Q1 2022 Global Ship Lease Inc Earnings Call
Operator: Good day, and thank you for standing by. Welcome to the Global Ship Lease Q1, 2022 Earnings conference call.
Operator: At this time, all participants are on a listen only mode.
Operator: After the speaker's presentation, there will be a question and answer session.
Operator: To ask a question during that session, you will need to press star one on your telephone.
You will need to press star one on your telephone excuse me.
Operator: Please, be advised that this conference is being recorded.
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Operator: I would now like to hand the conference over to your speaker today, Ian J. Webber, CEO of Global Ship Lease. Mr. Webber, the floor is yours.
Speaking today.
Weber CEO of global ship lease.
The floor is yours.
Ian J. Webber: Thank you very much. Good morning, and good afternoon, everyone, and welcome to the Global Ship Lease first quarter 2022 Earnings conference call.
Ian J. Webber: Slides that accompany today's presentation are available on our website www.globalshiplease.com.
Ian J. Webber: Slides two and three of that presentation, as usual, remind you that today's call may include forward looking statements.
Ian J. Webber: That are based on current expectations and assumptions, and are all in nature inherently uncertain and outside the company's control.
Ian J. Webber: Actual results may differ materially from these forward looking statements due to many factors, including those described in the [inaudible] section of the slide presentation.
Pomper section of the slide presentation.
Ian J. Webber: We also draw your attention to the risk factors section of our most recent annual report on form 20-F, which is for 2021 and was filed with the SEC on March, 24th this year.
Ian J. Webber: You can obtain this via our website or via the SEC`s.
Ian J. Webber: All of our statements qualified by these and other disclosures in our reports filed with the SEC.
Ian J. Webber: We do not undertake any duty to update forward looking statements, and for reconciliations of the non-GAAP financial measures to which we will refer during this call, to the most directly comparable measures calculated and presented in accordance with GAAP, you should refer to the earnings release that we issued this morning, which is also available on our website.
to the most directly comparable measures calculated and presented in accordance with GAAP, you should refer to the earnings release that we issued this morning, which is also available on our website.
Ian J. Webber: As usual I'm joined today by our Executive Chairman, Georgios Giouroukos Youroukos, our Chief Financial Officer, Tassos Psaropoulos, and our Chief Commercial Officer, Tom Lister.
Ian J. Webber: George will begin the call with a high level commentary on GSO and our industry, and then, Tassos, Tom and I will take you through our recent activity, quarterly results and financials, and the current market environment, after which, we will be pleased to take your questions.
Tassos, Tom and I will take you through our recent activity quarterly results and financials and the current market environment.
Which will be pleased to take your questions.
Ian J. Webber: So now, turning to slide 4, I'll pass the call over to Georgios.
Now I'll pass the call over to George.
Georgios Giouroukos Youroukos: Thank you, Ian, and good morning, or good afternoon to all of you joining us today.
Georgios Giouroukos Youroukos: Looking at the current macro environment, it is safe to say that there is uncertainty related to any number of factors, from the continuing war in Ukraine, to COVIDlockdowns in China and rising inflation.
Georgios Giouroukos Youroukos: What is certain, however, is that the charter market for container ships has remain very tight, with almost no vessel capacity coming into the charter market, and net growth in the outsized segments is likely to be negligible.
And net growth and outsized segments is likely to be negligible.
Georgios Giouroukos Youroukos: Moreover, widespread supply chain disruptions has remained a persistent feature of the market, tying up global capacity and reducing effective supply.
Tying up global capacity and reducing effective supply.
Georgios Giouroukos Youroukos: And, perhaps, most importantly for today`s discussion, all of our 65 mid-size and smaller vessels earning revenues from fixed rate time charters, many of which extend for several years and reflect the excellent chartering conditions that really took hold during 2021.
Most importantly for todays discussion all of 65 mid size and smaller vessels.
Revenues from fixed rate time charters, many of which extend for several years and reflect the excellent chartering conditions that really took hold during 2021.
Georgios Giouroukos Youroukos: Our results for the first quarter of the year reflect that reality, as well as benefiting from the significant forward charter fixtures that we were able to secure over the last few quarters, including those which only came into effect during the first quarter of 2022.
For the first quarter of the year.
They flipped that reality as well as benefiting from the significant forward charter fixtures.
That we were able to secure over the last few quarters.
Including those which only came into effect during the first quarter of 2022.
Georgios Giouroukos Youroukos: Additional higher rate chartering [inaudible] were due to come online in this current quarter, second quarter of 2022.
Georgios Giouroukos Youroukos: As you can see, on the right side of the slide, our financial metrics for the first quarter of 2022 are all multiples of what they were just a year ago.
Georgios Giouroukos Youroukos: Driven by cash flows that we have, in many cases, secured for long durations into the future.
Georgios Giouroukos Youroukos: I'm particularly proud to say that our normalized earnings per share has more than tripled over the last year.
Georgios Giouroukos Youroukos: In line with our policy to allocate capital dynamically, driven by relative returns adjusted for risk, we have used our increased cash flows and long term visibility, to increase our common dividend this quarter as promised, as well as to opportunistically buy back around $5 million of our shares in the market, in line with our Polish [inaudible] capital to shareholders, in a prudent manner that is well supported and sustainable for the long term.
Wed love to Opportunistically buy back around $5 million of our shares in the market.
In line with our Polish over it doesn't capital to shareholders in a prudent manner that is well supported and sustainable.
For the long term.
Georgios Giouroukos Youroukos: On the ESG front I would like to mention two things.
Georgios Giouroukos Youroukos: The first is decarbonization, where we are pursuing a collaborative approach.
Georgios Giouroukos Youroukos: Overtime, taking proactive steps to tackle decarbonization has become even more important to all participants in the supply chain.
Georgios Giouroukos Youroukos: In line with our risk averse approach to investment, we're in continuous dialogue with our customers to identify opportunities where we can reduce our collective carbon footprint by retrofitting our fleet in the context of long term charters.
Georgios Giouroukos Youroukos: Interests are clearly aligned on this point, and we believe that there are prudent ways to incorporate such upgrades into the fleet, in a manner that benefits all involved.
Secondly, I wanted to mention the Safe Haven initiative that we launched to look after our Ukrainian seafarers and their families during the ongoing humanitarian crisis in their country, by providing transportation to Greece, and on-arrival accommodation and food, et cetera for a minimum of six months.
By providing transportation to Greece, I dunno rival accommodation and food.
Et cetera for a minimum of six months.
We created a small community locally, and now have a total of 60 people safely here in Greece, and another 73 on their way.
And it's worth, it's wonderful to see other industry participants with similar initiatives to look after people caught up in this awful situation.
And with that I will turn the call to Ian.
Yeah.
Ian J. Webber: Thank you, Georgios. Please, turn to slide five.
