Q2 2022 Grindrod Shipping Holdings Ltd Earnings Call
We have with US Mr. Stephen Griffiths interim Chief Executive Officer, and Mr. Carl accurately Chief operating 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 at which time if you wish to ask a question. Please press star one on your telephone key.
Pat and wait for the confirmation tone, indicating your line is in the queue.
I must advise you that this conference is being recorded today.
I will now pass the call over to one of your speakers Mr. Griffith. Please go ahead.
Thank you operator.
Welcome everyone and thanks for joining our call today on the second quarter and first off thank you transfer to financial results.
It would be please refer you to slide two our forward looking statement disclaimer.
On this call we will make certain forward looking statements.
Any statements regarding our future financial and operating performance.
These statements include information regarding future time charter contracts.
Outlook for the Drybulk market and other operating metrics.
These statements are based on the beliefs and expectations of management as of today.
Actual results may differ materially from expectation.
This should definitely read the risks and uncertainty.
Slide two of this presentation and in yesterday's press release as.
As long as the risk factors included in there and you'll recall in our other filings with the S E T.
We assume no obligation to revise or update our forward looking statement.
Whether because of new information future events or otherwise.
Except as required by law.
In addition, during this call we will go to discussing certain non-GAAP financial management needs. It.
For additional disclosures relating to these non-GAAP financial measures.
A reconciliation to the most directly comparable GAAP measures E.
Yesterday's press release.
Pages 23, 25 of the slide deck, which was posted on that we'd thought.
And our filings with ACP.
Please turn to slide Paul for an overview of how about second quarter.
Uh huh.
<unk> financial results.
They're not shipping reported another record quarterly performance with a strong second quarter of 'twenty to 'twenty two.
Making a resilient market now and you see some X ultra Mike.
The other area of Sigma.
So the second quarters 2022, Oh go ahead.
Profit adjusted EBITDA, and adjusted net income increased materially year over year.
$64 6 million $73 $9 million and $3 $3 million or $2 81 thing they wouldn't reshape.
Okay.
But the first half 2022 I gross profit adjusted EBITDA and adjusted net income increased $205 $3 million $124.1 billion.
And $83 $1 million or $4 42 things the ordinary share.
Yeah.
As of June the state yesterday.
We had cash and equivalents of $160 million.
And restricted cash of $9 7 million.
An increase from December 2021 due to our strong results.
I'll go into more detail on our financials later in the presentation.
Now turning to slide five to look at our operational highlights and recent developments.
I didn't say it.
2022 we show the 2016, both medium range product tanker and the cheesecake.
Gross profit was $80 million.
This is the last bank B and a.
So I think there's an opportunity to complete our exit from the product.
Ill take that.
And if it got to strengthen in this sector.
In may the 10th anything too we exercised the purchase option on the chocolate in 2015, both Super Mexico area.
The obvious target for an amount of $18 million.
<unk> done it with delivery.
On July 10.
Anything to.
But they still remain chartered in the original contract right.
Ill leave it.
They're not shipping has four remaining purchase option, which you'll find on slide 22 of this presentation, which provides information on our long term chartering batesville.
And so she had to purchase options.
On Monday I made itself during 'twenty two we agreed to extend the long term chart that in the 2014 bolt.
Mexico area, obviously comes in pretty okay.
We live in.
And the chart right.
$26276 per day, the main thing made it.
Hey.
On August 17, 2022, our board of directors declared an interim quarterly cash dividend.
The 84 cents per ordinary share.
Payable on or about September 19, 2022.
Shareholders of record and all of this depends on not 2022.
The dividend is the highest to date since we initiated our policy in Q3 of last year and we are pleased to continue returning material capital to our shareholders.
Read that market.
Hello, guys into the financial highlights and performance for the second quarter.
Based off of 2022.
Turning to slide 10.
In the second quarter up 50, Thank you T D.
You increased.
$61 $6 million.
