Q3 2022 Safe Bulkers Inc Earnings Call
Thank you for standing by ladies and gentlemen, and welcome to the Safe Volcker's conference call to discuss the third quarter 2022 financial results.
Today, we have with us from safe Volcker's, Chairman and Chief Executive Officer, Mr. Polish How's your annual.
President Doctor, Lucas buffers, and Chief Financial Officer, Mr. Konstantinos Anemophilous.
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Forward looking statements will be right now before we begin. Please note that this presentation contains forward looking statements as defined in section 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act of 1934 as amended.
Is there any future events, the companys growth strategy and measures to implement such strategy, including expected vessel acquisitions and entering into further time charters.
Words, such as expects intends plans believes anticipates hopes estimates and variations of such words and similar expressions are intended to identify forward looking statements.
Although the company believes that the expectations reflected in such forward looking statements are reasonable.
No assurance can be given that such expectations will prove to have been correct.
These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies many of which are beyond the control of the company.
Actual results may differ materially from those expressed or implied by such forward looking statements.
Factors that could cause actual results to differ materially include but are not limited to changes in the demand for dry bulk vessels competitive factors in the market in which the company operates risks associated with operations outside the United States and other factors listed from time to time in the Companys filings with the Securities and exchange.
Commission.
The company express, especially disclaims any obligation or undertaking to at least publicly any updates or revisions to any forward looking statements contained herein to reflect any change in the company's expectations with respect thereto or any change in events conditions or circumstances on which any statement is based.
And now I will turn the floor over to your Doctor Buttress. Please go ahead Sir.
Okay.
Good morning.
That's probably about as bad in the state budget.
Welcome to our conference call and webcast to discuss the financial results for the quarter was great.
The third quarter was.
Good quarter.
Factoring financing, but four months, well 41 cents earnings per share and maintained a healthy consumer receivables.
Sure.
Very good.
Actually we can charter market environment compared to the previous quarter with increased today, then you should go to past contract admin fees.
Pizza vessels and higher expenses due to inclusion and diversity.
In this environment, we maintain a strong balance sheet.
It's comparable power grid scrap value and we need to adapt our resources, providing us with a very quiet.
As we see slightly shifting about characteristics.
It does come out appears.
According to our fleet and Dallas sleep expansion on one <unk> leverage.
Revenues from the other.
Not only rewarding our shareholders through the DPA.
But in parallel to create increasing value for an extension expansion program with phase III.
We would like to focus on our quality and.
Investments presented in slide four because this is the basis on which we compete in a market like yourselves peers.
All 44 vessels in our fleet, we have ballast water treatment system by the end of 'twenty, two 2022 or eight of our games.
But at the end of 2023.
Joining me on the vessels will be environment created by the <unk> 23.
So I go to more of our fleet by the end of course.
But she still 19 beds as well it's been cool.
I also hope all of them.
Out of the total fleet of 19 vessels will be a 12 eco ships and seven phase III.
Please see slide five for the environmental making according to that I see.
Two phase III.
Eliminating opioids.
The N V passes and then be climate effects.
It's just not the best and let them out of the four months that performance globally. It right back.
Dry bulk market well, if they just wait for doing it.
Savings in political.
We intend to compete in this space without me with seven ships by the end of 2023, and 10 banking constraints pretty cool.
We would like to focus on those that's kind of struck structure each light sweet.
We are maintaining a comfortable level.
People.
Four 3 million compared to our previous cut by you'll see kind of 19 million.
Oh 10, five years of age.
You can do with that they've been.
It's been a median of about 8%.
He says that she says.
Same time, our average interest rate of $2 91 per cent for our consolidated debt with a portion of 100 million euros.
295 speak English.
Secured five yes.
Please go ahead.
Slide seven.
I don't think we've got the resources I mean being strong at 206.
6 million, which together with the contracted revenue Oxycodone dengue doesn't need them I see slide eight provides flexibility to our management and capital allocation.
Well hedged against the market we're lucky.
So I didn't do the Baltic Capesize Index IPC Spencer.
<unk> $4000 per day, while I assume the left graph on slide eight seven or seven out of eight of our Capesize class vessels are chartered under period charters with coupons eight years of its remaining integration and the 22007 hundred.
It's a shockingly totaling $185 million.
The revenue gain.
Hello.
I actually didn't like nine.
We have maintained.
Yes, I'm fine since you said over the last quarters.