This slide will be familiar to many of you, that here we show the portion of our fleet that we already owned at the beginning of last year, 2021.
We already are at the beginning of last year 2021.
The darker blue bars indicate charters that were agreed during the course of that year.
If you compare the rates that we were running in each of the newly agreed charters to the rates in the charters that immediately preceded them, you'll see that the new rates for renewals over the last year have, on average, doubled from previous levels.
Given that operating costs daily Opex are essentially fixed, we therefore have high operating leverage, and pretty much all of this incremental cash flow goes straight to our bottom line.
And should continue to do so through the multi year duration of the contracts.
On slide six we show those vessels that we acquired in 2021.
We highlighted in red what has happened as the legacy charters, that were in place when acquisition came to an end, and those ships were re-fixed, often well ahead of anticipated expiry. At this point, they've been able to command double or even triple then what they had been previously earning in the market.
Oh acquisition came through and items and those ships will re fixed often well ahead of anticipated expiry. At this point, they've been able to command double or even triple what they had been previously anything in the market.
At this point, they've been able to command double or even triple what they had been previously anything in the market.
And we're very happy with the graduated chance at maturity profile of these acquisitions, and indeed, our legacy fleet, which provides us with a combination of long term certainty on very attractive cash flows and nearer term charter market exposure for further nearer term renews.
Nearer term renews.
Thus far, [inaudible] exceedingly well, enabling us to more than double our total adjusted EBITDA to $94.5 million for the first quarter of this current year, compared to the first quarter of last year.
Adjusted EBITDA to $94 5 million for the first quarter of this current year are compared to the first quarter of last year.
At the end of first quarter 2022, our total contract cover stood at over adjust surrounds at $1.7 billion with a weighted average remaining duration of 3.4 years.
On the next slides, slide seven, we provide some illustrative guidance on how a contract cover flows through to our earnings and through our cash flows.
As I've said in the past I want to be clear that we are not providing a forecast.
Rather, we are providing three illustrative scenarios in order to demonstrate the relationship between market charter rates and our adjusted EBITDA.
We're providing three illustrative scenarios in order to demonstrate the relationship between market charter rates and our adjusted EBITA.
The assumptions underlying this exercise are spelled out in detail in the EBITDA calculator in the appendix to the presentation.
I'd like to highlight just a few things.
Given our contract coverage with only three open days out of nearly 24000 in 2022, and based on the assumptions that we've set out our revenue for 2022 is pretty much set.
I also sorry, three open days out of 90, 24, thousands and tens of 'twenty, two and based on the assumptions that we've set out our revenue for trains train two is pretty much set.
Any variability on revenue will be driven by the amount of actual [inaudible] compared to the assumptions that we had.
Looking out to 2023, spot exposure remains limited.
According to our EBITDA calculator, around 87% of our ownership days are covered, so 13% are opened.
Around 87% of our ownership days are covered.
<unk> percent are open.
I should point out that the ships coming open in 2022 and 2023, all of which are on charters at below market rates, we assume that the charters will hold onto that capacity for as long as possible, looking to redeliver right at the end of the [inaudible] window.
In short, we have very high visibility and certainty of cash flows, through at least the medium term, and we're on track to experience yet another significant step up and I really believe in our 2022, even absent of the growth or new chartering activity, and irrespective of market conditions.
Turning to slide eight, I'd like to discuss our dynamic and disciplined approach to capital allocation.
We look to allocate capital on the basis of relative returns adjusted for risk.
As you will have seen expressed this quarter in multiple ways, we believe that it is important for us to prudently return capital to our investors in a sustainable value maximizing manner.
As you will have seen expressed this quarter multiple ways. We believe that this is important for us to prudently return capital to investors on a sustainable value maximizing manner.
From this quarter we`ve been paying a dividend of 37.5 cents per share, $1.50 annually, triple the amount that we proposed of 12 per share, with 48 cents in the year, just over a year ago.
12 per share, with 48 cents in the year, just over a year ago.
We've also had been utilizing our share buyback authorization on an opportunistic basis, buying back approximately $5 million worth of our shares recently.
Okay.
Additionally, we look to build equity value by deleveraging and building liquidity, while also proactively managing any balance sheet risks.
What we also proactively managing any balance sheet risks.
We allocate capital to meet the evolving demands of our customers and the impacts of decarbonization regulations, to improve our vessels fuel efficiency.
To improve our vessels fuel efficiency.
We approach such investments as we do any other, with our minds towards anticipated return profile, and it is clear that there is a growing demand from the liner companies and their customers, think of Walmart or IKEA, on the basis of both regulatory and compliance, and the impacts on their scope free greenhouse gas reporting.
There is a growing demand from the liner companies and their customers think of Walmart walk here on the basis of both regulatory and compliance and the impacts on their scope free greenhouse gas reporting.
Finally, we continue to pursue accretive growth and fleet renewal on the selective disciplined basis.
If the returns or the asset profile don`t meet our requirements, we will pass on a potential acquisition, and in fact, we have, on that basis, declined far more transactions than we actually pursue.
As we consider these options we look at the degree of forward visibility on associated cash flows, potential macro risks, industrial cyclicality, regulations, and the decarbonization implications of potential opportunities.
At its core, our focus is on generating long term value for shareholders through our balance risk-averse approach, that builds sustainability overtime in a cyclical industry.
Balance risk averse approach that builds sustainability overtime in a cyclical industry.
With that, I'll turn the call over to Tassos to talk you through our financials.
Tassos Psaropoulos: Thank you, Ian.
On slide nine now, we have summarized our first quarter 2022, five months' wholesome highlights.
Revenue for the quarter was $154 million, more than double the $73 million in the prior year period.
Similarly, adjusted EBITDA for the quarter was $94.5 million, more than double the $44.2 million over the first quarter 2021, our normalized net income, which adjust for the one off items almost went up four times at $69.7 million in the first quarter of 2022, compared to $17.8 million in the first quarter of 2021.
Millions of dollars in the first quarter of 2021.
Moving to the balance sheet items, where I will highlight the following. We had $222 million of cash [inaudible] out of which $126 million is restricted and $25 million representing minimum fee liquidity level set by our debt facilities.
A highlight the following we had $222 million of cash support a range of which $126 million easier restricted and $25 million, representing minimum free liquidity level set by our debt facilities.
We agreed amendments to our existing syndicated senior secured credit facility in January, which had a tough time and outstanding balance of $213 million, extending the maturity to December 2026, enhancing the governance in our favour and releasing speed vessels from the collateral package, while leaving the price unchanged at liable plus 3%
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<unk> plus 3% those.
Those three unencumbered ships were used as collateral for the new $60 million loan facility priced at LIBOR 2.75%, we utilized the proceeds to reduce higher cost debt and eliminate the last junior facility of $26.2 million and $28.5 million partial redemption of 8% on senior and second builds.
on senior and second builds.
We have an additional $89 million of those notes [inaudible] and maturing in 2024.
