Q3 2022 Diana Shipping Inc Earnings Call
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Ladies and gentlemen, thank you for your patience and please remain on the line today as Diana Shipping conference, we'll be starting shortly again, we do thank you for your patience and ask that you. Please remain on the line today as Diana shipping conference, we'll be starting shortly.
[music].
Greetings and welcome to the Diana Shipping, Inc, 2022, third quarter conference call and webcast. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If you would like to ask a question you may do so by pressing star one on your telephone keypad, if anyone should require.
For operator assistance during the conference. Please press Star Zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Mr. Ed <unk> IR advisor. Thank you Sir Please go ahead.
Thank you Donna and thanks to everyone for joining us for the Diana Shipping Inc.
2022 third quarter conference call with US today from management are semi Roomies, Paula <unk>, Chief Executive Officer, Anastasia Smucker honest, President you honest stuff Iraq as CFO.
And Chief strategy Officer, Treasurer, and Secretary Oh, let's cut it goes on top of three phone Chief operating officer, and Maria de de Chief Accounting Officer with US out further Ado I will turn it over to MS. Paula you.
Yeah.
Thank you Ed.
Good morning, ladies and gentlemen, and welcome to the Diana Shipping Inc. Third quarter 2022 earnings call. My name is Ed mentioned it. So maybe I missed by you the company CEO and it is an honor to have the opportunity to present to you today.
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 third quarter presentation.
Okay.
The third quarter of 2022 has been another very profitable quarter for our company, but also has been a very busy and productive one with the acquisition of the nine vessel fleet.
Fleet in August .
While market conditions have become less robust, especially towards the end of the third quarter. Our disciplined chartering strategy has allowed us to continue generating attractive free cash flows.
As a result, we have announced another attractive dividend for this quarter continuing to reward our shareholders.
Turning to slide five I will review with you the company's snapshot as of today.
This time around we do have changes since last quarter, and we find ourselves owning and operating and expanded fleet of 40 vessels in the water with a carrying capacity of approximately $4 7 million deadweight tons.
As already announced.
Our fleet to increase to 43 vessels by the end of the year as we take delivery of the main three panamaxes within December .
Our fleet utilization has remained at very high levels coming in at 99, 1% for the nine months of 2022.
36 vessels in our fleet are managed in house by Diana shipping services and full vessels are managed by our 50 50 joint venture Diana Williamson Management limited.
At the end of the third quarter, we employed 860 people at sea and shore.
Moving on to slide six and seven I will go over the highlights of the third quarter and recent developments.
More specifically in July of this year, we declared the dividend of 27.5.
Five cents per common share or approximately $23 7 million U S dollars in aggregate for the second quarter of 2022.
Also in July we made a prepayment or.
$4 $8 million for the release of the mortgage on the motor vessel about tomorrow of vessels that we have agreed to sell earlier in the year.
And all of this we were very we were particularly pleased to have agreed to acquire nine modern ultra Max dry bulk vessels built between 2015 and 2018 with an average vessel age of approximately five four years from seed Trade Holdings, Inc. The aggregate purchase price of the <unk>.
<unk> is $330 million of which 220 million will be paid in cash and $110 million is to be paid in the form of 18 million and 487.
<unk> thousand 395 in aggregate newly issued common shares of the company at the price of $5 $95 per share.
So far we have taken delivery of six out of the nine vessels and as mentioned before we expect to take delivery of the remaining three within December .
We view this transaction to be fully supportive of our strategy of expanding and modernizing our fleet while at the same time, maintaining a strong balance sheet with low cash flow breakeven point.
Also in all of this in anticipation of the motor vessel, New Orleans, and Santa Barbara sale and leaseback transactions, we made a prepayment of $30 million 8 million U S dollars on the relevant debt facilities and successfully released the vessels mortgages in September we prefer.
He did with the sale of the two vessels to an affiliated Japanese third parties for an aggregate amount of $66 4 million U S dollar and bareboat charters and the vessels for a period of eight years.
In September we delivered the motor vessel Baltimore to her buyers Ocean Power, Inc. And received 25000 series D convertible preferred shares issued by the buyers.
Part of the sale consideration.
Also in September we signed an up to $200 million credit facility for the partial financing of the nine fulltime asbestos.