Okay, 208 point, sorry, $109 8 million for the same period.
So when you want.
Revenue increased due to improved market conditions in the dry bulk business, which was slightly offset by a reduction in short term operating day.
The sale of the medium range product tanker.
Yeah.
In the second quarter upstream.
Based in Asia.
Singing operations.
Thanks, David and thank you. Thank you all.
Gross profit increased to $64 6 million.
Second quarter 2010, compared to $35 6 million times, David Tracey do you want it.
It's profitable.
Net profit attributable to the company increased $6 8 million or $2 market tailwind and reshape the technical.
Second quarter.
You too.
Thank you $2.8 million or $1 18 the.
The ordinary shares.
Thank you Juan.
For the first half of 2022 revenue increased 230.
The $1 9 million compared to $178 $3 million.
Same period.
Do you want.
Gross profit increased to 100 and bought one 3 million.
Today's topic. Thank you. Thank you Chi Tung.
Page $48 $2 million.
Period 'twenty, Thank you Ana.
No problem.
I don't know if the company increased to $85 8 million.
For Dallas.
It wasn't reshape and the first part of 'twenty two.
I'm $25 million or $1 50 per ordinary share.
All right. Thanks, a lot.
Yeah.
Turning to slide eight.
The priority on building a strong balance sheet and have maintained a healthy cash position, while repaying $50 million all that gate.
Second quarter I think he brings a great.
Partly as a result of the sale of an uptick there.
And it's especially I said pardon me.
This strategy has significantly reduced our net debt.
Indianapolis 6 million, while leaving us well positioned to achieve right.
Very good.
On slide nine we provide our bank lines and other bahrain's repayment profile at June 30th change between the two.
We continue to have limited debt maturities until 2020 call, which combined with a conservative and most of that.
First I'll provide you with balance sheet flexibility going forward.
Overall, we maintained low leverage.
And this was even lower when you take into consideration the market value of our fleet, which is comprised mainly of mutton Japanese built.
The vessel.
Turning to slide 10.
We will now briefly discuss the drop out rate.
The second bucket and say stop thinking too.
And he saw TCE per day was $27479 per day for the three months ended June .
2022.
<unk> $18104 per day time period.
Superman.
Superman I'll connect TCE per day with $51091.
For the three months ended June 22.
$21916 per day time period.
Thank you.
For the first half of 2022.
And you saw TCE per day was 24 $1990 for the six months ended June with it yet.
You too.
$16385 per day time period.
Thank you Budd.
Superman Ultra Max TCE per day was $27604.
Six months ended June thank you Chi.
$17600 per day for the same period.
Thank you Juan.
As a whole this sustained 2022 we have contracted the following key E per day for the third quarter up 2022.
But 95, we contacted 1020 breaking days at an average TCE per day of $25127.
Perhaps supermac Ultra Mexico contracted 1524 operating days.
At an average TCE per day of $26766.
Average long term charter in costs per day for the Super Max Ultimate sleep, but the third quarter of 2022 is expected to be approximately $14921 per day.
Now turning to slide 11.
All of the lives in the Drybulk freight rates is easily demonstrate the basically the off historical result.
During the second quarter 2022 approximately 90% of that piece was predominantly trading.
Link all of their contract.
Short term time charters on the spot market, leading a company well positioned to take advantage of a strong price environment.
To put this into context with every $1000 change in TCE per day, equating to approximately $10 8 million TCE revenue during the full year 2021.
And that's sort of concrete.
As you can see on the graph fixtures for the third quarter slightly lower than the second quarter.
Well about spot market benchmark indices.
Now turning to slide 12.
It shows the coffee cash break even analysis for the first off. Thank you. Thank you too right.
Break even per vessel per day was as follows.
Time charter in which include net G&A cost of 15336 Hay day or at.
I believe it was $11801.
Good day, and a combined average check lift for the pool of dry bulk fleet.
$12593 per day.
The cash breakeven rate per day. These operational expenses made G&A interest expense and debt prepayments.
