Q2 2022 Costamare Inc Earnings Call
Thank you for standing by ladies and gentlemen, and welcome to the customary incorporated conference call on the second quarter 2022 financials about.
We have with US Mr. Gregory <unk>, Chief Financial Officer of the company.
At this time all participants are in a listen only mode.
There will be a presentation, followed by a question and answer session.
Which time, if you wish to ask a question. Please press Star then one on your telephone keypad and wait for your name to be announced.
I must advise you that this conference is being recorded today Thursday July 28 2022.
We would like to remind you that this conference call contains forward looking statements.
Please take a moment to read slide number two of the presentation, which contains the forward looking statements.
And I will now pass the floor to your speaker today. Mr. Speaker. Please go ahead Sir.
Thank you Ed good morning, ladies and gentlemen.
During the second quarter evidenced recent broke somebody took out of the 90 million.
Adjusted net income more than doubled 2000, 19 million compared to 58 million for the same periods of last year.
Quarter end cash bonuses to look at that almost everyone has their media and total liquidity, including Undrawn credit lines was very strong as consumers have told us.
Over the last two months, we executed on our previously announced share buyback program by $60 million worth of common shares.
At the same time, we did conclude the five year syndicated loan facility or profitability proactively refinancing that you did in the sort of 16 vessels and significantly reduce your kind of course of funding.
Great Defense.
Regarding the market condition of pressure supply chains remain challenging as we enter the second half of the year.
Market asset values and charter rates remain I've shared with you at historically high levels.
So maybe just by our latest fixtures.
While the dry bulk market rates have recently been under pressure by students remain unprofitable levels, especially for ornish will enter the market the year before.
We view any potential softening of asset classes that you're comparing buying opportunity, we feel comfortable with the long term supply and demand dynamics of the sector.
Well the viable cloud increasingly we are actively evaluating new investment opportunities you see the shipping sector.
The potential to provide that hazard dams at acceptable levels.
Turning now to the drive for innovation.
On slide three you can see our second quarter results, which was the best Q2 over eight quarters since our listing for the quarter net income was $114 million or 92% that hasn't been think of was around Covid 1995 cents per share is up almost 600 million here over here right.
$54 million.
Yeah.
Besides Florida, because here's an update on our financing arrangements with close to half a billion facility refinancing 17 vessels with 12 U S Europe , and Asia and find some financing institutions.
The new facility increased our liquidity by two runs in video on the juice out of course were finding significantly extended the maturity of almost all the refinance crashes, while maintaining our work with leverage at a very low 24%.
Also deposits for quota shares for around $60 million.
Slide five.
Our revenue days covered percent fix.
Fixed for Brexit do and over 95% fixed for 2023.
We also for a fixed coupon versus $58500 per day per vessel for a period of three years, starting in the first half of 2023.
We continue to fix with our dry bulk vessels in the sport market, reaching 37 vessels since our last 30 days.
Finally with shoulder on dry bulk vessels the foundry for the capital gains of $3 $3.5 million.
Slide six.
Because NSE private market remains very strong levers the dry bulk market has seen that shows the levers and the order book remains low as color range well.
Well.
Above historical average.
Finally, we continue to have very long uninterrupted dividends record airports boosted by strong sponsor support.
Let's look at our leverage and liquidity.
It's increasingly exactly why our leverage continues to trend down.
It gives us the outbreak to look for opportunities to grow the company without wishing counterbalancing.
Slide eight.
You can see that that way for the rest of your fleet has it got impacted local people 3 billion with a duration of four years.
We are fully fixed for 2022, and 95% fixed for 2023 and 84% for 2020.
So everything is coming from a diversified three so first of all charters like Maersk MSC evergreen cosco gasoline backlogs.
On slide nine you can see the second quarter of 2022 snapshots.
We had an average of 18 vessels during Q2 up 65% year over year.
And then think of was COVID-19 video or 95 per share.
Figures to aid in due course that Asia and noncash items like the accrued charter revenues.
All of the gains from other schools and other nonrecurring items.
Turning to slide 10.
According to recent market overview raised for vessels above 2005 reality as you continue to remain at historically high levels because my sure. If we're going to create all sorts of names who regularly.
Slide 11.
Here, we're discussing the dry bulk market where rates have come off slightly from the seasonally strong first quarter, but do remain well above cash breakeven levels. Finally, the dry bulk order book of seven 2% available pre COVID-19, historically, which translates into modest fleet growth for at least the next two years.
With that we conclude our presentation and we can now take questions. Thank you operator, we can take questions now.
Yeah.
Thank you.
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That's star then one to ask a question.
Your first question today comes from Omar Saad with Jefferies. Please go ahead.
