Q4 2022 Costamare Inc Earnings Call

February 8, 2023

Thank you for standing by ladies and gentlemen, and welcome to the Costar, Inc. Conference call on the fourth quarter 2022 financial results, we have with US Mr. Gregory <unk> Chief Financial Officer of the company at this time all participants are in a listen only mode.

Thank you for standing by ladies and gentlemen, and welcome to the Costar, Inc Conference call on the fourth quarter 2022 financial results.

With US Mr. Gregory Zika, Chief Financial Officer of the company.

At this time all participants are in a listen only mode.

There will be a presentation followed by a question and answer session 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 February eight 2023.

Must advise you that this conference is being recorded today Wednesday February eight 2023.

We would like to remind you that this conference call contains forward looking statements.

We would like to remind you that this conference call contains forward looking statements. Please.

Please take a moment to read slide number two of the presentation, which contains the forward looking statements.

And I will now pass the floor to your speaker today Mr. Zika.

Please go ahead Sir.

Thank you and good morning, ladies and gentlemen, 2022 has been a record year with her mother with the political front has there been any vessels.

Thank you and good morning, ladies and gentlemen, 2022 has been a record year for somebody with a fleet of 70 vessels.

They're about ships the company generated net income of about $520 million as of the end of the year liquidity stood at.

They're about ships the company generated net income of about pipelines attractive daughters I showed at the end of the year liquidity stood at.

970 video.

The containership side 2022 was a unique year.

Through the first half growing up one pivotal poor market conditions with strong demand and logistical disruptions continue to impact the sector.

With our first half drilling up on favorable market conditions with strong demand and logistical disruptions continue to eat the sector.

During the second half charter as it passes by just normalized.

During the second half chartered as it happens if I just normalized.

The reduced starting with the month ends.

The reduced caught up with demand and capacity.

Capacity previously tied up by conjecture.

My conjecture.

With regard to the total of 16 circling around content during the year, which added incremental contracted revenues more than 5050 meter.

With regard to the total of 16 circling up on Tennessee during the year, which added incremental contracted revenues more than 5000 50 million.

Political revenues amount with reporting 2 billion with a weighted average time charter duration of about $4 two yes.

Political revenues amount with reporting to bring New York.

Or are you just average time charter duration of about four point to yes.

We are above 95% covered for 'twenty, three and we have to have to be able to use long term employment on a broad basis.

We are above 95% covered for 2003 and half for us to be able to use.

Long term employment on a broad basis for a number of conducting the streets got me I'll start that between 2023 and two.

Number of conducting the streets got me charter between 2023 and two.

25.

195.

At the same time, we are the process of disposing off some older torn down that the price is fixed.

At the same time, we are the process of disposing off some older donuts as far as fixed.

The type of market environment.

That type of market environment.

The dry bulk side, the new dry bulk operating platform previously announced commenced operations during the quarter.

While the dry bulk side, the new dry particle Brady platform previously announced commenced operations during the quarter with.

With an equity commitment of up to $200 million. Our goal is to grow the business under 200 basis.

With an equity commitment of up to $200 million. Our goal is to grow the business whether it was the basis.

Realizing Cherokee to gas, but I would say.

Our lives and character of the gas, but I would say.

Well the bulk of our increased liquids content inside the company we are at.

Well the bulk of our increased liquids content inside the company. We are actively pursuing new investments what you understood. The shipping sector, let's have the potential to blow by it sounds like that's acceptable leverage.

Actively pursuing new investments what you understood the shipping sector, let's have the potential to blow by it sounds like.

That's acceptable risk levels.

Moving now to the slide presentation.

On slide three you can see our results.

On slide three you can see all the jobs.

Thank you.

2022 was the best year since our listing.

For the year ended I think it was about $500 million 40.

For the year ended I think it was about 500.

$43 per share while adjusted.

$43 per share while adjusted net income was around spoke on the New York.

Adjusted net income was around 400 people.

Sure.

Our gearing is up by almost broke down the drain.

Okay.