In contrast to the daily TCE rates in the previous slide is robust.
But most of our profitability.
With that I would like to turn the call out so you could call to discuss the dry bulk market.
Yeah.
Thank you Stacey.
Now if you can please turn to slide 14 to look at the fundamentals of the product.
Bulk sector.
And how that's been developing against the current market environment.
Wouldn't you Craig it was negatively impacted a second thought about commodities.
The grain inputs lots of sectors, while weaker economic conditions in China have reduced steel demand a key driver to global dry bulk trade flows.
The demand pick staying.
It's being partially offset by long ago, a quad play.
Placement cargos continue to be so.
Yeah.
This is demonstrated by the ton mile demand expectations, but are still expected to increase by one 2% in 2022 boss actual tons transported are projected to be flat year over year.
The primary examples of this trade the substitution or in the grain and coal markets.
The sourcing alternatives to Ukrainian buttons, and European buyers are seeking alternatives to Russian coal well.
Especially the funds new export markets, whether it's commodities.
Please turn to slide 15.
I was gonna slots of pets grain trade is expected to contract in 2022, primarily due to the loss of Ukrainian export cargoes.
Whilst the coal trade has been impacted as well due to some buzz avoiding Russian coal cargos.
Also increased domestic coal production in China.
Lockdowns in Shanghai I'll be done.
So he called the weakening steel demand in 2022.
This negatively impacted the iron ore trade.
Congestion has also reached releasing more ships onto the market.
One of the boats the key cargo small vessels are expected to remain.
The lone bright spot exhibiting post Chicago growth during 2022.
You can tell them the big complaint realization, there's also still a factor, albeit somewhat reduced from the peak of 2021.
For 2023 expectations also returned to growth in all the major bulk cargoes categories.
Turning to slide 16.
The dry bulk order book continues to shrink to multi decade lows and it's estimated that only seven 1% of sleep.
This potential growth so we're lucky, but it's quite favorable, especially considering approximately 23% of the bulk fleet is 15 years or older.
Approximately 12% of the Cosmos, the 20th soda makes.
I actually thought that what tons.
We would also draw attention to the high fleet growth from 2000, a night, peaking in 2012 in 2013.
Ships will start to go great from 'twenty to 'twenty three on lubes.
<unk> an aging fleet.
Despite strong market conditions, new ordering remains constrained by uncertainty relating to cost practicality in terms of trading patterns that you see.
Let's see.
Jim Technology and emissions regulations pertaining to E X I N C I R.
For 'twenty 'twenty to 'twenty to 'twenty three.
Slide breaks is forecast to be two 7% I'm not quite certain respectively.
Handy size I'm Super Ultra Max order books.
Oldest in the dry bulk fleet.
Turning to slide 17.
Well Sandy saw suite much spot TCE rates have been volatile this year.
And it's healthy levels.
Looking ahead, although the impact on the dry cargo market has been minimal.
We remain prudent in our approach to respond to that given the potential uncertainty.
Looking at the chart on the right hand side and you saw a suit amongst asset prices are flat relative to the end of the first quarter 2022.
Slightly from their most recent highs in late June .
I would now like to turn the call back over to Steve.
Thanks Carl.
Finally, let's turn to slide 19 for our completions and strategy.
It stopped without achievements in 2021.
Sorry, 2022 sorry about that and report today and he had the second quarter 2022 yourself to be the strongest in over a decade as dry bulk market remained strong with nearly a four times year over year increase in adjusted net income.
Our commercial strategy continues to demonstrate its potential with material profits generated from both our long and short term charter in vessels.
Why don't we opportunistically exercise the purchase option on the obvious part of it at very attractive levels using cash on hand.
On the corporate side, we've been sending out flexible dividends and capital return policy.
Second quarter.
Really rewarding shareholders with cash dividends of 84 cents per share.
Since we commenced our dividend policy in Q3.
Thank you Tony you want.
