Q3 2022 Costamare Inc Earnings Call
Thank you for standing by ladies and gentlemen.
Welcome to the customary incorporated conference call on the third quarter 2022 financial result.
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'll be a presentation followed by a question and answer session at 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 Wednesday November 2nd 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 fourth looking statements.
Yeah.
And I will now pass the floor to your speaker today Mr. Zika. Please go ahead.
Thank you Ed good morning, ladies.
Ladies and gentlemen.
During the third quarter revenues reached approximately $290 million.
Net income reached <unk> 7 million compared to 116 million and 82 million for the same period last year.
As of quarter end cash balances and short term investments stood at around 745 million and total liquidity, including Undrawn credit lines was about right at $190 million.
Focusing on increasing visibility and our contracted cash flow base. We have recently started with a leading <unk> company. A total of 11 container ships with existing charters originally expiring between 2023 and 2025.
Seven of those vessels were chartered for periods ranging from four to five years, starting from 2025 and the remaining ships chartered for periods ranging from two to three years with Cobra starts in 2023 and 2024.
The new charters increased our contracted revenues by about 420 million and resulted in incremental charter coverage of about four five years.
Regarding the container market cargo volumes have been softening across several great lanes with energy cost inflation impacting gaucher <unk> picture.
Fixing activity at low levels and the majority of new fixtures for short term employment.
Today's have been under pressure, although they do remain appropriate levels.
Well, the dry bulk market rates for our aggressive sizes remain profitable, especially for owners greater than market the year before.
We're pretty comfortable with the long term supply demand dynamics of the sector and we view any potential showcasing a class a tractors, that's a companion buying opportunity.
Well the bulk of our increase like we did the container charter coverage. We are focused on new investment opportunities in the shipping sector does have the potential to provide in terms of dose that's acceptable risk levels.
Moving now to the slide presentation.
Well. Thanks as you can see our third quarter results, which was the best Q3 since our listing.
For the quarter net income was <unk> 89 per share adjusted net income was 88 cents per share and that would equate it to is up by almost $614 million year over here to rapidly.
Yes.
Slide four.
I already mentioned during the quarter, we forward fixed endeavour contingencies for it in before and getting better leverage of four six years. So thats approximately four granted rejoining contracted marinas.
The new charters beginning between 2023 and 2035 at the latest.
Our revenue days or how many percent fixed for 22 over 96% fixed for 23, 84% fixed for 24.
We do continue into a charter or lower dry bulk purchasing the sport market Southern 34 ships since our last earnings release.
On slide five you can see an update on our financing arrangements.
We define us to a 26 year old vessel.
Q4, before you joined in Q3 or four years, so we're $46 million facility.
Our corporate leverage remains below 30%.
Continued to maintain a strong balance sheet.
Finally in October we concluded the sale of frequent than it seems for a combined capital gains of about one 6 million expected to be realized in Q4 of this year.
Slide six.
And then as you've tracked the market has been under pressure over the past few months.
Dry bulk market has also weakened it makes up 50 levels, especially for smaller size vessels, which we operate the order book is at historically low levels. Finally, we continue to have a long uninterrupted dividend track records boosted by strong sponsor support.
Yeah.
Slide seven.
Our liquidity has increased significantly both year over year and quarter over quarter just like.
Where does it gives us the ability to look for opportunities to grow without reducing our balance sheet that provides us with a strong Porsche.
One of them to the next slide slide eight.
You can see our containership fleet has it got it back local people and $5 billion with a duration of four four years as already mentioned, we are fully fixed for 22.
We are more than 96% at 84% fixed for 2023 and 2024, respectively.
This fixed revenues comparable basis at least from a diversified base of first class charterers surface Maersk MSC Evergreen Cosco, yes, Matt how about Florida.
Slide nine.
In the third quarter of 2022 snapshot.
We've got an average of 17 vessels that were adjusted net income was 77 million or <unk>.
Sure.
Yes. It does its figures take into consideration the following items after which other avenues accounting gains or losses from asset disposals.
The nonrecurring or non cash taxes.
Moving to slide 10.
Over the past few months there have been a limited number of fixtures and the ones that have been concluded.
So the PTO said that lower rates, however, Saturday to make for the next article context.
The commercial bank with energy policy remains essentially are employed with a very low idle capacity of about one 8%, while the vessel availability remains low.
I'm going to listen to the last slide slide 11.
You can see the recent drybulk market transport rates have been volatile, but do remain unprofitable levels, especially for owners like us going to the market last year.
The order book is around 7% as historically low trigger which translates into modest growth with actually conclude our presentation and we can now take ratios. Thank you operator, we can take questions now.
Thank you as a reminder, if you would like to ask a question. Thanks, Pat Star then one on your telephone keypad and wait for your name to be announced.
You wish to cancel your request. Please press Star then two.
Thats Star one to ask a question.
Our first question today comes from Chris Wetherbee with Citigroup. Please go ahead.
