Q2 2022 Diana Shipping Inc Earnings Call
Greetings and welcome to the Diana shipping 2022 second quarter conference call and webcast at.
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A question and answer session will follow the formal presentation.
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Please note this conference is being recorded.
At this time I'll now turn the conference over to Ed <unk> Investor Relations. Mr. <unk> you may now begin thank.
Thank you Robin and thanks to everyone, who is joining us today for the Diana Shipping Inc. 2022 second quarter conference call, leading the call today will be semiramis, Paula <unk>, Chief Executive Officer, along with other members of the management team and so without further Ado I will turn the call over to Ms. Paula.
Your again Chief Executive Officer.
Thank you.
Good morning, ladies and gentlemen, and welcome to Diana <unk>, Inc. Second quarter 2022 earnings call. My name is I'm a fan.
The company's CEO and he's a NOLA having opportunity to present to you today.
Joining me on this call. This morning, we have most of the states you might have had a long president of Diana Shipping Inc. Mr.
Zafirovski CFO and Chief strategy Officer Mr.
I missed that Las Vegas property called Chief operating Officer and me.
Money is other.
Chief Accounting officer.
Before I begin I kindly ask everyone to review the forward looking statements applicable to today's presentation, which can be found on page four of the accompanying second quarter's presentation.
Uh huh.
The second quarter of 2022 has been another great quarter for our company and continues the trend of robust profitability since mid last year.
Market conditions remained positive during the second quarter and in tandem with our chartering strategy allowed us to continue generating attractive free cash flows.
A result, we have announced an even higher quarterly dividend for this quarter, reflecting our confidence in the market.
Turning to slide five I will review with you the company snapshot.
Not as of today.
Not much has changed since our last quarter, and we find ourselves owning and operating 35 vessels in the water with a carrying capacity of approximately $4 5 million deadweight tons.
Five vessels in our fleet are on mortgage.
It should be noted as already announced the motor vessel Baltimore has been sold and is expected to be delivered to her new owners during the third quarter of the here.
Our fleet utilization has remained at a very high level coming in at 99, 1% for the first half of 2022.
33 vessels in our fleet our lives in house by Diana Shipping services and two vessels are managed by our 50 50 joint venture Diana Williamson Management limited.
At the end of the second quarter, we employed 166 people at sea and shore.
Moving on to slide six.
I will go over the highlights of the second quarter and recent developments.
Specifically in May of this year, we declared the dividend of 25 cents per common share.
Approximately 21 $6 million in aggregate for the first quarter of 2022.
In June we signed a memorandum of agreement for the sale of most of the vessel back tomorrow to ocean filing for an aggregate price of 22 million.
20% of the purchase price was paid in cash upon signing and the remaining 80% will be paid upon the delivery of the vessel in the form of newly issued preferred shares of Ocean Power Inc.
In anticipation of the motor vessel Baltimore as deliveries earlier. This month, we made a prepayment of a $4 8 million on the.
Relevant debt facility and successfully released the vessels mortgage.
As previously highlighted the robust current market conditions have allowed us to be able to declare an even higher dividend for the second quarter of 27, five cents per common share or $23 $7 million in aggregate.
Our board, we continue evaluating the market conditions for the declaration of dividends for future quarters.
Lastly, our disciplined chartering strategy has allowed us to secure approximately $114 1 million U S dollars of contracted revenues for the remainder of the year with 84% contract coverage and 93 million U S dollars.
<unk> revenues for 2023 with 30% contract coverage Giannis will provide later on a more detailed analysis of our cash flow generation potential based on the current market environment.
Turning now to page seven.
Natural high life with the second quarter of 2022, we find ourselves as of June 30th 2022, with a cash and cash equivalents position of $113 3 million U S. Dollar.
With just a touch as again $126 8 million as of December 31st 2021.
Our debt net of deferred financing costs stood at 451 $7 million at the end of the second quarter of 2022.
Against $423 $7 million at the end of 2021.
Our time charter revenues for the second quarter of 2022 amounted to $74 5 million newest boneless as against $47 million for the second quarter of 2021.
Lastly, our earnings per share for the second quarter of 2020 came in at 42 cents versus two cents per share for the same period of 2021 yeah.
Yeah, and Nick will go over these numbers in more detail towards Iraq in the presentation.
Moving on to slide eight.
We find the summary of our recent chartering activity.
Consistent with our disciplined strategy, we have continued to take advantage of the favorable chartering market and have secured attractive time charters for five vessels of our fleet during the second quarter.
More specifically, we charted three panamax post panamax vessels at the weighted average daily rate of 19891 U S dollar and for our remaining average grade of 188 days for Invesco.
We have also chartered to capesize vessels at the weighted average rate.