Now looking ahead.
And you kind of disrupting the grain trade and other commodity players due to the impact of Russian sanctions.
Demand has remained more resilient due to replacement projects sourced from longer distances increase.
Increasing ton miles.
The smallest new bold new building order book indicates continues to support market strain.
Medium term.
It used to construct.
Fiction and vessel supply right.
Uncertainty of engine technology and emissions.
New building order.
Particularly in the smaller vessel segments.
You don't even know what isn't in other sectors, such as LNG and container shipping.
Has limited the shipyard capacity, meaning.
Meaning that most new orders could not get the work out until mid 2024.
Is the extent that ton mile demand continues to grow at the lack of available supply growth combined with E. Exxon environmental regulations in 'twenty to 'twenty three is expected to lead to an attractive potential multiyear win that the dry bulk market.
With that thank.
Thank you all for joining our call today and look forward to reporting credit Brexit.
With that we'd like to open for questions.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question can you.
You May press star two if he like to remove your question from they can.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Thank you. Our first question comes from the line of Paul Fry with Alliance Global Partners. Please proceed with your question.
Good morning, or good afternoon wherever you may be.
Ill start with the macro so I wouldn't mind, good morning, or sorry, Hello.
Yeah, if we could start with the macro and you know you did a nice job of outlining what's going on.
Currently and just the.
Constant impact on ton miles, even though volumes fairly flat.
Can you look at 2023, you said, it's a year grows can you just highlight some of the risk factors that you're looking at in 2023.
Yeah.
Oh, Yeah in fact that theme.
Yeah.
Hum.
You mentioned that might cause factors.
Obviously, we don't know what's going to happen with the Ukraine, Russia situation and how that plays up.
I think obviously a major factor will be.
Inflation and what isn't.
That's gonna have on interest rates and peoples spend ability.
But this.
It will be offset somewhat by the new.
New regulations on steaming we yet so you can see eye on them.
You know as analysts.
They expect that there will be a return to a dry bulk seaborne fleet growth, which you know over the years historically.
But.
Two and a half to three and a half 4%.
And we've been flat this year, so I think the expectations all that.
It will pick up also I think we must obviously talk to China.
Again, it's very difficult to know what comes out of that but.
China Watchers I was expecting a cut.
She to stimulate much instead of apparently already in place for that to happen with with the G. A presidential reelection due in November he'll probably want to start on the postage platform.
Great and then if we could talk about just the ship.
Provokes maxed in my hand. These you know the relative rate strength has been pretty striking for several quarters and especially in you know in recent months.
Can you just talk about some of the factors that you're seeing there on I think.
Previous calls we've talked about congestion.
Helping it sounds like that might be easing a little bit but.
Container.
Market tightness should push some cargoes under you know onto the into the dry bulk market do you see a lessening of that impact two and can you just talk to you know currently where you're booking you know both sectors and sort of what we should expect for the rest of the third quarter and then into the fourth.
Quarter.
Yeah.
At the moment the Atlantic.
Blacks.
The Pacific in the minor bulk trades.
We are starting to see quite a significant pick up in the last few days.
And.
After that well this year, it's been a summer lull in Colorado.
Quite a lot of uncertainty it does seem that trade trade is picking up and again, we talk to our potential China stimulus.
And you know I think overall, we were reasonably close to yes. The congestion may come out at least in the short term that might build up again and there is.
Coming out of the container market.
Overall, I mean, whilst we see the guests that things are for next year still heavily back where they were.
We are confident that we will be in a.
Profitable scenario.
And I think it will be above personally buzzworthy Ssi is.
Shelby mixture kind of looks like three and you can see that in the period market. If we wanted to.
Put out ships on period, it is quite significantly above where the market sits.
California right.
Okay sounds good and then if we could just talk about operating costs. You know some other companies have talked about higher operating costs yours your costs moved a little bit, but not anywhere to the extent that the rest of the industries is seen and can you just talk about.
