Q4 2022 Diana Shipping Inc Earnings Call
[music].
Greetings and welcome to the Diana Shipping Inc. 2022 fourth quarter and year end 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 anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Edward Nib IR advisor. Please go ahead well. Thank you Brock and thank you everyone, who is joining us for the Diana Shipping Inc. Fourth quarter year end conference call with US today from the company are Semiramis Poly you Chief Executive Officer.
And in a moment she will introduce the other.
Persons present from the company and so without further Ado I will turn it over to Ms. Palio.
Yeah.
Thank you.
Good morning, ladies and gentlemen, and welcome to Diana Shipping, Inc. Fourth quarter and end of the year 2022 earnings calls.
My name is Sumit I missed <unk>, the company's CEO and it is an honor to have the opportunity to present to you today.
Joining me today. This morning, we have Mr. Stacy amount of add on is president of Diana shipping.
Mr. The Army's Duffy that Keith.
So I'm chief executive.
The Chief strategy Officer.
Mr. David spoke about the need for director of Diana Shipping, Inc. And made some money in there the company's chief accounting officer.
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 fourth quarter and end of the year presentation.
2022 has been another profitable year for our company.
It has also been a very busy and productive one.
While market conditions have become less robust, although the last quarter and into 2023, our disciplined child. If there any strategy has allowed us to continue generating attractive free cash flow.
As a result.
Not only have we announced another cash dividend for this quarter, but for the first time since our public listing. We have also provided guidance of our intention to declare a cash dividend of at least 15 cents per share for the next three quarters.
Additionally, as a result of prudent and creative sale and purchase activity.
<unk> announced today another special dividend in kind in the form of Ocean power series D convertible preferred shares.
We believe that the combination of the cash and the in kind dividend is a true testament of our win to keep rewarding our shareholders when conditions are favorable.
Turning to slide five I will review with you the company's snapshot as of today.
Once again, we find ourselves on owning and operating and expanded fleet of 41 vessels in the water with a carrying capacity of approximately $4 7 million deadweight tons.
I was already in our fleet will increase by one to 42 vessels by the end of the second quarter 2023, as we expect to take delivery of one more will come out in April .
Our fleet utilization has remained at very high levels coming in at 98, 9% for the fiscal year 2022.
At the end of the fourth quarter, we employed 1020 people at sea in the shore.
Moving on to slide six and seven I will go over the highlights of the fourth quarter and recent developments.
More specifically in November of this year, we declared a cash dividend of $17.05 per common share or approximately $17 3 million U S dollars in aggregate for the third quarter of 2022, and the special stuff and a special stock distribution of all share a series the can.
But preferred shares of Ocean Power, Inc held by the company.
In December we concluded the sale of BSI under a mother to an unaffiliated Japanese third party for the amount of 29 point 85 million newest donuts and bareboat charter the vessel for a period of 10 years.
Also in December and in preparation of the just mentioned transaction, we made a prepayment of $22 million for the release of the mortgage.
Site under him either.
During the same month the company took delivery of two <unk> dry bulk vessels P. S. I P guesses and DSI Alastair.
And finally before the end of the year. The company released its third ESG report for 2021, a copy of which can be found on our website.
Referring to our more recent development in January the company took delivery of one more old panamax dry bulk vessel the motor vessel DSI Aquarius successfully concluding the Sch fleet acquisition acquisition transaction.
Also the company signed a memorandum of agreement for the sale of the motor vessel <unk> for the price of 15.08 million U S dollars to an unaffiliated third party.
In February the.
The company signed a memorandum of agreement for the sale of Melia for an aggregate price of 14 million U S dollars to Ocean Power, Inc. The amount of 4 million U S. Dollars was paid in cash upon signing of a memorandum of agreement and the remaining amount was paid upon the delivery of the vessel and the forum.
Oh 13157 series C convertible preferred shares issued by Ocean path.
Also in February we signed a memorandum of agreement for the purchase of one more terramax dry bulk vessel the motor vessel North Potomac.
For a purchase price of $27 9 million U S dollars. The vessel is expected to be delivered in early April .
In February we entered into a term sheet for a senior secured term loan facility with a major European bank for up to 100 U S dollars.
Millions of U S dollar sorry for the refund refinancing of nine vessels. This is still subject to concluding customary documentation.
As announced we have declared a cash dividend of <unk> 15 cents per common share for the fourth quarter of 2020, we intend to maintain this dividend of <unk> 15 cents for the duration of 2023.
We declared a special stock dividend in the form of 13157 series D convertible preferred shares of Ocean Power, Inc. Held by the company the payment of which remains subject to certain regulatory approvals in connection with the distribution.