Lately.
Jim.
But he mainly reflecting prevailing issuance in the capital market.
Focal points and uncertainty of the scatter market and it wasn't going to me is that we continue every day and it's a function of both free cash flow should find themselves.
But we can provide us with competitive advantage in terms of fuel consumption and environmental performance, while maintaining a level at or below the knee.
Yeah.
As we have already discussed.
We have repurchased two 8 million common shares.
In slide 10.
So the relationship among our base.
Scott Baidu well.
Revenue.
Cash and liquidity and Capex requirements.
With a strong company balance sheet fundamentals I'm only what do you see leverage I think.
The level of the feedstock value a fluke.
Cash flows from the labor content bodies prefix sponsors 11 basically.
I can't just be a competition and environmental regulations of 2023 onward.
That means we're well positioned.
Challenges and take advantage of.
Patrice.
Nick Let me now summarize that can pick up way.
Yeah.
You need it seems like its fundamentals focus financial flexibility, we reflect the market challenges.
We believe that cheap I guess with each hotel is among those companies that can successfully navigate the.
Challenges with the energy transition.
Gene.
Dry bulk fleet and will tap into the global uncertainties by utilizing the quantities will be sweet efficiencies, which lacked scale environmental upgrade program.
The violence to the company's expansion will be even more but a meaningful piece would be the company's well positioned.
From an antiviral metal basement button.
Now, let's move to the slides.
For the English pretty up to date.
We present on the graph.
Scott This is Mike.
Dave will assign driven by commodities.
Commodity dynamics.
So essentially what's exactly the case earlier this year.
You can find them at any of the mortgage market.
What they say market itself this year.
On the supply side as you're hearing slides 14 Ville.
The order book such at eight 6%.
Which is an energy level and pricing.
We remain cautiously optimistic despite the global instability caused by one.
Is it a bigger deal.
The passion.
We do expect it to accelerate a simple by NSX for fleet aging about 35% of fleet is older than 15 years old and environmental regulations.
That's equal professional gamers.
I see.
Moving on to slide 15.
We presented the development of the geography.
<unk> EBIT.
These strategies.
Yes, hi.
Indexing next basic commodity prices.
For example, energy agriculture, but he just made them.
Yes Nathan.
Could it be even indicators for CP.
One of my legs, Jason of monetary and fiscal 14 that did even during the pandemic is fully demand as policymakers employed inflation battery packs.
Our corporate focus of IMS downgraded the expected growth of global GDP at three 2%.
Yes.
Nobody inflation has been revised up to the war in huge commodity price.
But I see increases.
The bold any price pressures on food and energy prices as well as mitigating supply demand imbalances and is that you see.
We reached eight 8% this year.
One 5% up for the 2023.
And anything you can eat this.
Inflationary monetary policy is expected to affect global output with a projected increased by just two 7%.
If we got to the global dry bulk demand growth is expected to increase only by you want the same thing that they do and they are also and we just want the macro outlook.
China, the deepening of real estates could actually have less growth to be biased downward with major global and dry bulk spillovers, we expect that the electrification.
A major growth driver as global investments in Universal electric.
The capacity will continue to rise.
In case instead of economies are in a growth slowed down or outright contraction the global economies to scale.
That's critically.
Assessment calibration of monetary policy, the course of the war in grain and the possibility of ferric pandemic related supply side without interruption for example in China.
Turning to slide 16, we are focused on increasing value creation I shall itself about investments in technology.
Technology currently.
18 of our vessels there.
Theyre very low shipments your annuity business.
Hey, Savi sit with fuel oil price differential related to increased revenues for the scrubber fitted vessels, but S&P I E High site in Singapore, that's at about 270 per phone.
To kind of fight the tone for 2023 as the futures market.
Are these a strip price footprint or do you see the implant scrubber gain potential is about 23 million of that argument for our 18th collaborate issues.
And as we said already we had.
In the book, so installing additional sub retinal thickness.
Concluding our market slide 17 during 2018.
Leasing velocity.
Like volatility driven by geopolitical disruptions.
Today, I'm Workin' Buddies agreement adherence becomes increasingly important insight, but today definitely SaaS multiple different looks at a decent secret April continues for those will be best that Pete discuss that.
So it's been about a month early 15.
I think the company valuations in weaker markets.
And that means capacity exit.
So that'd be the more they might be enormous indications such as Kohl's came back.