Operating cost and then also it looks like G&A was a lot lower than what I expected and could you just talk about SG&A over the rest of the year.
Okay, Yeah I'll jump in here.
But I'll pick something we have we have that.
And our internal target.
On the on the basis of trying to not be at the top $5000 was still weak.
Still about definitely have come down from Q1.
It was probably come down about three or $400.
We continue to have some hot soft repatriation costs from.
From Covid issues explain some flop.
Yeah.
It's difficult in this in the spirit to reduce it the green we are continually working on it but you know we'd still like to be.
So a little bit further.
<unk> costs, I mean, theyre, all slightly lower than what we had in Q1.
So the one thing I was pointing out is it does create some softer liked it and think that as a result of our improved bottom line.
And you know these are variable cost and they will do significantly if you say the market market trends and our profitability is not as high as now so that's the role I'm, sorry, I'm still looking at rolling out cash breakeven and it did come down from the current levels of 12600.
Overall pretty much the same we'd love to talk to costs that are part of the best we can.
Vision of those chocolate chips in vessels when when we purchase when we exercise the purchase options.
Resulting in a lower cash cost and even more so if we then take them now.
There's no financing attached.
Yeah, you're supposed to have a possibility that we might pay down some of that debt.
It will also reduce costs not really high on the agenda.
So it's a potential.
Okay. Great. That's helpful. And then you know our U I I fell 10, 6% tax rate it seems like that's.
Your tax rate is going to be close to zero or it was over the first half of the year. He said.
Something I should.
Extend out or are you potentially going to have any tax.
Taxes over the second half of the year no no you cannot.
You can expect it to remain.
Failure, along the trend that we've had in the first six months.
Okay.
And then you would their purchase options you highlighted.
Highlighted it looked like the Pinehurst got shifted into the third quarter. So that's 18 million Bucks in the third quarter instead of the second quarter.
But the the two Japanese yeah, I've got a bunch of these names, but the new rule and not.
Hi, Akita those continued those purchase shopping options continued to go down, especially because you.
You know the yen dollar relationship Wendy.
Absolutely Yeah. When do you start to think about you know exercising those orally or doing something to lock in you know scratching advantageous in exchange rate.
Yeah.
Yeah, absolutely I mean in terms of our policy to hedge you know we wouldn't do that until we push the button and exercise the option, but in terms of Tommy now did.
Did you say the finished with it.
And and delivered in July we bought we have board approval to do another two I'm, sorry, we expect them to push the button and nice to see and then the other.
We plan to exercise.
In a late this year early next year. So you can expect us to move on that is pretty pumped up.
Now another thing that I'd like to add of course is we purchase it upon his state Street and and you know the plan is Lockheed it will do all of them they treat.
And you know this will contribute to our plan to reduce our daily cost in our fleet.
It's one thing to bear in mind in terms of the way I can't she is now the potential customer base for the 19 ships.
The $86 million.
And you know all of those option properties are well below the current market value.
Yeah, they look really attractive so just to be clear despite the.
Middle of next year, all four of those will be brought in.
Yeah.
Luckily it tends to bet, yeah, they'll likely be done okay.
Okay and that explains some use of cash, especially.
Given that your cash balances of 100.
You know call it a 170 million it looks like the third.
Yeah.
170 million, that's well above the purchase options it looks like the fourth quarter or third quarter.
And it's gonna be flat, just a little bit because of the purchase option on the Pinehurst that you executed, but can you talk about you.
You know the capital allocation going forward.
You know also you know the stock was a little bit weak.
You know went into there.
The mid teens can you just talk about how you're thinking about stock buybacks versus dividends and parameters.
So in the context of it but you know they are.
86 million that you're likely to spend.
Yeah, that's absolutely right.
Yeah. So you know with the dividends and capital return policy, it's always a topic of discussion.
At board level.
And you know of course, you know we.
Could increase our dividends at some point in the future.