Okay. Good.

9000 $70 million.

So I think the media.

Slide four during the previous quarter, we announced a set up with a new batch of adequate somebody bought Christine she'd be well, Jonathan drybulk pressures ease their interest rates.

Slide four during the previous quarter, we announced a set up with a bunch of other puts somebody bought Christie she'd be a little choppy drybulk vessels, either intra Asia trades.

Great.

<unk> and bunker swaps.

We have already invested in assembling a meter.

We have already invested in something with your daughters for.

Let me just put it another way.

Over the last miles, we fixed regulatory pressures.

Over the last miles, we fixed regulatory basis.

But it's you always have to face.

On slide five you can see an update on our financing arrangements, which amounted to $560 million without any material increase in leverage.

There were couple of weeks it leaves the factory costs and expansion with maturities, our corporate leverage remains below 35% and we continue to maintain a strong balance sheet.

Most of them that we're a couple of weeks it leaves the factory cost and fixed maturities.

Our corporate leverage remains below 25% and we continue to maintain a strong balance sheet.

Slide six.

We continue to charter allows dry bulk vessels in the spot market charter seven ships since our last earnings release on the container side, our revenues today, so at 96% fixed for 23, 85% to 80.

We continue with the charter allowed dry bulk vessels in the spot market charter into the southern shapes.

So elyse the container side, our revenue stays at nine 6% fixed for 23, 85% or greater for white out a contract with everything in South Africa.

Paul White out of contract with everything about that $2 billion.

<unk>.

Right.

Right right.

Thanks charter duration of about four years.

I can try the duration for about four years.

Lastly, with fixed 16, containership within three months or so.

Lastly, with fixed fixed income international within three months.

I think there's one more time.

Douglas.

Your daughters.

Slide seven.

The containership charter market has normalized in the cycle.

The containership charter market has normalized at the single Cup.

The year, mostly due to reduced card with demand and capacity.

Capacity pretty much tied up by congestion.

Capacity pretty but you're talking about by congestion.

Bulk markets. That's also we get the equity market indicates significant signs, especially from Q2 2024 months.

Bulk markets that ultimately we get the acetate market indicates significant signs, especially from Q2 2023.

Finally, we continue to calibrate all kinds of apathy was exactly right.

Finally, we continue to be what exactly that was boosted by strong sponsor support.

Thanks Bill.

On slide eight our liquidity has increased E C.

On slide eight our liquidity has increased significantly.

Significantly year over year spending that that 90 970 media.

Significantly year over year staffing I've got a nice time to 17 New York.

This week, we didn't it gives us the ability to look for opportunities to grow the company.

I think we did it gives us the ability to look for opportunities to grow the company Kathy basis.

<unk>.

Moving to the next slide.

Here you can see a snapshot of our fourth quarter 2002 results. We've had an average of 115 vessels, our adjusted anything about 75 million or 61 cents per share.

Here you can see a snapshot of our fourth quarter 2020 shops, we've had an average of 115 vessels Jocelyn anything else about 75 million or six two out there, especially at <unk>.

Our adjusted figures take into consideration the following items, which are the heavy users like all of the gains or losses were possibly sports impediments and nobody got it right.

Our adjusted figures take in due course that Asia is in the form of guidance.

Like all of the gains or losses were possibly sports impediments and nobody got it Scott.

Yes.

Items.

On the last one slide we're discussing the market moving to snipe, Jed workspace have normalized Columbia historical high levels. The latest one vintage of pictures that have been concluded how people showed up at the lower rates.

Although lessons lives, we're discussing the market moving to snipe jet.

Workspace have normalized Columbia historical levels.

The latest one vintage of pictures that have been concluded how people showed up at the lower rates.

Capacity has reached four 6%.

Capacity because of the age to 46%.

On Slide 11, you can see the recent dry bulk marketplace, where rates have been under pressure. The order increase of seven 5% of the directly are you altering continues to be subdued with that presentation and we can now take questions. Thank you.