And he has surely as an example.
C J environment, that's the delay.
The market to meet tightening even figured I'd say some of the uncertainty in the environmental remediation.
So you shouldn't Douglas getting LNG and the global inflationary environment.
Now, let me pass the floor to see a focus as much on a multiple of support.
Okay.
Thank you Luca and good morning to everyone.
We're not a note during the quarter. This quarter, we operated in a gradually weakening charter market environment compared to the previous quarter.
The increased revenues due to past contract and that earnings from starting to see the visits.
And higher interest expenses due to increased interest rates.
On slide 19, we present, our quarterly net revenues and adjusted EBITDA.
Finding a satisfactory levels.
Slide 20, we present, our strongest operating performance, an example, Nevada management alignment.
We achieved a daily time charter equivalent of $23400 compared to $24427.
During the same period into early 'twenty one.
Net income for the third quarter of 2022 reached $51 million compared to net income of $55 4 million during the same period in 2021.
Our daily Opex stood at $4949 versus $4608 last year.
Our daily Opex, excluding dry docking and be deliberate expenses stood at $4571 almost unchanged from last year's figure of 404.
<unk> thousand 507 cargos.
Our all in Opex and G&A for Q3 2022.
So the $6309, which we believe is one of the most competitive compared to our peers.
This number includes all our dry docking and food delivery expenses as windows, All our director and officer compensation.
We'll try to do that I think for example would have zero percent Commission of chartering management for our modules.
And so our managers are managing direct relations, we achieved blow it all but its total chartering commissions to third parties.
4% compared to the market is down 5%.
Moving to slide 21 is that our fleet contracted employment at the center. The other thing that they would have contracted revenue of approximately $314 million net of commissions.
From a non got set up to support them to bill them topic conduct and this does not include any scrubber benefit also part of November .
We presented slides 22 and to guarantee a three hour nobody keeping volumes for the nine months of 'twenty to 'twenty two.
Which we believe he's one of their load always in the NFC and the cash flow bridge millions for the same period.
The global economy is experiencing a number of challenges inflation higher up.
What was seen in several decades, alright, any financing conditions in most regions and Russia's invasion of Ukraine, and the lingering COVID-19, pandemic, all weigh heavily or there might be possible.
Of course, our main focus is lean operations in this inflationary environment.
Slide 24, we present, our own balance sheet analysis.
Our balance sheet is very healthy and I sense are presented in the book value No things up.
Writers exceeded the book value was considerably.
Moving on to Slide 25, we had a quarterly financial highlights for the third quarter of 'twenty two.
Back to the same period of 2021.
Our adjusted EBITDA for the third quarter of 2022.
Stood at $66 $9 million.
On behalf of $67 million for the same period in demanding Dwayne came on.
Adjusted earnings per share for the same quarter of 2022 or 39 cents.
Breaking down the weighted average number of 124 million shares.
Compared to 40 cents during the same period in demand to do Andy one calculated on the weighted average number of.
$119 9 million shares.
In conclusion on slide 26.
We show our quarterly operational highlights for the third quarter of 292 compared to the same period last year.
Based on a satisfactory financial performance the company's board of directors declared a five cent dividend per common share.
I have to emphasize that the company is maintaining a healthy cash position.
We have about $106 million as of four.
Forever 22.
Another 144 $3 million in available.
Available revolving credit facilities, as well as $51 million in Undrawn borrowing capacity.
Are the two loan facilities and the lessons of the Newbuild vessels.
That's a combined liquidity of over 330 million that provides us with significant firepower.
Furthermore, in addition to that are going back to the liquidity we have.
Contracted revenue from our noncancelable sporting events like this.
Of Oh more than 310 million.
Net of commissions and excluding scrubber revenue.
Additionally, the borrowing capacity on relation to seven that's pretty existing vessels and seven new builds upon their delivery.
We believe that as long as liquidity and relatively low leverage will enable us to reflects the blue without capital actual expanded fleet, while still rewarding our shareholders.
Our press release presents a more diverse financial and operational results.
Now for the Q&A session.
Thank you.
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Okay.
Yeah.
Thank you.
Our first question is from the line of Chris Wetherbee.
Please proceed with your question.
Hi, good morning, Yeah. So if we could just dig in a little bit more into.
Chinese Covid Lockdowns on you know softening demand over there in China.