Lastly, as of February 16, we have secured 68% of the remaining ownership days of 2023, securing approximately $169 2 million U S dollars of contracted revenues and have also secured approximately $39 5 million U S dollars.
Contracted revenues or 14% of the available ownership days for the entire year of 2024.
Yeah me too 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 the fourth quarter of 2022 on slide eight we find ourselves as of December 31st 2022, with a cash and cash equivalent position of $143 9 million U S dollars, including restricted cash and time deposits.
Against the $126 8 million U S dollar as of December 31, 2021.
Our debt net of deferred financing costs stood at $663 $4 million at the end of the fourth quarter of 2022, and again 400 and $423 $7 million at the end of 2021.
Our time charter revenues for the fourth quarter of 2022 amounted to $75 7 million U S dollars.
$68 8 million the same period of 2021.
Lastly, our earnings per share for the fourth quarter of 2022 came in at 27% versus 48 cents per share for the same period of 2021 yeah.
<unk> will go over these numbers in more detail further on in the presentation.
Moving on to slide nine we find a summary of our recent chartering activity consistent with our disciplined chartering strategy. We have continued chartering our vessels in a staggered manner and have secured profitable time charters for 17 vessels of our fleet since our last earning presentation.
November 17 2000.
More specifically we have chartered five also amongst the vessels at a weighted average daily rate of 14000.
U S dollar and for remaining average speeds of.
284 days for that.
We also have chartered one kind of survived for Panamaxes and post panamax vessels at the weighted average daily rate of 14350 and for remaining average periods of 296 days per vessel.
Two capesize and two new Craftsman Max vessels at the weighted average daily rate of 17622.
For our remaining average spirit of 532 days per vessel.
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 in a balanced way.
I'll now turn it over to Janice to go over the financials in more detail.
Thank you.
Clearly this has been a good idea and a nice quarter.
Our time charter revenues for the quarter stood at $75 7 million.
Dollars compared to 68 eight.
Same quarter in 2021.
The time charter equivalent rate was approximately the same.
As in the last quarter of 2021.
21000, and I found that approximately compared to 21.
The 51300 doors in 2000.
'twenty one.
Moving to the next slide slide 11.
We can see.
Yeah, so two jobs.
And again clearly that will go very profitable year with $15 $3 million net income to common stockholders compared to 51 $6 million in 2021.
For the full year time charter equivalent at eight.
Stood at $22735 a day.
We remind you that the same rate in 2021 was $15759 per day.
We want also to mention here that we have managed to keep our weighted average days to only standpoint, two years, but he views from the previous year, which was up 10 point.
Four years.
For our fleet.
Slide number 12.
Earnings per common share diluted was for the last quarter of 2022 equal to 27 shares cents compared to 48 in the same quarter of 2022. However.
Just to clarify that the quarter in 2020 to include that gain.
In 2002, when do you one surely included the gain from Ocean part of spin off which was equal to approximately <unk> <unk>.
She is more or less the cod in defense.
Slide number 13.
So we have already mentioned 2022 has been a very profitable year.
With a net income of $15 $2 million compared to 151 point sheets.
Previews here.
That is equal to 1.5 to $6 per share compared to only zero to $67 per share.
At this stage I would like to remind everyone that the last time, we were close to this number.
And we had a one.
$153.
Yes sure.
Our net income and earnings per share.
That was back in 2011 and over time, our stock price was more of an $8.
I would like to remind.
And also I would like to stress the fact that.
We're not paying a dividend at that time, when we were trading at $8.
And especially at up to 153 dogs.
Moving to the next slide.
Slide number 14 for another year, we have kept our balance sheet at a very healthy condition.
You can see the cash and cash equivalent and time deposits.
Our off the $143 $9 million and our total debt.
He's only $6063 4 million.
Net debt position is.
528 5 million.
Slide number 15.
Looking at our debt amortization profile, we have kept it very manageable.
With the latest agreement of the new $100 million credit facility the maturity profile.
There is no maturity before 2023, and we have very little for 2024.
Of course by.
By now you know what.
No our silent.
But we are always proactively in that respect.
We will not wait till the last moment to change so that speaks well for 2024 or even 2026.
Slide number 16.
Looking.
In addition to the previous slide the debt balance proposition is also very important for someone to understand.
Our debt Frac shortage.
So if a senior unsecured bonds Shannon leaseback.
Deals in a.
Secured loan facilities.
Our loan facilities Jeff.
Just for your info, the Ekati and margin of approximately 224% over LIBOR.
If you think about where.
Where the LIBOR is today.
You can clearly see that we have managed to shift the increasing interest rate environment with the sale and leaseback of base.
So they have an avid as fixed cost so far in the four 9%.
But it's even lower than the loan facilities that we discussed.
And then looking at the cotton liable rate, even the unsecured bonds.