Now we have fully hedged our floating rate debt exposure, having put in place a second tranche of hedges, reaching to an interest cap of $992 million total of floating rate debt with LIBOR capped at 0.75% and amortized for the years.
Also, as mentioned, we have used $4.9 million to repurchase approximately 185.000 of our class A common shares in the market with an average price of $26.66 per share.
We have also declared a newly raised dividend of 37.5 cents per class A common shares.
Now, moving to slide 10, it gives a summary of key capital structure developments over time.
In the upper left is a schedule of amortization in the coming years, we maintain an aggressive amortization schedule, but we believe it is prudent for the business like ours, utilizing our cash flow to deleverage, while limiting our exposure to refinancing risk at loan maturity.
On the upper right you can see the extent of improvement we have been able to achieve in our course of debt.
Also, our balance sheet, earnings power, counterparty risk profile and contracted cash flow have all improved market overtime, that has translated into a significant reduction in onboarding costs for 7.7% at year end 2018, to 4.6% now.
I think I've said before, in the leasing business, this is both a key performance indicator and major determinant of our competitors.
On the lower left you can see that the trading liquidity in our stock has increased substantially over the last year.
The sea chain in our trading liquidity has made it far easier for the vessels to both built and exit positions in GSL.
Our detailed financial statements appearing full on slides 11 through 13. With that, I will turn it over to Tom.
Tom Lister: Thanks, Georgios.
As usual, slide 14 is intended to highlight the ship sizes on which our business is focused, which will help put the subsequent slides in context.
GSL is focused on mid-sized and smaller ships, which is shorthand for ships ranging from about 2000 Teu up to around 10000 Teu, effectively the liquid charter market.
The top map on this side on the left shows the deployment of "our sizes of ship", i.e. ships under 10000 Teu and emphasizes their operational flexibility.
Left shows the deployment of quote unquote, our sizes of ship or ships under 10000, Teu and emphasizes their operational flexibility.
As you can see they're deployed everywhere.
The bottom map, on the other hand, shows where the big ships, those larger than 10000 Teu, are deployed, which tends to be on the east-west main lane or arterial trades, where the cargo volumes and shoreside infrastructure can support them.
And it's important to note that over 70% global containerized trade volumes are moved outside the main lanes, and the north-south regional and intermediate trades served by ships like ours.
In his opening remarks, George acknowledged the macro uncertainty the world`s currently facing.
The world currently facing.
And clearly that's true and one of the big questions, the container shipping industry, in particular, is having to ponder, is when COVID-19 restrictions in China will be relaxed, which will release pent up demand volumes into the system.
The longer the delay on releasing this growing backlog and the lumpier the volume uplift when it does come, the more challenging it will be to absorb on the supply side, and that's a good thing for earnings, of course. And I'm not suggesting a repeat of the second half of 2020, but that period does illustrate what can happen to the supply chain and to earnings when substantial demand suddenly comes back online.
And to earnings when substantial demand suddenly comes back online.
And it's worth remembering that year on year growth in 2020 was actually negative, volumes shrink that year by just under 2%, and that the snapback in earnings came off the idle capacity of the global fleet had peaked at just under 12%, a substantially lower baseline than today's situation of almost full fleece employment.
Anyway, rather than trying to second guess how the macro environment and demand will evolve, the following slides are focused primarily on the supply side on which we do have clear forward visibility.
Slide 15 shows the supply side trends, but tends to be a barometer of health for the sector.
The top chart shows idle capacity, which remains below 1%, so basically full global fleet employment, and we haven't even hit the traditional peak season in the freight market yet.
The bottom chart tells a similar story, ship recycling, scrapping was almost non-existent for container ships in 2021, which has remained the case through the first quarter of this year. Why? Because the earnings in the charter market remains phenomenal and we'll come back to that in a moment.
In the meantime, please turn to slide 16, which looks at the order book.
Here you can see, on the left, the composition of the order book by size segment.
As we acknowledged on our last earnings call, the order book has expanded during the course of the last 18 months or so, reaching an overall order book to fleet ratio of 27.9% at quarter end.
However, this overlooks the fact that the order book is very heavily weighted towards the bigger ships, over 10000 Teu.
If, on the other hand, you focus it upon our focus segments of 2000 to 10000 Teu, highlighted in the red box, you can see that for these sizes, the order book to fleet ratio is significantly lower, at under 12%.
Another point we continue to make when discussing the order book is that the delivery schedule is back loaded.
By this I mean that the order book deliveries tend to be weighted more heavily towards 2023 and 2024, and increasingly 2025, rather than to this year, 2022.
And this back loading is significant, if 2023 marks the implementation of the new environmental Decarbonization regulations, which we expect to cause a slowing down of the global fleet, reducing effective supply.
To put that in context, reducing the average operating speed of the global Containership fleet by just one nautical mile per hour, would reduce effective supply by between 6% and 7%.
Furthermore, the midsize and smaller containership fleet is aging.
As you can see from the chart on the right, and we provided additional data on the age profile of the global fleet in the appendix, if scrapping were to continue to be deferred, by the end of 2024 around 7.5% of sub 10000 Teu capacity, currently on the water, would be at least 25 years old, and for the lowest specification candidates, the least potential scrapping candidates.
the lowest specification candidates and least potential scrapping candidates.
Scrapping candidates.
Net this out against the total order book of sub 10000 Teu ships due to be delivered through end 2024, and you would get implied net growth in these sizes of just 3%. Not 3% per year, but 3% total over the coming two and a half years or so.
The long and the short of all of this is that we continue to see supportive supply side fundamentals for all focused size segments, which brings us to slide 17, the Charter Market.
Alta market.
As you can see from the chart, the charter market continued to firm through the first quarter of this year.
The market is very tight, as George said in his introductory remark.
Indeed, from the fillers we've put out, no more than five, I repeat, five ships in the 5500 to 10000 Teu size classes, are expected to come open in the balance of 2022. And, to be clear, I'm not talking about the GSL fleet here, I'm talking about the charter market as a whole.
And for the smattering of chartering activity in the fetus sizes, the smaller ships, both owners and charterers are preferring to fix for short, tactical periods covering network gaps.
Against this backdrop, it is challenging to provide guidance on rates and the longer term market. So, the rates you see in the table on the right, simply replicate those shown in our March investor presentation, based upon the assumed prompt availability of vessels.
Now, our view is that there will be a scramble for capacity and thus, a continued firming of charter rates when China reopens.
Having said that, we don't have any ships coming open until late in the year.
Anyway. So, I'll circle back instead to the supportive fundamentals.
Firstly, a baseline of full fees [inaudible] employment, compounded by continued supply chain disruption.
Secondly, an aging midsize and smaller ships peer group, coupled with a modest order book, pointing towards limited net supply growth in all segments.
Thirdly, emissions regulations in 2023 expected to slow the global fleet and reduce effective supply.