On Slide 11, you can see the recent dry bulk marketplace, where rates have been under pressure the order increase of seven 5% of the directly.

Our team continues to be subdued with that Rick I'll go through that presentation. We can now take questions. Thank you.

So if look at the equation.

So if we can take questions now.

Thank you as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad and wait for your name to be announced.

Thank you as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad and wait for your name to be announced if you wish to cancel your request. Please press star two.

If you wish to cancel your request please press star two.

Star one to ask a question.

Thats Star one to ask a question and your first question comes from the line of Chris Wetherbee from Citigroup. Please go ahead.

And your first question comes from the line of Chris Wetherbee from Citigroup. Please go ahead.

Yes, hi, thanks for taking the question.

Maybe we could start on the container shipping side I was curious about your take on discussions with charterers. So I know you have a degree a strong degree of coverage as we move through 2023, but in the instances where you have been having conversations with some of your customers can you give us a sense of sort of what that dynamic fuels like obviously, we heard from Marin.

Earlier, this morning, and I think broadly speaking overall box rates have fallen precipitously. So wanted to get a sense of how we should be thinking about sort of charter development either over the course of the next couple of quarters or maybe as we think about the next couple of years.

Maersk earlier this morning, and I think broadly speaking overall box rates have fallen precipitously. So wanted to get a sense of how we should be thinking about sort of charter development either over the course of the next couple of quarters or maybe as we think about the next couple of years.

Okay.

Thank you for that and good morning.

Thank you for that and good morning, Grace So couple of things.

So couple of things.

A softening of the charter market both in charter days at books rates.

The softer in Q2.

Charter market, both in charter days at box rates.

It is something that was expected.

At some point the congestion on the east end.

We have also seen.

Reduce the.

Cargo demand for the local regions, but it's got to be inflation related.

Or it may have to be with us.

It may have to be with.

Our initial targeting et cetera now.

National targeting.

No.

As you said.

We are pretty much close to 100% speaks for this year at 85% for the year after.

We are pretty much close to 100% speaks for this year and 85% for the year after.

We don't have a lot of ships that are opening and they generally sees that apart from the fact that charter rates have been falling at the same time.

We don't have a lot of ships opening and they generally sees that apart from the fact that charter rates have been falling at the same time.

The videos.

There are videos.

Okay.

<unk> has been shorter and shorter and then.

The Greek Shaw has been shorter and shorter and then.

Extension options.

That we see but again for two to three months charters auction now I cannot predict Golden Mindedly go well, let's say that for the time being we have not seen asset values being.

But we see back again for three months charters option now.

Im not predict Golden Mindedly go well, let's say that for the time being we have not seen asset values being.

At the same level, although there is definitely some correlation but we haven't seen it yet so regarding traffic Amit first of all we feel more than comfortable with the quality.

So at the same level, although there is definitely some correlation but we haven't seen it yet so regarding China cabinet adds. Furthermore, we feel more than comfortable with the quality.

Scott Barbour Jonathan is also.

Private Jonathan is also.

Okay.

What's your take there.

We are extremely profitable over the last couple of years.

Second neutral motto side you.

Second neutral Marseille you.

You saw.

So engaged with or like when it was drilled that asset values in the containership market.

So engaged with or like Brentwood thrilled that asset values in the containership market.

Wouldn't it be at negligible.

Wouldn't it be at levels, we find interesting.

Interesting.

I can tell you that.

Can't tell you that.

We might be there as you buy it but for the time being we bought we sit and wait.

Okay. Okay. That's helpful.

And then I guess I just wanted to come back.

And ask a little bit about what your thoughts are in terms of deploying capital in the market. What maybe is the most attractive area in your opinion currently.

And and ask a little bit about what your thoughts are in terms of deploying capital in the market. What maybe is the most attractive area in your opinion currently.

Obviously, you have ample liquidity as you highlighted on slide eight so kind of curious where do you think the best use of that capital will be or does it make sense to kind of sit back a little bit and I kind of.