As of now we have declared a dividend for the third quarter, which is part cash and cartons stock.
Cash dividend is $17.05 per common share or $17 3 million in aggregate.
With a payment of this quarter's dividend the total amount of cash dividends paid since we initiated our dividend in last November is one dollar. In addition, this quarter. We also declared a stock dividend of all Ocean power series D convertible preferred shares at our company.
Has received as partial consideration for the disposal of motor vessel Baltimore on a pro rata basis to all our shareholders.
This stock dividend will either be in the form of ocean, how common shares or series C convertible preferred shares at the election of each Diana shareholder.
The distribution of the stock dividend will be made after the registration statement filed by Ocean County, with the SEC has been declared effective.
We are very pleased that we are continuing to reward our shareholders with these output.
Our board will continue to evaluate the market conditions for the declaration of dividends for further quarters.
Lastly, as of November 14th we have secured approximately $35 million of contracted revenues for the remainder of the year with 80% contract coverage and the $123 7 million U S dollars of contracted revenues for 2023 with 36% contract.
Average Giannis will provide later on a more detailed analysis of our cash flow generation potential based on the current market environment.
Turning to the financial highlights of this quarter.
Of 2022 on slide eight we find ourselves as of September 30th 2022, with a cash and cash equivalents position of $129 7 million U S dollars, including restricted cash as against the $126 8 million U S dollars as of December 30 <unk>.
First 2021, our debt net of deferred financing costs.
At 471 $8 million at the end of the third quarter of 2022 as against $423 7 million U S dollars at the end of 2021.
Our time charter revenues for the third quarter of 2022 amounted to 43, $73 8 million U S dollars as against $57 3 million U S. Dollar for the third quarter of 2021.
Lastly, our earnings per share for the third quarter of 2022 came in at 37% versus 16 cents per share for the same period in 2021.
Yeah, and this will go over these numbers in more detail further on in the presentation.
Moving onto slide nine.
We find the summary of our recent chartering activity.
Assistance with our disciplined chartering strategy, we have continued chartering our vessels in a staggered manner and have secured profitable time charters for seven vessels of our fleet since our last quarterly earnings presentation. More specifically, we have charted one come through Max one Panamax and post panamax and for ultra Max vessels at the way.
The average daily rate of 14862 U S dollars and for the remaining average period of 374 days per vessel.
We said, we intend to keep chartering our vessels in a similar way by staggering maturities locking in cash flows and positioning us in a manner that allows us to participate in the market.
Balanced way.
I now turn this over to Yaniv.
<unk> in more detail.
Thank you.
This has been another very strong quarter for our company.
The time charter revenues stood at 73 eight.
U U S dollars with an average number of vessels 34 nine.
Compared to $57 $3 million.
With an average number of vessels.
The $6 three of the same quarter last year.
The time charter equivalent rate for this quarter was 23200 <unk>.
Nine.
<unk> dollars compared to 17143 U S dollars.
The same quarter the previous year.
What is also notable.
Is the decrease in our operating expenses.
Approximately.
The dollars.
Dollars per day compared to the previous year's quarter.
If we move to slide 11.
You can see that the same picture applies and as if we have the same picture for the nine months.
Time charter revenues were $214 million.
Compared to only 145.
The same period last year.
Even with a smaller average number of vessels.
Looking at the average time charter equivalent rate was.
This quarter it was 23363 approximately $10000 more than the previous year.
Operating expenses for the nine months were more or less the same at around $5500 per day.
Slide number 12 on this slide we can see.
Zero 39, being the basic earnings per share zero $37 per share on a diluted basis.
Let me remind you that the last year same indicate those stood at only zero 17.
And zero 16 per share respectively.
Yes.
Again for the nine months.
Same picture.
$115 per share basic and $1 10 diluted.
Compared to only zero 15, and zero 2014, respectively last year.
As always our balance sheet has been on.
But it's been a condition with.
I'm choosing only one number from the benefit of the balance sheet.
Being at approximately.
$49 million.
And in.
As of December 31st the last year, it was $305 million very vertical.
Slide number 15.
Again.
You have seen the slide before.
The maturities of our debt.
Clearly, our where we want them to be.