$1920 per day for our remaining average periods of 288 days.
We intend to keep chartering our vessels in a similar way by staggering maturities locking in cash flows and positioning the company an amendment that allows us to participate in the market in a balanced way.
I now turn it though with the Giannis to go over the financials in more detail.
Thank you.
Once again I wish I could be vertically with my comments up at all.
Cause she's clearly has been a very nice quarter.
One can realize without the local for explanation.
As you can see on slide number one all the revenues from the chalk as well.
74 $5 million.
It's not that it's a number of vessels.
75 compared to the previous year the same quarter.
It was only $47 million.
And with smaller vessels in the water I E seven.
Of course, you can see the time charter equivalent rate for the quarter was nobody's thinking for sure.
Something you would've thought of as compared to.
$477 the previous year.
For the same quarter.
On slide number.
And the same picture.
Right.
And applies for the six months numbers, where the revenue stood at a 100.
$45 million compared to 88.1.
He was going to school, they're pretty there's a six month period.
With less ownership days.
Uh huh.
We managed to have a close to doubling the revenue.
We've had previously.
If banks out there it was the 23000 and 404 to six month period compared to 12000.
Nine per day.
The operating expenses of the vessels have been kept more or less at the same level.
Slide number 11.
And just like in the next one.
What is worth mentioning is the earnings per common share diluted.
For the quarter was 42 cents per share, which we feel that it is substantial and sustainable for the near future.
Slide number 12.
Income statement as well, we see again the substantial learning so far.
73 <unk>.
<unk> per common share diluted.
Slide 15.
I was going to cause our balance sheet, we have kept our cost position clearly a debate he's got a 11th.
Oh, so I find that that Didnt get there.
And our total debt.
There's only $451 7 million.
That makes a net debt position.
To be close to $329 million.
Slide number 14.
This is one of my favorite slides.
Slides.
For me it shows clearly how well we'd have minus all mature at Houston, our debt amortization profile.
As you know this is very important for the company's future and also the ability of the company to pay dividends.
I don't have to go through that slide again, we have discussed that many times.
Slide number 15.
In addition to the previews.
This is a slide that.
It shows our ability to keep paying a dividend and also to improve revised view of the company.
Let's see the free cash flow breakeven.
He said it is very healthy.
And he's done such a bit less than $14000 per day.
Based on our average daily time charter rate.
Fixed revenues of 2022.
<unk>, which is a 24000.
Honda don't Wash then for 2020 is plentiful and 900.
The difference between the two.
Uh huh.
Oh gosh basically.
Slide number 16.
Again this is a slide that we have to do as many times school, so our non speculative and discipline our blending strategy.
What is worth mentioning here is the fact that we have secured $114 million plus for the remaining days of.
For 2022, starting from the 19th of July onwards.
We have also 16% of the days on fixed.
And the fixed days average is 24000 zero 98.
That's great.
Yes.
Like.
Number 17, that's a highlight of our presentation.
The 15 shows the potential of cash generation for the remaining of the year 2022.
And for 2023 based on a recent that they face.
As you can see 50 million.
<unk> can be generated for the remaining of the year based on a largish at Samsung and ER.
For the year 2023 $62 million plus.
Before I hand over the presentation to Stacey I would like to mention once again.
How confident are you feeling.
Our first one the need for cash flow generation for the near future.
Stacey you kind of a theme was at boarding stuff on the market.
Okay.
So.
I'll try and keep everyone awake and welcome all the participants who would be the same Corporation conference call.
I have to start by saying that the voting that Ukraine has continues to have its effect on the shifting into the second quarter of this year.
As Clarksons point out significant disruptions in trade patterns are expected to support the kind of my training throughout this year and possibly the early part of 2023.
More specifically the longer haul.
European Union coal imports some Atlantic exports from Russia for far eastern receivers and disruption to Green tree patents are projected together to drive up the average distance of the dry bulk seaborne voyage this year by about 1%.
So clarkson throw the conclusion that these are shifting trade patterns are projected to drive ton mile demand.
Higher by about 1.4% year on year.
However, let us look.
What do you think the war and other factors got pads on large bulk carrier earnings over the last few months.
Capesize average over the five key routes last year.
<unk> $3353 per day.
So far this year the five P T whose average rate is.
$18003 82.
Dara, it's pretty neat.
This was slightly more staples com sure Max average five Tc rates in 2021.
It was $26900 a day brocksmith weak so far this year.
Vessels earned an average of about $24200 a day.
As of yesterday July 27, the Baltic dry index closed at 2007, while the Baltic Cape Index closed at 2333.
The Baltic Panamax index was at 2076, the recent downward trends of eating disease can be seen on slide 18.
Turning to macroeconomic considerations on the next slide 19.