And finally, strong potential for an upward [inaudible] demand when China comes back online.
With that, I'll turn the call back to Georgios to wrap up.
Georgios Giouroukos Youroukos: Thank you, Tom. I'll provide just a brief summary, and then we would be happy to take your questions.
As a result of our extensive chartering activity and the signing of numerous multi year charters at elevated rates, we have extensive contract cover of almost $1.7 billion, over nearly two and a half years.
Over nearly two and a half years.
Our debt service, Capex and dividends, is fully covered through the end of 2023, even without any further chartering or growth.
We have a very strong balance sheet.
While some of our $150 million of our $222 million cash is restricted, our increasing cash balance is starting to move, more fully reflect the earnings growth that we secured during 2021 from vessel acquisitions and charter renewals at higher rates.
Our integration cash balance is starting to move more fully reflect the earnings growth that we secured during 2021 from vessel acquisitions and charter renewals at higher rates.
Further, we have no debt maturities until 2024.
We have no debt maturities until 'twenty 'twenty four.
Our fleet is in the sweet spot of the market, and well supported by supply side fundamentals.
Our high Reefer, midsized post Panamax and smaller container ships, were in high demand even before the current period of extraordinary market strength.
And we have even expectation that they will remain so for the long term.
They will remain so for the long term.
On the basis of their efficiency, flexibility and high specifications.
Meanwhile, while the order book for very large ships has increased, net growth for our size segment is expected to be negligible, and effective capacity might even shrink from 2023, with the new emissions regulations.
While the eligible for very large ships has increased net growth for our size segment is expected to be negligible.
And effective caboched capacity might even shrink from 'twenty to 'twenty three with the new emissions regulations.
This kind of market has proven to be more resilient than many initially expected, driven by both continued underlying demand and by supply chain condition that has proven to be more structural than transitory.
By both continued underlying demand and by supply chain condition that has proven to be more structural than transitory.
Freight and charter markets remain very strong.
Linus are forecasting another exceptional year of earnings in 2022.
Further, a demand side spike is expected when China loosens its COVID restrictions, which should have a very positive effect on earnings for the industry.
Finally, we allocate capital in a balanced opportunistic basis to maximize long term value.
With adjusted EBITDA for first quarter 2022 just over twice that of the prior period, we have increased our quarterly common dividend to 37.5 cents from this quarter, triple the level initially proposed just over a year ago. And, as we begin to accrue cash from our larger fleet and newly improved charters, we were able to purchase approximately $5 million of GSL shares in the market under our share buyback authorization.
to purchase approximately $5 million of GSL shares in the market under our share buyback authorization.
We remain dedicated to returning capital to shareholders in a prudent, sustainable manner.
As we keep part of our balanced approach to maximize long term value.
With that we'd be happy to take your questions.
Operator: Thank you.
As a reminder, to ask a question you will need to press star one on your telephone. To withdraw your question, please press the pound key.
Your question. Please press the pound key.
Please wait while we compile the Q&A roster.
Our first question comes from Chris Robertson of Jefferies.
Your line is open.
Chris Robertson: Hello, gentlemen. Thank you for taking my questions.
Tom Lister: Our pleasure, Chris. Go ahead.
Chris Robertson: So, yes. Revenues seem to be pretty locked in at this point, especially for this year. Can you talk about the expense side, in terms of cost pressures you might be seeing this year compared to last? And what are your expectations for any cost inflation this year?
Georgios Giouroukos Youroukos: Yes, I'll take that.
Yes, I'll take that.
The things that are, you know, in a cost operational reshape that are increasing due to the situation we see today is number one, lubricate oils, which is a by product of fuel. So, as fuel prices go up, lubricating oils in Greece, that is one aspect. The other aspect is COVID related expenses, such as transportation cost tickets.
Situation, we feel we see today is number one lubricate libertad oils.
Which is a byproduct of Oh fuel so as fuel prices go up lubricating oils in Greece.
That is one aspect the other aspect these COVID-19 related expenses, such as transportation of course tickets.
Those increases also, as we all face when we travel.
We all face when we travel.
China regulations, as you know, a lot of other ships, in general container ships, trade in China or in out of China. All of these regulations that change on a bi-weekly basis in China can create additional expenses of people having to wait and not being able to board the ship at the right time.
Trade in China or in out of China.
All of these regulations that changed on them on a biweekly basis in China can create additional.
Additional expenses of people, having to wait and not being able to board the ship at the right time.
You know, all these kind of expenses, but those are not material expenses. We see also some, we will believe that we will see actually, we don't see yet, but we will see some increase in possibly spare parts because of the price of steel going up as well.
Mainly spare parts for ships are made the steel, so, but I don' foresee any major increases.
You know major increases.
From the shipyard`s point, we have seen a 10%-20% increase in costs in dry dock costs, when the ship goes to repair.
Point, we haven't seen that 10% to 20% increase in in costs and dry dock costs when the ship goes to repair.
But container ships, again, do not need a lot of steel during a repair, which is the main thing that has increased the price of steel.
Again, there are some increases, but nothing that would materially affect the profitability of the company, I would imagine.
Chris Robertson: Okay. Yeah. Thanks for that color that was very comprehensive.
My next question is related to some of the retrofitting and incremental upgrades being done ahead of IMO 2023 through 2030.
So on the engine power limiters and other measures that GSO is taking to get the ships ready, can any of that be done while at sea or does it have to be done at the yard?
Georgios Giouroukos Youroukos: Let Tom will speak more about this, but just to say a few things, the EPL sends about, limiters can be done in the wireless ship at sea. Other things, more major, need the shipyard, but the EPL's gotta be done while trading.
While trading.
Tom Lister: Chris, I think Georgios probably addressed your two principal questions. Is there there anything you'd like me to add?
Chris Robertson: No, I guess, if there`s anything else outside of the EPLs that you guys are doing worth mentioning or talking about, that would be helpful. But if not, then Georgios answered my question.
I guess, if theres anything else outside of the Etfs that you guys are doing worth mentioning we're talking about that would be helpful. But if not that George you answered my question.
Tom Lister: Sure. Okay, well, what I would say, as a general comment is that we're working with with our customer base, with our charterers to seek to see what can be done to enhance the efficiency, and as a result reduce fuel consumption, and thus, reduce the emissions of our ships. But, I think it's too early really to provide any more sort of exact guidance from that. But it's an issue which is clearly at the very front of our minds, at the front of our charterers` minds and it's at the front of we understand their customers' minds. So decarbonization is certainly something that's gathering momentum and it will have to be attached or attacked on a collaborative basis, which I think is key.
To seek to see what can be done to enhance the efficiency and as a result reduce fuel consumption and thus reduce the emissions of our ships, but I think it's too early really to provide any more sort of exact guidance from that but it's an issue which is clearly at the very front of our minds, it's the front of Oh.