Obviously, you have ample liquidity as you highlighted on slide eight just kind of curious where do you think the best use of that capital will be or does it make sense to kind of sit back a little bit and I kind of.

The broader macro plays out.

Al.

Got it all plays out.

Luke.

Yeah look a.

Part of the answer is but the destination is that when we see asset values on the containership side.

Part of the answer is what I just mentioned is that where do we see.

Values are Dennis at site.

Being correlated to charter rates today, and we would look at it again, but this may take some time.

<unk> correlated to charter rates today and.

We would look at it again, but this may take some time.

For second time and also for your breathing so.

Both for second time and auction for <unk>. So this.

This is one area that I guess, we're going to be active.

This is one area that I guess, we're gonna be active.

Yes.

Hey, Gary insured market prices justifying the second applies also for the dry bulk fleet.

Hey, Gary insured market crashes justifying the second applies also for the dry bulk.

<unk> fleet so still.

Fleet so still.

We don't think that asset values.

We don't think that asset values have enabled.

Enable.

They have become.

Again.

But should this be the case, we will deploy capital buying ships.

Should this be the case, we will deploy capital buying ships at prices, which we think makes sense is it's going to position ourselves.

As we said we think makes sense is it's going to position ourselves.

Right.

Mystic diamine, so so it's a ship acquisitions, both dry bulk and containers.

So.

So it's a shipper who has he's josh both dry bulk and containers as you've seen that we have started the.

As you have seen that we have started the.

Dry bulk trading platform globally have allocated up to now 100 million that is going to go after to Congress.

Dry bulk trading platform that we have allocated up to now.

Lin media and that is going to go up to 230 basis.

Another area was upbeat.

Hey, Dan was upbeat.

And finally, we are looking at some other.

Initiatives, which helped doesn't materialize, yet so I cannot disclose them for two reasons both for legal reasons and also because they are not my.

Initiatives, which helped doesn't materialize, yet so I cannot disclose down for two reasons, both for legal reasons and also because there might.

Yes.

Yeah.

I concluded yet.

So I conclude there yet.

But.

We are working on some of the.

We are working on some of that.

Immediately was ready we feel that's a part of our liquidity.

It would be deployed.

Yeah.

However, if we don't see asset values gone, we've got levers that make sense, both because that one day.

However, if we don't see assets by just gone, we've got levers that make sense, both because that Dennis.

<unk> site and also at the time.

<unk> site and also in.

The dry bulk side simply wounds that feedback and we're not going to be buying.

But simply we will sit back and we're not going to be buying ships I have to remind you that we didn't put any new building orders.

So I have to remind you that we didn't put any new building orders.

The high prices, we saw in the containership market over the last couple of years simply because we've tried that.

The higher prices, we saw in the containership market over the last couple of years simply because we felt that as a branded web prohibitive, even charter rates offered but kind of as well. So we will take our time, we outpatient when it like we feel we should be and when.

Brian we're prohibited even charter rates offered.

So we will take our time, we outpatient when it like we feel we should be and we will wait.

Great.

Okay. That's helpful. I guess, maybe one final from me before I turn it over just in terms of the trading platform are you going to need to maintain a higher degree of liquidity in the business in terms of capital reserves to be able to manage the risk potentially associated with data just kind of curious about how that might influence how you think about liquidity and cash balances.

Okay. That's helpful. I guess, maybe one final from me before I turn it over just in terms of the trading platform are you going to need to maintain a higher degree of liquidity in the business in terms of capital reserves to be able to manage the risk potentially associated with that or just kind of curious about how that might influence how you think about liquidity and cash balances.

Yes, the way we see it now.

The way, we see it now Oh.

Our equity is that it's going to be up to 200 million.

Equity is that it's going to be up to 200 million.

Of course, if the business grows and deep youll see more potential.

Uh huh.

I don't think you will be surprised that we got a little higher but what we have today in mind and let's see how it goes but what we have today in mind is that those 200 million I couldnt be more than enough in order to cover our liquidity needs in this business.

In order to cover our liquidity needs are in this business.

And my nuts.