According to the IMF World economic growth has certainly been affected by rewarding Ukraine World GDP growth for 2022, which is not expected to come in at.
Eight 6% for this year.
And the same for 2023.
In the United States the equivalent figure is a three 7% for this year and two 3% in 2023.
In the Euro area GDP is expected to grow by two 8% this year and just two 3% in 2023.
China's GDP growth is expected to close at about four 4% this year and five 1% mix.
Both these figures have been adjusted down recently, which is the result of increasing interest rates caused by a spike in inflation throughout the western world.
This in turn has been caused by the well advertised increases.
Cost of energy food and other states of course.
Have a great mark in their weekly dry bulk report.
Expect the Chinese economic activity to improve in the second half of this year and definitely set a positive tone for the dry bulk market how does it hold going forward.
Slide 19, we talked about steel according to Commodore research last week marked the third straight month.
We're a global crude steel production fell on a year on year basis.
At the same time, the world has been buying less Chinese steam.
As a clear result of the global economy continues to weaken Mustang Mach E.
According to Commodore research in China at the end of June stockpiles are flat and construction, Steve were one 2 million tons higher than at this time last year, we're at about 7% lower.
Well June steel production, excluding China.
Just over 67 4 million tons.
This is a 9% year on year contraction in global crude steel output. So that's months outside of China.
Turning to iron ore on a worldwide basis of seaborne iron ore transportation is expected by Clarksons to remain steady this year at around 152 1 billion metric tons.
Next year, an increase of about 1% as anticipated, which was taken towards the 153 million tons.
Overall, according to Clarksons Chinese seaborne iron ore imports are not projected to decline by 2% this year.
To just over 1 billion metric tons.
Coking coal now.
Global coking coal markets continue to be affected by the fallout from the Russia, Ukraine country.
Prices are near multi year highs and trade patterns continue to shift and evolve.
As reported recently by greatly South African producers Bay coal terminal have witnessed a 40% increase in coal shipments destined for European imports in the first five months of the year.
Other countries such as Japan.
We have blocked the importation of Russian cold coffee plants do replaces coal shipments from Indonesia and Australia.
It is estimated that such a move will increase combined ratio.
China has emerged as a buyer of large quantities of Russian coal.
Most of the schools has shifted from Russia to China by rate.
Putting some bulk carriers out of the entire picture of supply demand for this commodity.
For this year drops and we estimate that our shipments of coking coal will increase by 1% and reached 269 million metric tons by 2023.
Expect a further 2% increase with exports, reaching 276 million metric tons.
Thermal coal now.
According to Clarksons seaborne thermal coal exports are expected to drop by 1% this year to 968 million tons and increase by 1% again in 2023 benchmark thermal coal prices have been fluctuating in recent weeks.
Around their record highs.
And $7 per tonne.
This year's drop in volumes would be mainly as a result of weak demand from China due to the high prices and rising domestic production.
Chinese coal production in June grew year on year by 17% According to Commodore research.
Meanwhile, Chinese coal derived electricity generation contracted last month by about 5% on a year over year basis.
Currently according to Commodore research Chinese Northern Coast Port stockpiles were higher by 7 million tons compared to last year, which is an increase of about 39%.
Our freight lanes have recently reported.
The railway infrastructure for bringing coal from the South African gold mines to load ports.
Please limit on the increase in export volumes from those ports. Therefore European buyers of coal have been actively looking at South America and the United States has alternative co source.
Turning to grade three.
According to Clarksons, even be loss of Ukrainian exports global seaborne grain trade.
Now projected to decline by 4% this year.
Shifting trade patterns are projected to result in a smaller decline in ton miles of about just cost per se.
However, a lot of uncertainty remains over the top.
Grain imports are expected to increase by 3% to 520 million tons in 2023.
Coarse grain exports are expected to decline by 8% and weak exports are expected to total 205, and a half million tons, which would be 3% more than what is expected to come in for the <unk> 2021 'twenty two.
Great.
Turning now to the supply of tonnage on slide 21.
Yeah.
Before moving onto pure bulk carrier new buildings statistics as.
It is worth noting that according to Clarksons in general concept.
Ruling transition by the end of June there were 960 alternative fuel capable vessels on order with a carrying capacity of 70 million deadweight.
This represents 44% of the order book.
From these vessels above 700.
To be LNG capable while 84 units.
It tends to be LPG capable and a further 84 units that are set to be case.
Cable.
Keep in mind, the VIP successful all types of shifts so no.
Yeah.
The order book in the dry bulk sector now stands at just seven 2% for fleet capacity with 14% of the total fleet order book of $65 7 million tons being alternative fuel capable.
Mainly LNG.
From this total figure 38% of the total capacity on order it indicates that.