<unk> minds and it's at the front of we understand their customers' minds. So decarbonization is certainly something that's gathering momentum and it will be have to be attached or attacked on.
On a collaborative basis, which I think is key.
Chris Robertson: Sure.
Georgios Giouroukos Youroukos: Just, if I just can add for the audience to understand that a little bit what we mean, so it doesn't sound like a black box.
What really is, it's the modifications are meant to improve the friction of water on the hall, so that the ship has less friction as she moves ahead into the water, and therefore, reduce the fuel consumption and effectively the ship remission, which is directly proportional to the fuel consumed.
It's the modifications are meant to do to improve the friction of water on the hard so that the ship has less friction as she moves head into the water and therefore reduce the fuel consumption and effectively the cargo the they should remission, which is.
Directly proportional to the fuel consumed.
These things can be changing the propeller, changing the nose of the ship called bulbous bow, adding some special things around the propeller area, which make the flow water more efficient, and these kind of things, putting special paint that is more slippery show that the ships slides into the water with less resistance. Just to make our audience understand what we're talking about.
With less resistance just to make our audience understand what we're talking about.
Chris Robertson: I have a final question, if I can here. So just thinking through slide 10, you have the amortization schedule.
The debt payments over 2022 and 2023 just scheduled amortization, are you guys thinking about any debt prepayments at this point?
And how does that fit in or could it fit in with your capital allocation program here?
Capital allocation program here.
Georgios Giouroukos Youroukos: Ian, do you want to take this?
Yeah.
Ian J. Webber: I'm happy to George.
This is scheduled debt amortization as we show on page 10.
I'm on page 10.
It's reasonably aggressive anyhow, as agreed with our lenders.
We have assets, which have a useful life, we used 30 years. So, we need to make sure that what's associated with the ships also reduces.
We used 30 years.
So we need to make sure that that's associated with the ships also reduces.
Ian J. Webber: In terms of capital allocation, we talked about it, a couple of touch points during the prepared remarks.
Couple of touch points during the prepared remarks.
It`s a dynamic policy, we've increased the dividend.
We've increased the dividend.
We've got about $40 million share buyback authorization, we actually bought back shares last year as well.
Last year as well.
We are open minded about allocating capital to deleveraging, but it isn't additional capital to deleveraging, but it isn't a priority for us right now.
We are open minded about allocating capital to deleveraging, but it isn't.
Additional capital to deleveraging, but it isn't a priority for us right now.
Even everything else that we think we can do with that capital. But, what I would say about that is that we`ve been very successful, Tassos and his team in particular, have been very successful refinancing.
But we think we can do with that capital, but what I would say about that.
We now.
Very successful tests awesome his team in particular.
<unk> been very successful. Refinancing.
Refinancing.
Either to push out maturities, or to reduce costs, or to do both.
Extended maturity in [inaudible]. We've made enormous strides in that over the last three years, since the merger with Poseidon, but that's probably more than we can do.
We've made enormous strides.
Strides.
And that's over the last three years since the merger with Poseidon, but that's probably more that we can do.
So while we still have pockets of expensive debt.
Then, we will look over time to see how we continue to bring the cutback cost down.
And that would be a colour.
Got it.
Not using any capital to make the business more efficient, the balance sheet more efficiently.
To make the business more efficient the balance sheet more efficiently.
Chris Robertson: Thanks, guys. I appreciate the time.
Operator: Thank you.
Our next question comes from Liam Burke of B Riley.
Your line is open.
Liam Dalton Burke: Thank you. How is everybody today?
Today.
Multiple speakers: Good, Liam. You?
Liam Dalton Burke: Good, good. I'm fine, thank you.
I'm fine thank you.
Just touching on slide 17, it's just the right chart.
They are obviously elevated in any kind of measurement and you want to see, either on a sequential or year over year basis, but how much of that lift is on the overhang from past congestion?
How much of that lift is on the overhang from past congestion.
And are these a normal representation of the supply demand strand right now?
Tom Lister: Ugh. That's a tough one to answer, Liam. This is Tom, by the way.
That's a tough one too.
To answer them Liam this is Tom by the way May.
Maybe I'll partially dodge the question and say, people have been talking about congestion in the supply chain as being transitory for about the last 18 months, and at least from where we're sitting, we don't see that congestion being structurally resolved anytime soon. So I guess, that's a partial answer, perhaps.
During transit tree for about the last 18 months and at least from where we're sitting we don't see that congestion being structurally resolved anytime soon so I guess, that's a partial answer perhaps.
Liam Dalton Burke: What I wanted to get to is the fact that we haven't seen the release from Shanghai closing so this could be exacerbated.
Tom Lister: Oh, yeah, I mean, I fully agree with that with that perspective. In fact, we tried to allude to that in our prepared remarks.
For sure, the more pent up demand that you have building up in China, while the ports and all the production facilities themselves are effectively closed, the bigger the demand side shock when it comes back online, and the grace of the sudden additional tightening in the supply demand balance. So, for sure, we see potential for the sustaining of these rates or possibly even increase of those rates when that eventually happens, and the longer it takes to happen, clearly the greater the impact.
While the ports and all the production facilities themselves.
Our are effectively closed the bigger the demand side shock when it comes back online.
And the the grace of the sudden additional tightening in the supply demand balance so for sure we see potential for the sustaining of these rates or possibly even increase if those rates when that eventually happens and the longer it takes to happen.
Clearly the greater the impact.
Liam Dalton Burke: Sure. And, asset pricing follows rates, so I'm presuming that these higher rates are reducing your potential acquisitions opportunities?
And rates.
Asset pricing follows rates, so I'm presuming that these higher rates are reduced.
Reducing your potential acquisitions.
Acquisition opportunities excuse me.
Yeah.
Georgios Giouroukos Youroukos: Yes, that's true. I mean, we feel that we look at opportunities continuously, but as you have seen, we have not executed on any of them, because we feel that the level of accretion that we want has not been in any of these transactions.
We will look at opportunities continuously but as you have seen we have not executed on any of them because we feel that the.
The level of accretion that we want has said has not been in any of these transactions.
But yes, as time goes by, we expect more and more opportunities to make sense going forward.
And if rates subside at the point, which they will, obviously, it's a cyclical market, then that would be reflected on the values and opportunities.
And opportunities.
Liam Dalton Burke: Great. Thank you very much.
Multiple speakers: Thank you. Thanks, Liam.
Operator: Thank you.
And, to ask a question, you need to press star one on your telephone.
To withdraw your question, please press the pound key.
Our next question comes from J. Mintzmyer of Value Investor's edge.
Oh value investor's edge.
Your line is open.
J. Mintzmyer: Hi, good morning, and good afternoon, gentlemen. And, congrats on a fantastic quarter.
Tom Lister: Thanks Jay.
Yeah of course.
Hey, yet, but we'll see.