Is very.
Competitively priced.
Slide number 17.
Our breakeven cost also.
Have been kept very very low levels at approximately $14200.
If we look at all of it is time charter rate of fixed revenues for 2023, which is about $18000 plus and 2024 close to 19000 all of US. This is a very manageable near breakeven.
Of course, we can.
Plenty of days fixed for 2020 before but Steve this is something not upwards.
Slide number 18. This is a the user graph depicts the excellence of our chartering strategy, which is exactly the same since 2005.
This is a strategy that is proven it.
Bruce.
But we provide the best AR.
It is pretty cool ratio for our revenue.
A specific number we have already mentioned on the previous slide about the secure the revenue is the base that that is increasing and so on but.
There is no need to mention again.
Slide number 19.
If we look if we use the FFA.
And as they were.
Published in February 2016.
Certainly they are not on the high side it looks as.
As if we can harvest cash flow surplus of $34 $2 million for 2023, and $13 $6 million for 2024.
And with that happy note I'll pass.
The Cold war on assessment of our own needs for the dry bulk market.
In our fresh.
Thanks, Jamie and welcome to all the participants of this first earnings conference call of 2020.
Slide 20.
Bulk shipping market started the year in the same mood.
It was at the close of 2022 macroeconomic factors and geopolitical developments had their influence on the freight market and produce certain extreme results has will be mentioned below.
The BVI the Baltic dry index, which has reached a high of $3368 20, <unk> May 2022 closed yesterday February 21st at 594.
Similar moves took place with the Baltic Cape Index, which dropped from 4006 or two in May last year to 303 yesterday.
The Baltic Panamax Index came down from 3000 and 416 in March 2022 to 843 yesterday.
Video time charter employment came down as well, but certainly not as much as the spot market.
But I'm just over $30000 a day in the first half of 2022 for one to two year employment contract.
<unk> commented around 15000 per day as it relates to secure reports were similar period employment.
Max's showed similar declines in 12 months employment daily earnings dropping from over $32000 a day in the first quarter of 2022.
So around $14000 a day this month.
The Panamax comes from X 12 month time charter rates dropped from U S dollars 31000 per day in 2022 to 14750 per day recently.
Let's have a quick look at what may have caused the apparent collapsing in spot market earnings, particularly of large bulk carriers.
Two of the most obvious and visible reason.
First has been the collapse of Brazilian iron ore exports in January and early February of this year due to exceptionally heavy seasonal rainfall that's have been reducing volumes since late 2022.
These adverse weather conditions have contributed the building up of Capesize capacity in Brazilian loading ports in early February congest.
Congestion in Brazil has up to that point to drop by about 11% during last year.
The second reason is what we just mentioned that is port congestion.
According to Clarksons in early 2022 worldwide Port congestion was estimated to have absorbed an extra 5% over the bulk of fleet.
This congestion now appears to have to a large extent disappeared except for some localized congestion as Jeff mentioned above in Brazil.
Global macroeconomic headwinds and other factors such as the ongoing challenges in the Chinese economy also played a role.
Before leaving this slide slide 20, even though we have Diana certainly not the charter.
We're looking at the pattern of drops and peaks.
All the dry bulk.
Exchange indices appear to be set for a bottoming out with indices about to turn positive.
The question as usual remains exactly when this will happen.
On slide 21, we looked at some macroeconomic developments.
Latest estimates from the IMF provide forecasts of world GDP growth of about two 9% for this year and three 1% for 2020 for the Chinese economy is expected to grow by five 2% this year in Florida, and a 5% in 2024, obviously these figures can change for various reasons.
As we have seen in the past.
The U S economy is expected to grow by one 4% this year and by just 1% in 2024.
The eurozone economies are basically expected to stagnate this year with growth coming in at.
7% of our next year should see the economies of the area grow by one 6%.
Let's see how these growth figures might affect demand supply balance for bulk carriers going forward.
Starting with demand according to Clarksons after dropping by about one 9% in terms of ton miles in 2022 overall bulk trade growth is currently expected to increase by 2% in 2023 last.
Last year's drop was primarily caused by China importing about 4% fewer bulk cargos than in 2021.
The minor bulk trade.
I would expect it to be negatively influenced by weak global economic growth volumes and expect it to grow by just 1% this year.
More importantly, though Clarksons report that worldwide steel production is expected to remain steady this year compared to 2022, which will come after a drop of about 30 million tons in 2022 compared to 2021.
This trend will have a profound effect on demand for the shipment of iron ore and coking coal and metallurgical coal this year.
Seaborne iron ore trade is expected to remain steady this year with stronger trends appearing in the second half of the year. In 2024. This trade is expected to grow by about 1% year on year.