And how that's really impacting box shipments you know into year end as well as the first half of 2023 didn't know if there was some additional color that you could shed on the situation and you know what you're hearing out there and and you know what if there's if you are in anticipation of you know where that's going to be headed you know both near term and into the first half of next year that'd be great.
Yeah.
Yes.
The suggestion was that we've always been in most countries.
These are back to normal demand that there is a very normal lives, including Maysville hops like Singapore is holding up well.
Ships tend to change isn't the end.
Take supply some older all goodness in China, the situation with student and student Eh.
It's a bit uncertain.
But no there's no vaccine.
Oh, they they saw.
So overall Chinese population so the city. This a question of how the winter wouldn't be bad luck and if there would be locked down.
All zero carbon only see it will be maintained for the time being something on top of it we don't see something extraordinary happening there in the business since it is Oh I'm sorry, I was you there's a lot of lots of Warsaw, what are the summit that we.
We see some some locked down cell doesn't.
Really create congestion and this and the previous round was not necessarily a bad thing.
To hover in the faith market.
The time being it looks okay.
And in the winter.
Yeah, No. That's very helpful. Thanks for thanks for that additional color and.
Now moving on to our you know fleet sizing. So you know it looks like you you guys reported 44 vessels within your fleet within this quarter in comparison to 42 in <unk> and 40 in <unk>. So just looking forward at the cadence of the fleet additions I'm you know a new builds what are you expecting in terms of fleet.
Sizing and moving forward.
You know both into for Q and again into the first half of next year.
Yes Hello.
Yeah.
The addition of the new ships are the sub.
Coming Oh, two already deliver them the five more will be delivered in 2023.
Yeah. They are opening up a very good time as far as the.
The cause there.
There's a little bump of the fleet to the revenue of the company simply because the shapes of the latest technology vertical along with our long haul theological John some of the time when the U N law applies to places that are around $700 per metric ton. So this shifts when we all live and bug incentive.
Well, that's the amazing about the if you're alone players would have been not on the 400 or 500 show up but it isn't the present level.
Ships could easily.
The form of a $5000, but they bet on all the modern ships in that market.
Very welcome contributions to the.
The company.
But it looks to be a challenging year like you said that was mainly for non shipping delays all small for those loans that have made it too.
So back to the wall and vigilant as it relates to full economies falling into a recession because of higher high instead of saying.
Airports full cab the inflation okay.
Because the vintage applies to send the wrong. So for the time being we call. She loves this additional so very good and very welcome coming into the fleet and plenty plenty of the same time at the same time, we're taking a.
One Batesville Oh Oh.
Oh, hi, good loan prices.
To install scrubbers on the remaining AR on the remaining AR capes in our fleet in order to pull work.
In a split answer what around $200 for 'twenty to 'twenty, three which at a give a very quick pay back of alternate hobby, yes for both ships. So I believe that a 'twenty 'twenty, three say yellow sort to concentrate on more on environmental.
Our investments in the fleet.
So we will we are planning to increase our the dry dockings.
In the year of 10 to 23 from the normal.
Eight or nine and we have every year to possibly 15 or 16 dry dockings, taking advantage of the lowest plate market and at the same time.
Ooh Ooh investing environment, although the improvements of the fleet to even be more competitive in the years to come because I believe that the last couple of yes.
Shifting hasn't done much the torso decarbonization.
With the low freight market that people would be more concentrated of cloud to invest that.
Lots of liquidity.
Into environmental updating of their fleets.
It is two fold. One is there is there is a phase III notebooks in the second fault is a baking oh, what existing ships and the Amazon schedule would be.
Oh no no.
Environmental law.
Prices are like.
That's on top of things and.
No clicks on bad since all the other things that today's technology for life.
Yeah, you see I mean, you can see different little button.
It's about a 44 vessels.
At the end of 2023.
19 of our vessels will be.
Cool.
A phase III there shows the settling something for the ability of the company and the timing of them.
Okay.
And everything.
The other half equal she did a 'twenty one or the other vaccines that will be upgraded at meadowbank.
He is someone who understands that.
A week kind of against that.
And is there anything you can think of.
Thanks, Ben and gets you a window to make that investment because this quarter's false directly to our ability to track and this is a kind of tucked away from pantheon the senior market.
Okay.
Consumption.
Not only that this is a one time.
Any reference in our social and other.
Other indications.
Well, we have to be bad.