Thank you hi, guys.
Hi, Greg Good afternoon, everybody and thanks for the overview.
I just wanted to ask just.
About the containership market and you know how things have been developing there recently.
And maybe just first off just on the on the new buildings that you had that were canceled earlier this month.
Those six ships.
You gave a bit of color as to what happened, causing.
You guys can go ahead and terminate the.
Charters I'm, sorry, those contracts all together.
Okay.
About the eighth container ships.
We discussed that we had ordered a fortune 10000 deals involved at 10000 Teu like Oh.
Upon delivery of the vessels.
We did constant impactful milka that you just for the time being I cannot say anything more.
Over and above what we mentioned in our 6K filings.
We did that.
Major contracts because the shipyard has been in default.
The problems that I cannot say anything more at this stage at least.
Okay.
That's fair and I guess, you know those ships were secured right with with some long term charters on there.
Oh, yes, yes those ships.
Each one of them upon delivery.
FX didn't hear charter.
We said major liner.
Okay, and then do you think there's an opportunity or a chance to replace those that have you had those discussions with the with the customer is that something you'd like to do.
To find a different way to.
No questions.
This object with what countries.
For the diabetes, a web assets advisory side for the new buildings.
This is something we will think twice I mean normally we don't like ordering at the people in the market we're done.
We don't like all the ordering can bring to the market that so where today you bring in practice.
In today's environment that gives you something that doesn't make sense for us at least.
In the future of clause or is there some software and integrating the market the new building prices and something we would consider again.
On the bulk of our time charter.
Which is good enough in order to amortize our investments.
Yeah, so definitely not no no speculative ordering only against the.
Awesome.
But even if you will building project today.
Not on a speculative basis, but on the back of longtime childhood where asset values are.
This is something that we wouldn't do today.
Because even if the EBIT if you have a separate note. Then obviously you had thought that you are still ordering at the peak of the market and we try to be cognizant of that so this is the this is the reason we have not all of it.
No breathing say at this point.
Okay. Thanks for that and then maybe just one one final one just on the dry bulk investment.
It's clearly it's proven I think beneficial and profitable on any updated thoughts on where.
The Drybulk fleet sits long term do you see any thoughts that you can give us on maybe a spinoff potentially or a gradual sell down of that fleet or do you think that becomes a permanent part of cause tomorrow going forward.
I think look those like I see it.
What's the last year are surprises, which are much lower compared to today's markets. As you rightly pointed out it's around four to six vessels.
We sold one for the capital gains of three four and $5 million, but from a scientific point of view this as a long term investment.
Bulk ships.
So and I think those are complement a quite well be contaminated with rehab.
So.
Starting from the point that.
The peak of the market, that's an interesting market.
Would you like to continue.
Basically can containers.
The dry bulk of investment last year.
<unk> proved to be quite the right call.
We're here to stay in the dry bulk business and depending on market conditions and say this is something we would examine to also grow the dry bulk business, but its subject to market conditions and subject to other advisers. This really much if theres nothing is holding us back.
Yeah.
Okay, I think that's clear thanks, Thanks, Greg I'll turn it over.
Thank you Omar thank you.
The next question comes from Ben Nolan with Stifel. Please go ahead.
Hey, Greg.
Hey, How's it going I had a couple.
Maybe capital allocation type questions you guys look to have been pretty busy in the quarter on buybacks.
What was it three something million shares quite a lot.
Although it first of all just maybe to help me out in the share count didn't really move much did you buy them all at the end of the quarter or something is there a reason why.
That didn't change the share count.
Yes, I mean, I think most of them that were booked in third quarter entered as per accounting standards predicted but it just shows during the quarter, but.
What we can do is that we.
Concerns you.
The sort of.
Share count their schedule. So you can see exactly how we come up with this as a country right now.
Okay, well do you have just any quick number as to how how we should model it for <unk>.
Yeah.
For Q3.
Yes, I mean in total as Luke.
But like I think three or four 8% in total of the total.
Those are the five shares outstanding.
I think our we haven't bought the last day a couple of weeks. So I mean for Q3 should be they still count as of June 3rd JV, but let us get back to you with a very detailed schedule.
Oh, okay. Okay.
Okay. That's helpful. I appreciate it.
And then as it relates to <unk>.
The capital out obviously, you're you're buying back shares.
At this point have any capex or generating lots and lots of cash flow and leverages pretty reasonable.
You did pay a special dividend a little bit earlier this year a year ago, you increased the dividend a little bit.
Or are you thinking about the sort of normalized run rate differently any.
Or or.
Do you think that the company can permanently support a higher dividend payout and then NIM, where we're currently at.