J. Mintzmyer: [inaudible] Great questions early, by both the other analysts. I just wanted to follow up a little bit on repurchase capacity.
You installed the $40 million program. It looks like you used about $5 million of that in April, stock prices have come down significantly since then, right down another 15%, 20% since that point.
Will you think is a reasonable pace, where you can keep your balance sheet with enough liquidity, but still deploy repurchases. There are certain number per quarter that you could think of?
You can keep your balance sheet with enough liquidity, but still deploy repurchases does it.
There are certain number per quarter that you could think of.
Tom Lister: Ian, do you want to take this?
Ian J. Webber: Sure. That's a good question, J. Thank you very much.
That's a good question. Thank you very much.
It's really difficult to tell.
I mean, we do provide you all with some information on annual figures for EBITDA and Capex, regular dry dockings, and the regulatory stuff as well, we don't split it down by quarter, as you would expect, right?
With.
Some information on on on.
Annual figures for EBITDA and Capex regular dry dockings.
The regulatory stuff as well, we don't split it down by quarter.
As you would expect right.
Our cash flows is in an environment where we forward fixed charters at higher rates to come into effect further into the year.
At higher rates to come into effect for the further into the year.
To a degree, our cash flow is backend loaded.
It's not massively towards the end of the year, but there is a timing effect of it.
The effects of it.
So cash becomes more available to us towards the end of 2023.
For 2023, sorry.
All right.
And, given the other potential demands on capital, and the dynamic approach that we have, which we review with the board every quarter, I'm afraid it's just not possible to say "well, you know, we've done $5 million in this quarter, so we expect $5 million a quarter for the next few quarters".
On the dynamic approach that we have. A review with the board every quarter I'm afraid, it's just not possible to say well you know we've done $5 million in this quarter, sorry pardon me in the quarter for the next few quarters.
A review with the board every quarter I'm afraid, it's just not possible to say well you know we've done $5 million in this quarter, sorry pardon me in the quarter for the next few quarters.
J. Mintzmyer: Okay. I appreciate it. I was trying to pin you down there [laughter]. But, it's worth looking at it, it's very interesting to see the stock essentially flat, I mean, 1.50 as of September, when there was insider buys and repurchases.
I appreciate I was trying to pin you down there [laughter], but.
But it's worth looking at it's very interesting to see the stock essentially flat.
Dollars 50 lots of timber REIT, when there was insider buys and repurchases.
That's after you've added significant value in charter rolls. On the topic of charter rolls, it looks like the next availabilities are one or two in early 2023, a bunch of ships coming up in mid 2030. One of your peers did a lot of foreign fixtures a year or so out, obviously, there is some sort of discount associated with that. When do you think the next sort of window for new charters is going to be? Is this something we could expect this summer, or this fall, or are you going to hold those a little bit longer?
with that. When do you think the next sort of window for new charters is going to be? Is this something we could expect this summer, or this fall, or are you going to hold those a little bit longer?
Georgios Giouroukos Youroukos: Well, what is interesting is that 87% of our, let's call it fleet days, is covered for 2023, so only 13% remains to be re-chartered.
Days, let's call. It flip days is covered for 2020, there's only 13% remains.
So, we are looking at actively re chartering forward days fleet and that's what we've been doing for the past 18 months.
And we continue to do that.
Obviously, with very little remaining for 2023, we want to time this in the most efficient way.
And therefore, the window is open as we speak, it's not like a window that we have to snap. It's a matter of negotiating the best deal for the company.
And we are in continuous discussions with our customers in doing so, so I wouldn't be able to tell you whether it's now or in three months. It could be tomorrow morning that we fix a ship, long term forward fix, and then again in two months the next one, or right away the next one.
But it's not like there is a window that is closed right now and it`s going to reopen. It's an ongoing process and, you know, it`s a negotiation if you know what I mean.
J. Mintzmyer: Yeah, certainly, a lot of moving parts and things remain really tight.
Georgios Giouroukos Youroukos: Yes, exactly. You see, it's all about this, you know. Obviously, once China reopens, a surge in demand will come, which helps rates even further.
Would you say, it's all about this you know. Obviously, one China reopens. A surge in demand will come which helps our rates even further. <unk>.
Obviously, one China reopens.
A surge in demand will come which helps our rates even further.
<unk>.
And it depends on the exposure each company has. I mean, like I said, we have very little exposure to for 2023, it's only 13% of our days.
We can afford to be, let's say, a little bit more opportunistic, in order to try to achieve the better result that we can, without taking any risks, as I said, you know, because we're razor focused on extending and renewing in advance.
Yeah.
Opportunistic in order to try to achieve the better result that we can.
Without taking any of these countries as I said, you know because we're razor focused on extending and renewing in advance.
J. Mintzmyer: Certainly. Well, I`ll hope for the best, and hopefully, the market conditions, the stock market conditions improve a little bit. Thanks for your time, gentlemen, and congrats on a great quarter.
Multiple speakers: Thank you very much.
Operator: Thank you.
And next we have [inaudible].
Oxton Securities.
Your line is open.
Unknown Speaker: Thank you. Hi, guys.
Multiple speakers: Hello. Hi.
Unknown Speaker: A quick question on the China Lockdown.
A quick question on the China Lockdown.
At the near point of China reopening and that`s going to drive exports up again.
I'd like to drive exports up again.
Just curious.
If you have any view on port congestions, as it`s gonna change dynamics from basically vessels piling up in China versus how it used to be in the important side, out of, let`s say, Los Angeles. That congestion is coming down.
Port congestion.
Change dynamic.
Basically the vessels piling up in China versus.
Used to be in.
And the important side out of that.
Los Angeles.
Congestion is coming down.
So, is it changing the need to put more ships into the system, so to speak, in order to keep the loops up?
Is it changing the knee.
Put more ships into the system so to speak in order to keep the loops.
Tom Lister: Good question. I mean, to me it feels like a balloon in some ways. If you squeeze it in one place, it blues blows up in another.
So, the business of congestion within the supply chain and exactly where it sits and where it's manifested through a build-up of ships waiting, changes all the time.
But, I think the fact is, at least as we see it, that congestion is expected to remain, now whether it's in China, or it`s in the US, or it`s in Europe, wherever.
It makes very little difference to the overall dynamic, which it's a super tight market, in terms of supply.
Unknown Speaker: Interesting.
Yeah.
Yeah.
It doesn't.
Well, you mentioned the contract renewals. But, I`m curious to see if the liner companies are willing to buy chartering ships instead of going along. That was at least a phenomenon you saw last year. Is that still the case?
But.
Sure.
The liner companies are.
We're willing to buy.
Outside of chips.
And along that pleasantly.
The phenomenon you saw last year.
In the case.
Georgios Giouroukos Youroukos: Well I would say that, and this is the case right now, as long as chartering a ship is more expensive, cumulatively, if you see the total EBITDA the charter hire the liner company is going to pay out, EBITDA wise, versus buying the ship, there will always be interested in doing so.