Also the projected loan balances are very manageable compared to the estimated value.
<unk> of our vessels.
Yes, sure that the maturities.
We keep changing well ahead of their final dates.
Our track record to be such that we have always talked that proactively.
Slide number.
Succeed.
As of September 2022, our free cash flow breakeven was 13153 per day.
Again, a very healthy number as regards to the ability of the company to pay dividend.
Now talking about dividend.
And especially the dividend, we have announced I think that.
If someone doesn't necessarily calculations based on current prices so for ocean by the shares but there may be distributed in the form of carbon czeslaw existing shareholders together with the cuts announced.
This is a very meaningful dividend close to 40 cents.
Okay.
That will be distributed to our shareholders.
Slide 17 is the usual boring slide that we have always said there is simply.
Ah represents our disciplined non speculative chartering strategy.
What we can say for that slide.
Is that we have secured another $35 million for the remaining of the year and we still have another 20%.
The days on fixed for the remaining.
And.
Yes.
This is going to be my last slide and then I'm going to hand, it over to stacie.
Slides should be seen in continuation with the previous slide and based on the very recent FFA rights.
But we have used for the fixed revenues.
It is estimated that the total revenues for 2023 can be around $254 million.
Yeah.
Before I turn it over to Staci.
I would like to mention once again that the company today has announced.
Very good results and also a very healthy dividend for our shareholders.
And our balance sheet remains in a very very good condition.
With excess cash.
In our accounts with a mortgage versus low financially secure employment and I don't know if it really John vessels together with other safety bonds that we have.
We feel very very comfortable with the ability of the company to pay dividends.
And with that.
I give the floor to Stacy for the markets.
Ill now.
Thanks again.
Let's start with.
Looking at what has happened during the this geopolitically turbulent year with the bulk carrier earnings across all of the bulk carrier size range.
And this first slide.
I'd like to point out that Clarkson summarize recent developments by reminding us that after the strongest year for the sector in 13 years, that's what 2021 bulk markets have softened in 2022. The main reasons as we've mentioned below where problems with demand for commodities and easing port congestion after <unk>.
Bounding by three 5% to $5 5 billion tons in 2021, seaborne dry bulk trade will probably increase only marginally by <unk>, 6% in ton mile. This year.
According to Howe Robinson, there are a number of contributory factors behind the recent fall in dry cargo rates, but the unwinding during October of a record number of vessels tied up in China has certainly been significantly congestion in China peaked near the end of September at around 640 vessels.
Dave This figure has come down to around 427 across all size ranges.
The release of over 200 additional vessels onto the international market.
As clearly led to a shift in the supply demand balance in the Pacific with a knock on effect globally.
Even though the gradual easing of Covid restrictions has been partially responsible for the lower congestion in Chinese ports and sharp drop over the last months in particular has more to do with fewer vessels arriving in China.
These are drivers went down 22% in October on a year on year basis.
To put things in perspective, I could speak in October 2021, the Baltic Cape Index reached 10 485.
Yesterday's close that one 333.
Baltic Panamax Index peaked last October at 4328 and closed yesterday at 1688.
The BSI reached 3624 in October of last year and closed yesterday at 1001 <unk>.
Capesize market earnings have come down at that point as much as 74% from the 2021 highs in.
In the Panamax sector earnings have also softened, but have seen less acute pressure then indicate size sector panamax spot earnings averaged $15691 a day in the third quarter of this year.
Earnings have also saw something that had the Maxwell panamax sectors. This year, but have for most of the year outperformed the largest Texas supra.
Superman hosted IMAX trip earnings have come down about 40% from last year, but are more than double their pre call with 10 year average.
Grain and minor bulk commodity inputs carried mostly northern Mexican handy Max vessels have been coming down due to several factors, among which energy rationing and current high commodity prices.
Turning to the next slide.
We look at macroeconomic consideration the IMF has been reducing its estimate of GGP global growth recently, the latest forecast for growth this year and next three two and two 7% respectively.
For China growth is estimated to come in at three 2% this year and four 2% in 2023.
India might grow at between six and six 5% this year and next while the Euro area is estimated to grow by three 1% this year and just half a percent next.
The U S is estimated to grow by one 6% this year and 100% next year.