For Capes for example.
We are we have that.
Bonded with leap joining.
In area and now it happens that the wider market be slipped thousands we have patents on that but yes.
So these things.
How proactive monitoring has been into what we're trying to achieve by increasing our revenues and then being more weighted on time and everything and trying to reach the market.
Yes.
And that's for sure.
<unk>.
And that's that's certainly very helpful. So you know in terms of the five additions you know you're expecting to take on in 2023, I mean is that going to be do you have any indicator of opinion or is that going to be in the first half the second half or you know any additional color around that.
Yes tore in the blood in the first offer and three are in the second half.
So so so we're starting to one in say Q2, and then we have three more in the second half.
They've been much evenly spread throughout the year. So sure. So little slow ships will be I think then we have three more incentive 24, one morning, beginning 75, sorry.
But by that time, we expect that the company would be able to finish that work.
New technologies are.
Other than that I am more phase III tier three vessels.
Taking all of us it wouldn't be offered by shipyard.
And.
What type of new engines will be offered by cheap gas before considering the next move.
I I am recalling them up in the past that we were considering that two years ago shapes with you allow engine.
Powered by LNG and left at all no. Other thing other proposal solid ideas came around with vessels.
Burning I'm wanting.
<unk> made out of game mishandled.
Now, it's coming a hydrogen so that there are so many things up they are appearing and disappearing.
In the last.
12 months, but scopes are about to ship all of that said did not dive into into.
This story before.
Oh, Martha is becoming more clear, but I believe by the time, we will complete our new building program and the next thing yeah, it'll yet and a half we will have more concrete evidence on what all of the company's future investment.
It would be and so that's the extent I mean the program. We are doing he also companies you'll have seen on slide number 10.
The liquidity we have in the in the in the company right now.
It's more on the topics that we'll receive the nine new buildings nine remaining new buildings on the yes.
So we are planning.
Yeah.
This is Dave.
Future debt on on on those new buildings, but we will be receiving benefits incentive for that.
To be totally wholly invested on all new technologies. So from a company we're doing what we have to do and what we can do.
Say sustainable sustainable, meaning that fewer children to be able to to be competitive.
In the future. So this is just the planning we have done and there's always on the we are we have a heartbeat, Dave up what I was getting delivery of the ships without additional battery.
The finance system. So we are very well there.
When do you have to develop the next.
Technologies to be able to.
Dissipate on more on all on those discussions.
Thank you very much for that additional color.
Okay.
Thank you as a reminder, you May press star one to ask a question. Please wait for your name to be announced.
Our next question is from the line of Gabriel Moreen with Safe Bulker. Please proceed with your questions.
Hey, I'm just wanted to get a little bit of insight into I know you guys provided some insight into your fleet and how youre looking to upgrade it but my question kind of relates to the retiring.
Previous vessels, and how that would either losses or.
Gains are being recorded.
Is that being recorded as part of your normal operation where is that being charged again.
<unk>.
Yeah.
If I if I got the question is what do we do with it with the rest of the fleet the older ships or something else you US yeah, yeah, So what I'm asking kind of is.
You know the proceeds whether it's a gain or a loss on the old fleet, if that's being reported against your operating income.
Okay.
Look the old fleets and the old Buffalo off lately, so lull ships, we construct it oh.
We contracted new buildings 2015 years ago or 10 years ago.
That's a very healthy pricing. So we don't have a expensive newbuild between now our fleet and Eh, maybe you showing a month ago. It was sold to one our 2006 built vessel plus 16 million.
Yes.
And the planning there was sort of a continuum is to continue may be sending selectively if the market allows a couple of more all the ships and that end.
We ate more liquidity for music all of them.
But even if we don't sell those all.
All the ships and we plan to play them.
Economic life at the end of the handle their economic lives.
Alright. Thank you so much I appreciate it.
What.
Yeah.
Thank you.
At this time there are no additional questions I'll now hand, the floor back to management for closing remarks.
Okay.
So there is no other.
Great.
No there is not sure if you'd like to make some additional comments. Please go ahead.
Yes.
We are fine.
Thank you very much for attending this webcast.
A webcast for the Q3 these sorts of 2022 and we're looking forward to discuss again with you next.
Nick's, Florida think again.
Have a nice day.
Thank you to everyone that participated in today's call. You may now disconnect. Your lines at this time and have a wonderful day.
Yes.
Okay.