is that kind of the math.
Or is there really no maximum.
I think theres, probably effectively not maximum but.
We organized the company.
We all we organize our company into fleets as far as operations and technical are concerned.
And and mainly.
Maintenance marine maintenance.
So basically the more vessels, we have the more fleets, we will have and then on the other hand.
The positive thing about it is the economies of scale that are that we are magnets and also G&A should should lower so.
I don't think theres going to be a problem. We'll just have to work with my husband whenever the work a bit harder and I suppose.
Very good for the 4 billion dollar club may not too far in the future.
Thank you.
Thank you Magnus.
Yes.
We have no further questions at this time please continue.
No more comments so operator, thank you very much.
That does conclude the conference for today, Thank you for that.
Thank you you may all disconnect.
Okay.
Yeah.
[music].
Yeah.
[music] welcome.
Welcome to <unk> Conference call. Please continue to standby.
Vince will begin shortly.
Yeah.