As the U S is the country, where inflation pressures that are expected to ease before this happened elsewhere in the western World growth should return more swiftly than for example in Europe .
In China consumer spending has been recovering so far this year. It has been going up for four straight months. According to Commodore research with the latest increase being the September year on year increase of two 5%.
Lending by Chinese banks has steadily increased this year in China remains according to Commodore research only one of three nations.
Actually cut rate this year with the central and regional governments continue to work on stimulating the economy.
Launched in September total to $4 seven trillion won.
One of the outcomes over the water Ukraine is the China and Russia have been strengthening the commercial ties over the last few months.
Of Russian coal for example by China in September .
Came in at the highest level seen in over five years.
Now turning to commodities a brief look at steel industry. According to the World Steel Association Chinese steel production was up 4% month on month in September even though it was still 6% down from 2021 level.
The problems of the property sector or the main pressure currently as regards Chinese steel production in.
India appears to be the only key producer where output is set to rise this year with September production being up 7% year on year on firm demand trends.
How much research reported global steel production has gone down for 12 straight months.
Weakness in the steel market, while not new remains an important headwinds.
Capesize market.
Turning to iron ore has come Commodore research pointed out Brazil iron ore exports have contracted on a year on year basis, this year by $14 5 million tons or 5%.
Same strengthened that rate is needed for the capesize market to be able to find consistent support.
According to Clarksons iron ore seaborne trade will contract slightly by <unk>, 2% in 2023 on the bank on the back of weaker demand in steel production trends in China and economic pressures elsewhere.
For 2024, Clarksons predicts that Chinese demand for iron ore imports booties.
Although global trade is projected to rise by 8% year on year potentially supported by improving economic trends in Europe and other key reasons region.
Steam coal now according to Clarkson.
Global seaborne thermal coal trade is forecast to grow 2% in 2023 to 980.
The 5 million tonnes, mainly driven by increased patient demand is likely to be met by increased Indonesian and Australian exports.
Further ahead 2024 is initially projected to see seaborne thermal coal trade shrink by 3% to 981 million tons as European energy mixes potentially start to shift once again away from coal.
Clarksons report that the EU and the U K imported 68% more cold in September 2022 than they did the same time last year.
Up to September Russia was the largest exporter of coal to Europe .
September however, a new trend seems to have developed most of the coal imported by the EU came from the U S, Colombia, Australia, and South Africa, a total of 75% of imports came from those companies.
If this trend continues it will no doubt benefit the panamax and <unk> vessels due to the longer distances introduced into cohort three.
For coking coal clubs.
Clarksons report the global coking coal market continued to field several negative impacts from the conflict in Ukraine as well as related macroeconomic headwinds.
In 2023, Clarksons predict inputs to increase by 2% to 268 million tons with Australian exports likely to improve at some new mine projects come online.
In China domestic output and land borne imports mainly from Mongolia would expect it to continue to grow on.
On Green Congress now according to Clarksons the grain trade is expected to increase by about 4% in two.
<unk> 2022, 23 Green season, and reached 537 million tonnes on the back of recovering Ukrainian grain exports and expanding U S and Brazilian soybean production.
Clarksons forecast for 2024.
In addition to the 4% increase in seaborne volumes as Ukrainian exports potentially return towards prewar levels. Brazilian exports continue to grow and North American shipments returned to more robust levels, helping to ease somewhat food security concerns worldwide.
This trend if it materializes will be particularly helpful for the earnings of smaller bulk carrier.
Turning to slide 21.
Commodity prices have it finally stopped going up apart from grain cargoes, which for seasonal reasons and some supply related issues have been firming up lately.
On the next slide 22.
If you look at the New building order book in early October the bulk carrier order book stood at around 7% of the trading fleet.
According to Clarksons, the new building order book for Capes stood at the beginning of October at $22 1 million deadweight, which was five 8% of the current fleet.
The Panamaxes on order with a similar $21 8 million deadweight, which represents 9% of the fleet.
Sandy Max's on quarter totaled $17 2 million deadweight equivalent of seven 6% of the existing fleet.
Let's have a brief look at the environmental issues now.