Sector will be for alternative fuels.
Indicate satisfactory about 23 million deadweight on order representing about 6% of the trading fleet as of first June .
There are 22 million deadweight first for Panamaxes on order equivalent to nine 1% of the trading fleet.
As for <unk> versus the total tonnage of north of $17 4 million deadweight representing 78.
Okay great.
According to Clarksons. The total bulk carrier fleet is expected to grow by a net two 4% this year and a mere <unk>, 7% in 2023.
Capesize fleet is expected to grow by one 8% this year and by 8%.
Same figures for the Panamax fleet anticipated to grow by 3% this year and one 6% one year from now.
As toxins pointed out new building market activity has recently been.
Radical ordering of container ships and LNG, Canada.
At the same time, altering our busters and taxes, which together account for 75% for work.
Capacity has been limited so much so Kathy containership sector order book is now larger than both the tanker and bucket or the books combined in deadweight terms, which is the first time.
Yeah.
Chinese new building case that milk price at around 64, and a half million dollars, which is about nine 3% higher than they were at this time last year.
As we got to kind of set of Max's.
Latest prices around 37 5 million.
Evelyn to 15, 4% more than last year's price.
When looking at the supply of tonnage we need to also keep a close eye on projects.
For example, with the graduate easy.
Of COVID-19 restrictions in China.
<unk> is gradually coming down in the Pacific region.
Barak indicates back sector is more plentiful and this is my place to live on freight rate short term and then convert to gradually migrate towards their plan.
It is estimated by Clarksons at about 3% of the bulk carrier fleet.
He is currently tied up by congestion is down from 6% at the beginning of this year.
All in all we agree with Clarksons that'd be supply factor bus pattern appears to be quite manageable.
New environmental regulations that might lead to extra scrapping and slower speeds mainly of older ships makes the supply side dynamics seem distinctly favorably for the bulk carrier.
Looking quickly at scrapping.
Scrapping of about patterns has been limited during the last few quarters, mainly due to the firm freight rates with Macquarie.
However, the prices of just under $600 per light displacement, we tasked all of us to set a favorite of older units scrap used to environmental and other regulations coming into force over the medium and long term.
According to Clarksons, only 17 bulk items of $1 8 million deadweight reported sold for demolition. So far this year compared to $5 2 million deadweight scrap for the whole of last year.
Gabe you have accounted for 84% for both dry bulk carriers sold for demolition so far.
The forecast for this year is that the only $5 7 million deadweight will be sold for scrap and about 22 million deadweight in 2023.
Finally, let's turn to the outlook for whatever use.
It would be a fair conclusion to reach by looking at the above mentioned statistics and forecast that the bulk carrier sector should he said I have no further experiments dislocations and disruptions.
Do relatively well over the next few quarters.
Once the summer fire seasons over shipments in inquiry should pick up and all sizes of cluster should benefit accordingly.
We agree with Clarksons, but even though iron ore shipments are vital to a world recession.
And coal shipments will continue supporting the dry bulk market for as long as the west tries to become independent of Russian coffee.
Increasing interest rates.
That's a headwind for us.
It would not be unreasonable however to assume.
The worlds largest column that is the United States and China, We act as a catalyst and keeping world growth from slowing down too much.
And causing disruption in bulk commodity trading among other things.
Especially in the United States would hopefully be short and shallow effects of the Americas.
China's growth will resume.
Is that the Chinese government has taken in order to avoid a sharp slow down such as the creation over $75 billion infrastructure fund, which will help revive China's economy from this quarter onward.
In this environment of reasonably healthy earnings with a degree of uncertainty though.
<unk> business strategy will be.
In such a way as to maintain the integrity and strength of our balance sheet.
At the same time it should also have the ability for paying our shareholders a very attractive dividend reserve at least for the near term and hopefully longer.
I will now pass the call to our CEO .
Before he for closing remarks, thank you.
Thank you Stacey.
So before we open it up to the question and answer session I would like to provide a summary of what I believe to be the most important point.
We remain disciplined and focused on taking advantage of favorable market conditions for securing positive free cash flows.
Ours to continue rewarding our shareholders with attractive dividend.
Secondly, we remain vigilant in maintaining a strong balance sheet.
Laos us to entertain creative growth and sleeping you and opportunities.
Third we are committed to our long term strategy of providing relevant stability in a cyclical business with an emphasis on maximizing shareholder value.
Now I will turn over the call to the operator to commence the question and answer session.
Thank you.
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Thank you because there are no further questions at this time I will turn the floor back to management for any closing comments or closing remarks.
Thank you all for joining us today, and we look forward to talking to you again in our next financial results call. Thank you very much.
Thank you to everyone attending today. This concludes today's call you may disconnect your lines at this time.