As long as and this is the case right now.
As long as chartering a shape as more expensive cumulatively, if you see the total EBITDA at Atlanta.
Charter hire the Atlanta company who's going to pay out.
EBITDA wise.
Investors buying the ship.
They always there will always be interested in doing so.
And right now, yes, there is such interest continuously these days, interest of liner companies buying ships instead of chartering, if they can get them, because it's cheaper for them. You make more money by chartering the ship than selling, simple ways.
Interest of Atlanta companies buying ships instead of chartering if they can get them.
Because it's cheaper for them. It's it's you make more money by chartering the ship than selling a simple ways.
But that's why you don't have a lot of owners willing to sell the ship to the liner companies, as they can charter of the ship and make more money by chartering the ship to them.
So, we do see some deals happening, there are some owners who are exiting the sector. But generally speaking, the pace of this happening has reduced quite a bit. Because, you know, the less ships there are, the liquidity for ships right now is very, very, very limited, the more profitable it is for the owners to give their ships and trade them, rather than sell them.
Some deals happening there are some owners who are exiting the sector, but generally speaking are the base of of doing of happening. This has reduced quite a bit.
You know.
The less Cps that up liquidity for ships right now is very very very limited there.
The more profitable it is for the owners to give their ships and trade them rather than sell them.
Unknown Speaker: Great. Well, that's a good support for asset values, I guess.
Great well that's a good.
Support for asset values.
In terms of the outlook.
I think you mentioned on speed reduction in the figure there, but, when you look at it overall, when you look at the order book and the delivery, what is your current expectation problems with the new carbon regulations? What's the effect of scrapping? The effect on so speed?
On speed reduction.
There.
But when you look at it overall.
When you look at the order book and the delivery.
What is your current expectation problem, the new carbon regulations.
What's the FX the scrapping.
The sector so speed.
And you know, what`s the realistic effect on fleet growth in 2023 and 2024, in your words or your opinion?
What's the realistic.
Fleet growth in <unk>.
<unk> said before you.
You know what works or opinion.
Tom Lister: Sure, again, this is Tom. I'll try and address that.
That's something we had a crack at addressing in the prepared remarks on slide 16.
First of all, let's sort of recap. At the moment, there's about 1% idle capacity in the global fleet, which its tool intents and purposes full utilization, and during the course of this year, in order to synthesize additional capacity, we've seen in our own fleet, speed up of the orders of the charterers, and we presume that that would be reflective of the global fleet, also speeding up, and come 2023 with the implementation of EEXI, the only way that ships can be brought into compliance with the new regulations is by being brought down inside a particular speed envelope, let's say. Now, that envelope is going to vary by ship, so it's very very difficult to come up with a nice, elegant, starting January 1st, the global fleet is going to slow down by X. So, all that we've put out there ourselves, and I think we've heard this also from others, is that illustratively, for every knot, in other words, for every nautical mile per hour, the global containership fleet is obliged to slow down, as a result of the implementation of these emissions regulations. That is equivalent to removing between 6%-7% of effective supply from the mix. So, you know, you can play around with those numbers, but I don't think anyone has been able to say, come January 1st, X amount of capacity is going to be taken out of the system.
in our own fleet, speed up of the orders of the charterers, and we presume that that would be reflective of the global fleet, also speeding up, and come 2023 with the implementation of EEXI, the only way that ships can be brought into compliance with the new regulations is by being brought down inside a particular speed envelope, let's say. Now, that envelope is going to vary by ship, so it's very very difficult to come up with a nice, elegant, starting January 1st, the global fleet is going to slow down by X. So, all that we've put out there ourselves, and I think we've heard this also from others, is that illustratively, for every not, in other words for every nautical mile per hour, the global containership fleet is obliged to slow down, as a result of the implementation of these emissions regulations. That is equivalent to removing between 6%-7% of effective supply from the mix. So, you know, you can play around with those numbers, but I don't think anyone has been able to say, come January 1st, X amount of capacity is going to be taken out of the system.
is by being brought down inside a particular speed envelope, let's say. Now, that envelope is going to vary by ship, so it's very very difficult to come up with a nice, elegant, starting January 1st, the global fleet is going to slow down by X. So, all that we've put out there ourselves, and I think we've heard this also from others, is that illustratively, for every not, in other words for every nautical mile per hour, the global containership fleet is obliged to slow down, as a result of the implementation of these emissions regulations. That is equivalent to removing between 6%-7% of effective supply from the mix. So, you know, you can play around with those numbers, but I don't think anyone has been able to say, come January 1st, X amount of capacity is going to be taken out of the system.
starting January 1st, the global fleet is going to slow down by X. So, all that we've put out there ourselves, and I think we've heard this also from others, is that illustratively, for every not, in other words for every nautical mile per hour, the global containership fleet is obliged to slow down, as a result of the implementation of these emissions regulations. That is equivalent to removing between 6%-7% of effective supply from the mix. So, you know, you can play around with those numbers, but I don't think anyone has been able to say, come January 1st, X amount of capacity is going to be taken out of the system.
illustratively, for every not, in other words for every nautical mile per hour, the global containership fleet is obliged to slow down, as a result of the implementation of these emissions regulations. That is equivalent to removing between 6%-7% of effective supply from the mix. So, you know, you can play around with those numbers, but I don't think anyone has been able to say, come January 1st, X amount of capacity is going to be taken out of the system.
as a result of the implementation of these emissions regulations. That is equivalent to removing between 6%-7% of effective supply from the mix. So, you know, you can play around with those numbers, but I don't think anyone has been able to say, come January 1st, X amount of capacity is going to be taken out of the system.
X amount of capacity is going to be taken out of the system.
Georgios Giouroukos Youroukos: One thing I should add to that.
Is that, factually, the ships in general, of all sizes, are trading at about two to three knots higher than they used to prior to Covid.
The ships in general of all sizes.
Trading at about a two to three notch higher than they used to prior to Covid.
So there is a lot of room for slowing down.
Unknown Speaker: Would you care to make a guess on what`s the effective [inaudible].
Yeah.
Georgios Giouroukos Youroukos: It's very difficult to guess, but we see the average speed around 20-21 used to be around 17-18.
I wouldn`t mind if I was a betting man, I would bet that at least one knot it's been a slow down.
Of course, it's a balance between, you know, the emission penalties and the money the liner companies make by speeding up the way they speed up the fleet. Because they want to make more ton miles per year. So they want to make more rounds every year than they usually usually say, instead of doing 10 rounds, they wanna make 11 rounds, how can they do that by making the line growing faster?
It's a balance between.
You know the emission penalties.
And the money they Atlanta companies make by speeding up the way they speed up the fleet because they want to make more ton miles per year. So they they want to make more rounds more more rounds.
usually say, instead of doing 10 rounds, they wanna make 11 rounds, how can they do that by making the line growing faster?