Our exposure.

Our exposure in that market, but as I said.

Market risk.

But as I said.

If this thing is something that will make sense.

We think is something that will make sense.

And we feel more comfortable with the whole setup.

And we see potentially on the market. The two foundry does not eliminate it does what we feel we should allocate to date.

And we see potentially on the market to come do it there's not a limit. It just does what we feel we should allocate to date.

We could easily go north of that if it is justified.

Okay. Okay. That's very helpful color. Thanks for the time. This morning appreciate it sure. Thank you have a nice day. Thank you.

Next question comes from Omar <unk> with Jefferies. Please go ahead.

Thank you Hi, Greg Good afternoon, alright, thanks for the update.

I just wanted to follow up maybe on the on the last discussion about the dry bulk fleet in a trading operation you've obviously moved very quickly here over the past 18 months building up the owned asset base now you've chartered in those 14 capes in the non cancer Max that you referred to.

At least I guess from the maybe the perspective of a brisk or maybe just duration.

And I guess from.

From the maybe the perspective of risk or maybe just duration how should we think about those vessels are these short term charters or are they longer term.

Should we think about those vessels are these short term charters are they longer term.

How should we be thinking about those how they sit in your portfolio today and for how long.

Yeah, the <unk> target in the trading platform, which is asset light.

And they are feasible.

They are feasible.

All of them have been delivered most of them will be delivered over the next couple of quarters, but.

All of them have been delivered most of that will be delivered over the next couple of quarters, but.

The captive video day could be between two to three years. However, most of them are on index. So <unk>. When you have a ship charter in an index. There is no exposure because it gives you an index you pay what the market is baked.

The traffic video day would be between two to three years. However, most of them are on index. So you can speak to when you have a ship chartering index. There is no exposure because it gives you an index you pay what the market space.

And sort of you get the CLA based on market data.

And sort of are you get the CLA based on market data.

However, having said that in the future we may have.

However, having said that in the future we may have ships with a fixed rate.

Ships with a fixed rate.

Again for periods, it's going to be a combination of both I guess, but most of those vessels today to answer your question.

For the period right after three years and most of them iron ore in the index based.

For the period after three years and most of them iron ore in the index based the charter rate.

Sounds great.

Okay. That's helpful. So good to know that they are indexed based and then you do have youre, saying you have the Coa is basically covering them on the on the other side, where you can capture it.

Okay. That's helpful. So good to know that they are indexed based and then you do have youre, saying you have the Coa is basically covering them on the on the other side, where you can capture this spread.

Spread.

We have still ways and at the same time, we have started.

We have still ways and at the same time, we have started employing as it faced.

As well both in order to hedge and also in order to position our sense. So we've done things we've done.

As well both in order to hedge and also in order to position our sense. So we've done the things we've done a few ways.

Yes.

Especially for the business.

Especially for the business that are going to be delivered now.

I was going to be delivered now.

We have 23 vessels chartered in most of them by an index and for the bank our exposure.

We have 23 vessels chartered in most of them on index.

And for the bank our exposure.

We will also be doing Buckingham pancreatic.

We will also be doing Buckingham bunker hedging.

Okay. Thank you and then just on the on the 23 ships that you are about to have an <unk>.

Okay. Thank you and then just on the on the 23 ships that you are about to have in the fleet is that kind of a.

Does that kind of is that the right size it needs to be is that or is that maybe a starting point is there a certain number given the liquidity or the capital you're putting forth into that operation will come.

Is that the right size it needs to be is that or is that maybe a starting point is there a certain number given the liquidity or the capital you're putting forth into that operation.

Well clearly the size of that trading fleet.

The size of that trading fleet.

Yes, no. This is isn't this is a start and Burlington.

Yeah. No. This is isn't this is a start and Burlington.

Those ships they work when we just over the next couple of months I would say.

I think sooner rather than later, we could easily reach the finish.

I think sooner rather than later, we could easily reach the finish line.

50 ships being.

<unk> B.

Operated and of course subject to market conditions.