Hey, Thanks, Good morning, Chris.
Chris You know, Greg maybe if you could distinguish both market and try to get a better understanding of.
What the what the rate environment looks like specifically there. So you don't have a lot of replacement brain you have more storage on the ships. So that would be erratic, we'd be putting pressure downwards on the TCE rates you guys are able to get so it looks like debt remained little stronger than we thought so maybe you could just help us understand what that could look like going into <unk> and then through.
Through the winter and how that would change into 2023.
Sure.
I didn't.
Hear you properly.
The question has to do with your debt levels or sort of the charter rates I completely missed it.
The time.
Charter rates on the bulk side, yeah. So how should we be thinking about that sounds like a little stronger.
Okay.
Okay.
Recently, I mean, the last couple of days.
We have seen a softening in the market.
And it's been volatile.
For the bulk of it now I think theyre trading at around $56000 per day.
The fact is that the supermarket is where the market has.
We seem to be.
We do have all our ships spot.
In the future this might change I don't know if depending on the view we take.
But considering.
Our low cash breakeven levels and the factors were generally positive.
That's on the dry bulk market.
For the time being we follow this strategy now I cannot forecast and we never provide forward because when we think the market will be the next Florida those adult phase two.
Or like in Q1 of next year, but the content.
Yeah.
Considering the low order book.
Being generally bullish on the dry bulk sector. This is a view we have today.
You look at when you look at the macro environment, maybe more specifically understanding and I'm not looking for a forecast on the rate side, but what is what are some of the pressures coming in for Q2 would impact the rate side.
A little replacement grain coming out of Russia, and just lower demand and some of the other places like in China for soybean imports are down. So just curious what some of those puts and takes are there.
Yeah, well, it's a couple of things you.
You rightly pointed out the Russia.
China, which is the biggest player.
In dry bulk COVID-19 disruptions.
It is.
Inflation, if we say it definitely does not help and also congestion easing.
Yes, it does not help it.
Either in the past day have to tell you that there were some sort of thought.
Part of the upside in their hand, and say it had to do we see.
Elevated levels of the no and they lead to availability.
Well Dana.
And congestion.
It was a determining factor of the.
However, at the same time as I already mentioned, we have a very low order book and we do feel that in that sector compared to the container store.
Supply and demand dynamics at all but all more positive now.
To conclude.
This is Roger as you mentioned it is China. It is congestion easing agencies also inflation.
At the same time.
If there is some stimulus packages.
Our growth for essentially the construction industry in China. This is going to be a huge boost for the.
Dry bulk vessels and this could also be the case, so it's a lot of factors.
Only one or two I'm afraid.
Understood. Thank you.
Sure.
The next question comes from Omar <unk> with Jefferies. Please go ahead.
Thank you Hi, Greg I just wanted to.
Just wanted to continue on that kind of the topic on dry bulk and you wanted to ask you how you're thinking about deploying capital right. Now you guys are obviously very aggressive last year expanding into drybulk looked like it was well timed and we have seen drybulk values easing here over the past several months, but also containers are coming down pretty aggressively.
What do you think about the S&P market here and you look to buy container ships.
They have been taking a step back over the past couple of years or do you still look to commit more into the dry bulk market.
Yeah for the content Thats, just take them one by one for the containers.
We have seen the market softening.
In terms of charter rates and also in terms of box rates. However, we don't feel asset values have gotten to a level II, the new buildings or secondhand vessels.
And investment today would make sense.
Probably in the future as it continues there will be opportunities, but this is not something we see today and it may take some time.
Until the box rates.
All chartered eight.
By the way to asset values now.
For the for the dry bulk vessels last year I think the timing of our acquisition with the benefit of hindsight.
I think it was good.
Those sort of acquisitions that do make sense and associated with that.
Acquired with low leverage low cash breakeven levels. So today, they they are profitable and they have been profitable since buying them now.
Also for the dry bulk vessels for the diverse as we have not seen asset values at levels close to the summer of last year.
Our acquisitions, so based on that I think.
The proper thing to do is to sit and wait we don't have to grow we are close to 120 vessels today.
Oh.
Like in the past whatever acquisition, we do we it's going to be on the managed said not for the sake of growing so to devices in the dry bulk sector.
We still consider them to be relatively high or we haven't seen something that does make sense. So in that respect we continue to sit and wait.
Same applies for the containers for the new buildings and we didn't have any new buildings over the last couple of years as you mentioned the main reason was that <unk>.
New building prices were extremely high and we will be ordering at the peak of the market with something we try to avoid so we have those vessels now containers and dry bulk vessels all profitable with fixed forward as many containers as we can.
<unk>.
We received the yield on the dry bulk vessels.
The acquisition of <unk>, which I think a question whether market this was well timed.
Yeah. Thanks, Thanks for that color and maybe just on the on the new building.
Yes.
Prices have been very high but wanted to just maybe get your sense in dealing with and talking with the shipyards is there any.