Our board is pretty happy with it as it stands you know with everything that I've spoken about them, but very much on the agenda.
Chip I bet, Yeah, we didn't do anything in Q2.
The last point to now share prices when we're in a close period for reporting.
Yeah and in the Middle East.
And that we may well Buffett about some kid of course, it shaped part dependent.
I have to say isn't it.
In a in a position, where we would probably consider buying back but we've got the approvals in place and we will look at it in a week. They hit once we got back out as I stated are important.
Great I appreciate your time thank you.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad will pause a moment to allow for other questions.
Yeah.
Yeah.
[noise].
Yes.
Thank you. Our next question comes from the line of French's Daniels with antibody investment. Please proceed with your question.
Thank you very much operator.
Uh huh.
To get a little bit more color.
Color on two things.
First one is on your comment.
About new order is not coming and hitting a wall time till mid 2024.
What are you expecting closed 'twenty 'twenty four 'twenty 'twenty four I see new order to commenting them do you expect that the supply will be greater than hum demand I'm, not and I and Dan and I'm asking because of the impact of Exane.
Yes supply on shipping kicked in values and then my second question relates to how to me they like and the significance of the declining.
Baltic dry index number it's been declining seem to dog.
Made and all of.
May I don't know if you have any bolt on what that means for you.
Yeah.
So you should I answer to this.
Yeah, you got call I'm sorry.
Yeah as far as the new building orders.
There are plenty of ships to them, but not in a good and.
So the dry cargo side too I mean the stocks.
And in terms of the order book on the handy size them.
Super One foods.
Yeah.
Two main reasons for that.
One is that the yards or.
Quite full with the.
So ships that can do new too or dual fuel engines and more liquidity to do that.
It's easier to get finance for them. They take the E. S. G boxes, because that can see because.
They're in the right way to go in terms of decarbonization, reducing your carbon footprint.
So until.
The.
Technology It comes along.
To make it attractive for financing to finance it.
So the people who.
Or obviously, the big companies, who are governed by ESG policy, and we will look into ESG policy, but they.
Big companies with deep pockets are very much governed by it.
These days.
Until this new fuel technology comes along but couldn't fit into the candy Oh for our sector.
It's.
It's difficult to see or predict that there's going to be a big uptake of new building when we're still building them with the old.
That'd be carbon using engines.
Of course the.
The economies are always getting better on those ships they get they're getting more eco.
But I just hope yet no one's come up with the with the magic bullet on how you couldn't afford to.
Put all of them are inexpensive engine onto what is a fairly inexpensive ship.
And well see the next question Sheila.
I'm sorry. It seems his line has disconnected I will <unk>. Our next question comes from line of Paul Frat with Alliance Global Partners. Please proceed with your follow up.
Yeah, I think the second question that he had was that.
Can you talk about your what you're seeing in the market the floor at the Alturas and supers in handy just relative to the driver.
The B B I.
Weakness the Baltic dry index weakness.
Yeah B.
Okay.
The BD is largely got them percentage wise by the Cape market.
And on the Cape market is it is.
Have you fully built.
And.
It's driven almost entirely by the iron ore and to a lesser degree cold.
I'm in China.
Appetite for growth in the.
The iron ore imports it is not but.
Cause that leveling out and a stable production and also because they now produce plenty of scrap.
There's less reliance on I don't know I think it was of course, they still produce iron ore. So.
From my perspective are we going to cease the Cape market is going.
Have any.
Big strides in the near term.
Say it governance.
D D. D. D is much more representative market, whereas the minor bulk sizes.
Have a smaller percentage of the P. D R.
We believe that for all the reasons I think we can.
We've already said that the the the minor bulk a good sector.
Detain its strengths.
And we can see that.
Sectors outperformed all markets. This.
This year.
Great. That's really helpful. I just had a couple.
Additional follow on questions.
One is can you talk about you know the dry docking schedule over the second half of the year it looks like 166 days.