Thermal coal is expected to increase by 2% this year on the back of European demand.
Coking coal demand is also expected to lead to 2% growth in seaborne trade. This year based on increased demand from emerging economies and India.
The grain trade is projected to see a rebound this year of about 5% after significant disruptions to Ukrainian exports in 2022 and the negative impact on this trade in 2024. This trade is expected by Clarksons to increase by a further 4% based on normalized Ukrainian exports and increased.
Demand from developing regions.
Turning to slide 22.
The bulk of supply projections appeared to be positive with the order book still near a 30 year low of 7%.
Over the existing fleet to about 60% of the Capesize and Panamax Campshot Max Order book will be delivered this year from 'twenty to 'twenty four onwards deliveries dropped dramatically.
This has led clarksons predicted that fleet growth is expected at about one 8% this year, while the impact from emission regulations could absorb some extra supply.
Clarksons estimate that are compliant with E X sight, the energy efficiency existing shipping.
And the CIA the carbon intensity index regulation.
The absorbed between two and 2.5% of available tonnage in the two year period of $2023 2024 through slower speed and retrofit time.
Looking at 2020 full clarksons foresee strong as ton mile demand of about 2% or higher depending on the robustness of future GDP growth at.
At the same time supply is estimated to increase by less than 1% with emissions regulations continue to have the effect from supply has referred to above.
New building orders for bulk carriers of all sizes were down in 2022 by about 56% year on year.
Prices have softened slightly compared to last year.
Looking quickly at scrapping according to Clarksons dry bulk scrapping is expected to be about 16 million deadweight. This year due to weaker market conditions and the introduction of new environmental regulations, such as <unk> mentioned about <unk> from this totaled $4 2 million deadweight I'd expect it to be.
Capes and about four and a half million Panamax comes from Max.
Clarksons prediction for demolition in 2024 stands at just under 22 million deadweight. Most of these scrap candidates will be vessels, whose compliance with the new environmental regulations proves to be too costly for owners to bear.
Finally, turning to the outlook now for our industry, we agree with Clarksons that 2023 will be a year with more moderate market conditions than seen at the peak of 2022.
Demand is still facing mark.
Macroeconomic headwinds in the Chinese economy is recovering slowly from the drop in GDP growth theme at the latter part of last year.
Furthermore, there are still some direct impact from the Russian Ukrainian conflict.
Finally, port congestion, which had been absorbing about 5% of the Bulker fleet in early 2022 as mentioned earlier has eased considerably thus releasing plenty of tonnage at the seasonal low of the dry bulk market.
However improvements are expected in the dry bulk market, mainly from Chinas, both coffee to the opening and the stimulus programs introduced by the Chinese government.
Furthermore, macroeconomic headwinds and expect it to start easing later this year and environmental regulations that are expected to support the supply side.
According to Braemar, Brazil.
Brazil is expected to have a record soybean harvest.
This season.
Braemar to expect strong increases in soybean exports from Brazil to China, which will certainly support the bulk carrier freight rates, particularly that for Panamaxes, which would carry most of the standards coming up for soybean shipments.
As we have mentioned repeatedly in the past to Diana's business. Our strategy is not based on specific forecasts about the future trends of the freight market and asset values.
This is not about to change by the fact that we as a company find reasonable the forecast made by several shipping analyst.
That there are good chances for the dry bulk market to start recovering from its spreads present weak state.
In the middle of 2023 onward, and well into 2024.
In this environment, we will continue to protect the integrity of our balance sheet and then the fleet expansion or renewals as well as our dividend policy will be handled in such a way so as not to prejudice. This.
Right.
I will now pass the call back to our CEO Semiramis, <unk>, who will summarize the highlights of the company's business plan goals and aspiration.
Thank you.
Thank you Stacey.
So before we open the call up to questions and answers I would like to provide a summary of what I believe to be the most important points presented today.
The company has been distributing substantial cash and then kind of dividend since November 2021, and has additionally provided clear guidance of its intention to declare a cash dividend of <unk> 15 per share per quarter for the next three quarters.
At the same time the company is maintaining a strong balance sheet, allowing us to entertain created growth and freight fleet renewal opportunity.
Yeah.
Also the company remains committed to its long term strategy of providing the relevant stability in a cyclical business with an emphasis on maximizing shareholders value.
Now I will turn it over to the operator to commence the question and answer session.
Thank you at this we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Once again, if you would like to have a question. Please press star one on your telephone keypad.
Okay.
Okay.
Okay.
Yeah.
There appears to be no questions at this time I would like to turn the call back to management for closing remarks.
Okay.
Thank you all for joining us today, and we look forward to talking to you again in our next financial results call. Thank you very much.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
[music].
Okay.
[music].
Okay.
[music].