From a pure cost perspective, we can support it has to do with you shortly.
Our cash balance of 700 million right.
And contracted cash flows of north of 3 billion.
And or the driver is from the continuation or the dry bulk vessels.
This environment that we're highly profitable because you have low cash breakeven reported last year.
That's a good surprise so from a cost perspective, we wanted to give up a little crazy.
No.
As you mentioned, we paid one special dividend, we did raise the dividend before that and we and we have.
You have bought back shares.
Whether you know if we're going to be buying more shares back we've had the program of 150 million.
Use like a <unk>.
$60 million worth for the time being the program is still there we'll see.
This is this has to do with where they were buying.
Acquisition opportunities or new projects hitting the market. Our main goal is to continue investing our excess cash from operations.
Business.
Which in time, they are going to be producing more dividends in the future. So.
It remains to be seen but we find out in the market. This as I mentioned in my commentary.
Actively looking at opportunities.
So first let's see what happens there.
And then this is something to consider as well, but the things that we have increased the dividend payment of one off dividend.
We bought back shares.
We've done quite a puzzle piece, let's see how we're going to continue investing.
Critically the cash from operation.
Okay. That's helpful and then.
Did that lead shorted, two and my last question.
You know you said that you would be opportunistic opportunistic with respect to adding to the dry bulk fleet if prices were better.
That said lately.
In the last I don't know three quarters or so you've been have sold a number of the container ships even sold one in the dry bulk ships.
<unk>.
And I am sure that you have.
Gains in all of those dry bulk ships at the moment and all of the container ships.
Any thoughts of continuing to do that or are you pretty much.
<unk> done what you'd wanted to do on the sales side.
What are the content.
We're pretty much that we sold but we felt it made sense.
She has to sell for reasons, we sold ships 2000 built between the us and we saw them as a graduate like 75 million or more.
So I think what.
That is frankly, a pretty much of course subject to market conditions, you can never predict the market, but based on what we know today I think on the contingency political you're pretty much done with the disclosed.
Disclosures on the dry bulk.
We showed that one vessel.
For example, again, but I think for the dry bulk was here to stay.
So it was not like a environment.
Investment, which are gonna disposal children actually should we see some shift in the UK the market.
Eventual fastest advisers into equally thrilled that they did.
It doesn't make sense.
From a capital allocation perspective, we'd be more than willing to expand our footprint.
The diabetes business.
Subject to market conditions, but the disposal of branches I think for the diabetes also in the dry bulk there may be a couple of examples a couple of smaller vessels, we may decide to sell food appropriate or something but generally the dry bulk fleet is here to stay and subject to market conditions out of it.
Or which would be to expand it further rather than to shrink it.
Alright, very clear I appreciate it thanks Craig.
Thank you thanks, Brian .
Yeah.
The next question comes from Quebec mode with a value investor's edge. Please go ahead.
Good morning, gentlemen, thank you for taking my questions you.
You have started to use the share repurchase authorization buying back around two 8% of the outstanding which seems like an optimal capital allocation call even to discount your shares are trading at is there any interest to initiate a tender to take on large blocks.
Right.
No for the time being.
Selling prices program.
Abu Cannabis division, we have been used coupled with yet.
So I mean, we will see I think where should we should should we decide to buyback more shares. This is something we would go through the broken up I guess for the time being no of course.
The only thing.
If we wish to continue with our share buyback and there is a more efficient way.
As to do it as we go into country goes in but for the time being.
Uh huh.
This is on a plain vanilla basis through this authorized by the board program.
That's helpful. Thank you.
And your preferred series have been trading above par.
I was wondering if there is any appetite to grow any of those series how do you view the preferred on your present capital structure.
So the preferred shares.
If I understood correctly.
Correctly in.
The fact that today in our biomass is being treated as equity.
Because they are they are truly besides just without their efforts.
Junior perpetual.
Without I may step options that we can redeem them anytime we want partly or in total after.
All five year period, so that we did.
His equity stake is that the question now they're trading all above.
But above the $25.
We have authorized.
Preferred share buyback program of 250 meters, which obviously, where the where they're trading today.
We have not utilized it in the past we bought back.
It's small amount oh.
Like a preferred shares.
Today really addressing it doesn't make sense to buy them back we'll see.
Indeed, thank you that's all from me Okay.
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Okay.
This concludes our question and answer session I would now like to turn the conference back over to Mr. Jacobs for any closing remarks.
Thank you for dialing in and for being with Us today.
We look forward to speaking with you again during our Q3.
That's cool thank you.
Thank you that does conclude our conference for today. Thank you all for participating you may now disconnect.