You're anticipating and then looking at 'twenty three you're looking at two or I'm. Sorry, 220 can you just talk about you know how firm that dry docking schedule is and you know what maybe why the second half is heavier then you know then last couple of quarters.
Okay.
Yeah.
Right.
Steve Yeah.
Okay.
[laughter].
Yeah look in terms of the second half it's yeah.
Yeah. It is there is going to be more than you spent in the second half and.
And then what we had been in the place.
Yeah. It is it is quite materially higher.
And then what we spend in the second half.
Is.
Sorry in 'twenty 'twenty treat ultra high it's just that you know.
The timing and the share getting it has been pretty light in the first half of this year. So we can.
And expect it to be yeah definitely.
Tom Pyle.
I mean, it's slightly higher than that.
In 2022.
Okay I mean.
I think it's what I think it's worth adding that you know we tried to put ships.
Two and a half years.
And you know that.
The special survey use that'd be thought is which is.
You have to dry dock for special survey, you don't have to dry dock.
Immediate one but we do.
Just because we believe we get better at running ship that we paid the holds we paint a hull, which isn't environmental requirement should go crossover and spokes Oh growths. So we we we dry docked when the schedule comes around and go on a ship, but we didn't do.
Every two and a hobbyist.
Yep.
Right.
Alright, and southern Cal they'd probably say no.
We have had some <expletive> Julian the first half of this year, but theres been delays in China. So they chose to be a had been of course not be net instead of consistent flow through through the year.
So we are a bit more than we would be.
In the second half of this year.
And then 'twenty three is obviously the expectation is pretty much the same as what we spend over the course of 2022.
And then you know historically you haven't looked at scrubbers, you know theres some in the industry, but are you, saying that you know the.
The dry bulk the Noncancerous you know companies are going to start to look at scrubbers.
Has your view on scrubbers changed at all.
I mean, we.
Yeah, we wish.
We didn't go for scrubbers.
Leslie the environments are arguments to one side as to whether that good thing or bad thing you get different opinions on that but the main reason why we didn't guide to the scrubbers is because it's really capitalizing on what is a very nice Japanese modern eco fleet.
A milk for mattresses for example, everything that we have is 2014 onwards with when the new at me and you can pay me, which gets greater efficiencies on your speed and consumption. So.
To go into spent two two and a half million them on scrubbers and then all the costs of the scrubber maintenance to keep them working which was.
We we felt.
I'm still food, but that's not a necessary expenditure.
Yeah, Okay, and then just one if we could look at just the working capital flow it looks like working capital change.
Changes were fairly positive in the second quarter.
Calculate about 20 million according to sort of the way I calibrate working capital within your cash flow. Just you know you're reporting for what is different but that's what it back into.
Can you just talk about what working capital should do over the rest of the year.
There just was the second quarter, a reversal of the first quarter working capital deficit. Just if you could help me understand what's going on with working capital.
Yep.
Absolutely you know, it's very very difficult.
Can you estimate what its going to be at a point in time you know.
You might maybe close with a big at play on on on voyage expenses well.
At the end of a lot just before the end of the quarter or you might have a time charter that's got to be paid for up to two weeks just before it's very very difficult to predict.
100% dropped in terms of it was the reversal yeah. We we've had about a 15 million reversal in and in that in Q2.
Most of which went the other way in Q1, we do do a base to two to manage that and close to the quarter and we look at all about outflows and inflows.
And see what you can do but some of them are just not unavoidable.
Unavoidable.
It was just in terms of timing you know you have to pay certain customer sitting back.
Yeah, if you haven't looked.
Hum.
You know that the level should be pretty much the same.
But I'd say manage it as best as we can.
Perfect. Thank you.
Thank you, ladies and gentlemen that concludes our time allowed for questions I'll turn the floor back to management for any final comments.
Okay. Thanks, everyone for joining us for taking the time to join our resolve cool and yeah, you'll hear from US again in the next quarter.
Hi.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.