Since that values are going to start to come off a bit now that steel prices have been correcting or are they still fairly fairly firm at these high levels.
Well for the time being what we have seen.
The price et cetera.
And there are still the new building orders being influenced especially by diners. So in this environment of course, those will be some exceptional trading opportunities, which we haven't seen.
So in this environment are if you look at it when we started that perspective still it is.
A very high asset value.
Environment, which are in that we don't want to.
Danny or this even though we have charter or not still this is something we would avoid ordering.
No big price sort of close to be priced.
Yes, Okay got it and then just final one and you get this question.
Every quarter basically.
How do you think about the company going forward.
You've got the dry bulk containers together do you like that diversity within the same platform or do you still or do you ultimately think about just the split at some point down the line.
Look for the time being there are no immediate plans to have a spinoff versus the private separate company where like.
We would have a dry bulk dry bulk platform and also a containership their platform Z containers. They provided us today with the contracted cash flows which are closely with reported 5 billion. We've got.
Solid charter coverage over the next years.
Hi, bulk vessels at the same time, they're more opportunistic, but they started from a low cost base.
So we don't see any reason today to have a spinoff of course in the future circumstances My Jane.
It might make sense, but today the snow.
There are no immediate plans to have the dry bulk vessels panel.
Under a different entity.
Okay got it thanks, Greg I'll hand, it over.
Yes.
The next question comes from Benjamin Nolan with Stifel. Please go ahead.
Hi, Good morning. This is maquila Roger is on for Ben today. Thank you for taking our questions.
Sure My first one.
Just kind of wanted to get some color on how youre thinking about maintenance capex for vessels moving forward you know with the container market softening would you expect to maybe retire assets once they come off contract or any insight into kind of how youre thinking about the future.
Yes look it today.
Today, we don't have.
Any scrap candidates we have some some older ships in our.
In our fleet, we have some ships 1996 built.
But as we mentioned those subscribers.
Our medium to long term charter and we have recently refinanced them, although they're 26 years old we have refinanced them for four years forward.
So those are not scrap candidates because they do have charter.
Nothing we are nothing we are targeting to scrap a day.
In the future of course.
Yes.
It's a matter of.
Timing in tough market conditions, we wouldn't have a problem to scrap the vessel <unk>. These equity in order to renew the fleet.
Oh or like the funds released from describing that could be used in some.
Accretive investments, but today there are no plans for scrapping based on now the fleet portfolio both of the containers and obviously for the for the partners as well.
Thank you that's very helpful and just one quick one.
Given some of the preferreds are trading below.
Below or close to par would you consider using some liquidity to call them in the future or any color around what you guys are thinking there.
Yeah. Good question.
It's more about the <unk>.
<unk> capital allocation.
We have a buyback program for that would be fair to say $150 million, which we have not utilized we have.
Utilized part of our buyback program.
For common shares and some of the preferred.
Callable as well.
Because five years have Nazis.
<unk>.
Alright.
So it's.
The module, where we think we're going to be allocating our excessive liquidity.
Whether it's going to be buying back stock as we did almost all I mean.
In the past or some preferreds also took some other type of investments.
As discussed at the board levels.
Options, which.
Each one of them makes sense.
However, I'm not in a position today to tell you exactly what would happen. There are discussions we know the preferred we know that buyback over this time, we would.
I would like it we think our Australia at below NAV.
So we'll see.
It's good to have those options, but nothing has been determined to data as we speak.
Thank you very much I appreciate the time.
Thank you.
As a reminder, if you have a question. Please press Star then one I'm sorry. Thank you.
The next question comes from Quebec Mullen.
<unk> investors.
Go ahead.
Good morning, Thank you for taking my question.
Moving out share repurchases alongside the results you just closed you had repurchased $60 million worth of shares but no additional buybacks have been pursued since then.
What was the driver behind this decision.
Looking ahead, how should we be seeing about your appetite for additional share repurchases given the discount to any of you are trading at.
Yeah.
$60 million almost.
Almost look back.
Yes.
We have a program of 150.
Medium for the global show.
It's $90 million more available under this program and we also have a program for the preferred.
So.
I cannot predict also I cannot tell you what we're going to be doing because it is something we are discussing internally of course, we have the option to buy back more shares, especially considering where the stock is trading today or sort of where the stock has been trading.
Over the last weeks.
At the same time, we have the option for the preferred as well.
So this is something that we're considering but I'm afraid I can't.
I'll tell you that we have decided to buy back so much common stock also must be deferred.
At this price under those conditions within the next quarter or so.
These are discussed at the board level, so I'm not.
I don't have anything more to say.
On that question right now.
I understand and thanks for the color. That's all from me. Thank you for taking my question for taking my questions. Okay. Thank you.
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 today and for your interest in <unk>, We look forward to speaking with you again in our next quarterly results call. Thank you.
Thank you that does conclude our conference for today. Thank you for participating you may now disconnect.
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