Operators and of course subject to market conditions, we could we could go 200 to 250 easily. This is why I said earlier.

We could go to 100 or 250 easily these areas.

It's really it makes sense the $200 million total labor with equal treatment.

It really it really it makes sense the $200 million total labor with equal treatment.

It could go higher.

Because.

Because at.

At some stage you need to have a meaningful size.

In this business as well so.

It is a business as well so.

It will definitely be 50 against sooner rather than later into the future equal total Lou It could also go through Congress or even north of that.

It will definitely be 50 against sooner rather than later into the future Kudos Hulu. It could also go through Congress, Colombia, 50, or even north of that.

Okay got it thanks.

Okay. Thanks, that's very helpful and maybe just one quick follow up just on the reference you made to the a couple of initiatives you were looking at that you can't comment on.

Thanks, that's very helpful and maybe just one quick follow up just on the reference you made to the a couple of initiatives you were looking at that you can't comment on.

Kent can we assume that those those were maybe outside of dry bulk and containers.

Well, it's going to be in shipping.

I got no format.

I got in this format.

You bet.

But I'd say it's.

It's gonna be within dry bulk and containers.

It's gonna be within dry bulk and container as I can give you there.

Partly but they're not sure if I say that it will not the same thing so I'm afraid I cannot Goldman that's always going to be shipping related.

Of course, it's not gonna be aviation, but this is <unk>.

Of course, it's not gonna be aviation, but this is something.

Something.

Baltimore is uncertain for the same producer that has not concluded yet.

Both of them together.

For the same producer that has not concluded yet.

I cannot comment more than that.

Okay I appreciate it Greg I'll turn it over.

Thank you.

Sure. Thank you.

Yes.

As a reminder to ask a question you May press star one on your telephone.

The next question comes from climate Marlin <unk> with value Investor's edge. Please go ahead.

The next question comes from climate <unk> with value Investor's edge. Please go ahead.

Good morning, Thank you for taking my questions.

You want to pursue additional acquisitions, if attractive opportunities arise and given your solid financial position I was wondering how do you plan to balance these additional spending with potential shareholder returns, especially consumed a significant discount to a navy ships are trading at.

Can I just come to a navy ships are trading at.

Yeah.

No.

About capital allocation of which comes quite often and its a fair question.

A question about capital allocation.

Quite often.

It's a fair question.

I cannot rule out share buybacks and.

I cannot rule out share buybacks and yeah, and we think in the past.

And we think in the past and we also increased the dividend in the past.

We also increased the dividend in the past and we also have other than one offs.

And we also have other than one offs excellent dividend payments.

Dividend payments are at the same time now for the time being however, we feel that the asset values makes sense and that's the measure and then justify further acquisitions either in the containers objective.

At the same time now for the time being however, we feel that the asset values makes sense and as I measure.

Despite further acquisitions either in the containership Jacobs.

So your billings or scope of dry bulk vessels.

So a quick pass, though your billings or should go for dry bulk vessels are this is something we would look very very carefully without excluding share buybacks for example.

Something we would look very very carefully without excluding share buybacks for example.

But we follow the market before timely acquisition should circumstances change.

But we follow the market before timely acquisitions should circumstances change.

Makes sense. Thanks for the color that's all from me. Thank you.

Makes sense. Thanks for the color that's all for me. Thank you.

Thank you thanks a lot.

Yeah.

This concludes today's question and answer session I would now like to pass the floor to Mr. Zika.

This concludes today's question and answer session I would now like to pass the floor to Mr. Zika or his closing remarks.

For his closing remarks.

Thank you very much for your attorneys that are interesting.

Thank you very much for your attorneys, just because I'm not and for and for dialing in today. We look forward to speaking with you again during our next quarterly results call. Thank you.

And for and for dialing in today, we look forward to speaking with you again during our next quarterly results call. Thank you.

Thank you that does conclude our conference for today. Thank you all for participating you may now disconnect.

Yeah.

[music].

Yes.

Yeah.

[music].

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