So, having high speed means liner companies are making a lot of money and making a lot of money, we make a lot of money. So it's a triple effect.
You know, it's having high speed means.
A lot of companies are making a lot of money and making money, we make a little money. So it's a temporal effect so.
It's difficult to say, but, I would say that I would expect at least one knot slowing down, because of the emissions penalties are going to be quite steep for them, and especially, as we all know, year on year 2023 to 2024, and then, into 2025 the emissions are being stricter and stricter, they`re not whatever they are for 2023 or for 2024. 2024 is less emission should quiet and 2025 even less emission show.
the emissions are being stricter and stricter, they`re whatever they are for 2023 or for 2024. 2024 is less emission should quiet and 2025 even less emission show.
Being stricter and stricter or not whatever the FY 'twenty three outlook for 'twenty four 'twenty for us is less emission should quiet and twenty-five even less emission show eventually.
Eventually, whether they like it or not, ships are going to have to slow down, I think.
Tom Lister: And to add to that, just a quick clarification.
EEXI, which is this energy efficiency existing ship index, which is the emissions regulation, which is prompting engine power limiters to be installed on ships, is binary in nature, it's a pass fail test, and if a ship fails, it can no longer trade, which means that the liner companies themselves are not going to be able to trade the vessels at speeds, in excess of the limits imposed upon them by EEXI. So, sorry, I don't want to get into the weeds of them, of the regulations, because it gets pretty complex, but I think that's an important point to make. EEXI is pass-fail, and if you fail, you can't trade. So, everyone will have to bring their ships into compliance.
engine power limiters to be installed on ships, is binary in nature, it's a pass fail test, and if a ship fails, it can no longer trade, which means that the liner companies themselves are not going to be able to trade the vessels
The liner companies themselves.
We are not going to be able to trade the vessels.
at speeds, in excess of the limits imposed upon them by EEXI. So, sorry, I don't want to get into the weeds of them, of the regulations, because it gets pretty complex, but I think that's an important point to make. EEXI is pass-fail, and if you fail, you can't trade. So, everyone will have to bring their ships into compliance.
<unk>.
By way of engine power limitsers or a combination of other factors.
Georgios Giouroukos Youroukos: Hey, you could, to make it simple, it's like you have the speed radar and the police is stopping you for going above the speed limit.
So that's the EEXI number for its vessels, it`s a speeds rather. So, if you go above that, you can`t.
You can't.
They take your license.
So that will make ships go to the maximum of what is allowed, basing their emissions per vessel, you know, each vessel has a different emission.
That's the one thing.
The one I was mentioning is the CII, which is the Carbon Intensity Index, which is a metrics that has to do with how you trade the ship.
So, in other words, you can take, let's take a car, which is simple for everybody to understand, that if you take a hybrid car you know it is with gasoline and battery.
Let's let's take a car, which is simple for everybody to understand that if you take a hybrid car you know it is a with a with a gasoline and battery.
And you operate that car slowly and prudently, you achieve what the maker suggests, that it`s going to be the fuel consumption. But if you take the same car, and you flat out, you know, you pedal to the metal, drive the car...
The same God and you flat out you know you pedal to the metal drive the car.
Obviously, whether it is a hybrid or not, it won't produce the same fuel consumption as advertised. The advertisement of the fuel consumption is assuming a prudently driven car.
It won't produce the same fuel consumption as advertised the advertisement.
Fuel consumption is assuming it prudently driven car.
The same goes for four ships. So if the ship is operated by the liner companies in a manner always to the maximum allowed speed by EEXI, which we said the speed radar.
But always to that limit, and with a lot of days at sea, and so on and so forth, then the ship gets into a category that is not allowed to stay for more than 12 months. Because, that's a different thing. It's, you know, how you operate the ship also. So, the liner companies have to operate the ships within the speed limit, number one, and prudently, number two.
So, no pedal to the metal kind of actions, in order for them not to get into the categories that are not allowed to be. So, it's quite a complex equation.
Unknown Speaker: Indeed. Thanks for all the color on that speed stuff.
Thanks for all the color on that.
Yeah.
I mean, clearly, if you have one knot speed reduction, it`s quite significant. I think, the order book that`s 8% growth. And if you have 6%-7% reduction, of course, that`s a big impact.
If you have one not speed reduction.
Quite significant.
I think the order book.
8%.
Grow.
Thanks Evan.
Reduction of course.
Okay.
The final question I have, if I may.
If I look at the slide seven you have this EBITDA scenarios, but 2024 is not in there. I just, if you could, if you have the numbers, what's the contract coverage for 2024?
Scenarios.
Up 12% before it is not.
In there.
I just.
Uh Huh I have the numbers, what's the contract coverage for our constant the core.
And.
Do you know? Maybe you don't know, since it`s not on there. But, do you know what 2024 EBITDA would be?
Maybe you don't love them, there, but you know what.
That's for EBITDA would be.
With, let`s say, 15 years average rate.
The 15 year average rate.
Ian J. Webber: We do know.
Uh huh.
We've done the math, but, we don't we don't disclose it, yet, because it's so far away.
Uh huh.
The further out you get with these illustrative earnings scenarios, the less accurate they become.
We're clearly confident enough to put the data out on our 18 months in advance, through to the end of 2023, but I think we wouldn't want to go beyond that.
18 months in advance through to the end of 2023, but I think we wouldn't want to go beyond that.
Unknown Speaker: Okay fair enough.
Yeah.
Ian J. Webber: You can get a sense of contract cover from the previous couple of pages, five and six. Where there`s more white, i.e. ships unfixed. But, there`s still a significant amount of [inaudible] red bars, and pale blue bars, actually, as well legacy charters that continue.
Five and six. Where.
Where. There's more whites R E chips on fixed but there is still a significant amount of.
There's more whites R E chips on fixed but there is still a significant amount of.
A dog right boss.
Blue bars, as well as she legacy chances to continue.
Unknown Speaker: Yes. I think when I checked it was between 50 and 60% coverage. Anyways, it should be a fairly good in 2024 as well.
I think when an architect it wasn't between 50 and 60% coverage.
Yes.
It should be a fairly good.
So in terms of the floor as well.
Ian J. Webber: Yes.
Unknown Speaker: Thank you, That`s all.
Yeah.
Operator: Thank you. And I see no further questions in the queue.
And I see no further questions in the queue.
I'll turn the conference back over to Ian Webber for closing remarks.
Ian J. Webber: Thank you, everybody. Thank you for your questions. We look forward to giving you an update on the second quarter, which would be early August, if we follow our normal timetable. So, thanks very much.
The second quarter.
Which would be early August .
We follow a normal timetable.
Very much.
Yes.
Operator: This concludes today`s conference call. Thank you all for participating, you may now disconnect and have a pleasant day.
[music].