According to Clarksons shipping fueling transition continues to gain momentum the alternative fuel capable order book stands at 1079 ships of all types.
$76 9 million gross tons, which represents 44% of the total order book.
Today, only 5% of the World fleet in GT terms is alternative <unk> capable.
Most of the order book of alternative fuel capable ships involves LNG, but there.
It has recently been interest in methanol <unk> unit.
Some owners are even pursuing fuel optionality by ordering LNG, you'll Hugh and methanol stroke ammonia ready ships Optionality, though it comes at the high price New building costs escalate rapidly the larger the number of option of fuse and main engine can operate on.
So far this year, 13% of tankers in deadweight terms delivered have been alternative Hugh capable, while only 3% of bankers in deadweight terms.
Has the same flexibility this highlights the comparatively faster uptake of alternative fuels in the tanker sector.
A recent study.
It has been published by the Chairman's University of technology.
Claiming that discharge of water from scrubbers is responsible for up to 9% of certain emission of cutting allogeneic and environmentally harmful substances.
The Swedish transport agency for Marine and water management have proposed a new ban on vessels using scrubbers and the internal waters of the Baltic Sea.
Since the date of the study's data collection, the number of ships fitted with scrubbers.
According to Commodore research.
Therefore, we will no doubt be hearing further on this subject over the next few months.
Meantime, the price spread between very low sulfur fuel in the three 5% high sulfur fuel has been opening around $260 over the last few weeks.
Finally, let's look at the outlook.
Of our industry.
Overall in 2023 supply demand fundamentals could see some improvement.
Two 2% ton mile demand growth as initially projected versus just <unk>, 6% fleet growth.
However, easing congestion looks likely to see earnings remained below the high seen in 2021 and environmental regulations are expected to curb active supply ago, which may help.
Markets to remain healthy at least by historical standards.
A positive sign for Panamax is an ultra Max vaccines is the fact that the Chinese customs agency has been preparing a longer list of approved Brazilian corn exports.
Point out that overall scenario is developing in which China will gradually replace U S corn with corn bought from Brazil.
If this materializes it can certainly help boost demand for panamax and northern IMAX.
Chinese forecast according to Maersk broker being four to 18 million tons of corn in the 2022 23 Green season, which began this October .
According to Commodore research, the dry bulk market needs ongoing improvement with China, having to continue to offset the deterioration in much of the rest of world.
It is unfortunate that global inflation will not subside anytime soon and the industrial demand destruction, we have been witnessing so far this year might continue for a short line.
Nevertheless, we'd be benign supply picture and longer voyage durations.
For several reasons positive trends might develop next year and earnings might surprise us positively.
Even without the much hoped for pending of the war in Ukraine. It would see a return in demand growth.
And a gradual increase in earnings across all size range.
Interest rates will probably level off in the U S and later in the year in Europe , and the rest of the Western World.
This will provide another.
Is the shadow ever higher interest rates will be negatively affecting sentiment for the loss.
Therefore, if less negative developments take place then fears the market, which will have prepared itself for the latter might move higher.
It happened several times in the past cycle.
I'd like now to pass the call to our CEO semiramis value for some closing remarks and takeaway. Thank you.
Thank you Stacey.
So before we open it before we open up the call to questions and answer session I would like to provide a summary of what I believe to be the most important point.
Firstly, we remember we remained focused on taking advantage of favorable market conditions for securing positive free cash flows that allow us to continue rewarding our shareholders with attractive dividend.
We believe that the payout of one dollar of cash dividends since last November in addition to the stock dividend relating to Ocean power, Inc. Firmly exemplifies our efforts to reward shareholders.
Secondly, we remain vigilant in maintaining a strong balance sheet that allows us to entertain creative growth and fleet renewal opportunities.
We have demonstrated our ability to deliver on this point with a recent three modern vessel acquisitions.
Finally, 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 the call over to the operator to commence the Q&A session.
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Yeah.
Right.
Once again, ladies and gentlemen that is star one if you would like to register a question at this time.
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Management team did you have any additional comments today.
No I would just like to thank everyone for joining us today, and we look forward to talking to you again in our next financial results call. Thank you very much.
Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect. Your lines have walk off the webcast at this time and enjoy the rest of your day.
Okay.
Yes.
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