Q1 2023 Costamare Inc Earnings Call
Thank you for standing by ladies and gentlemen, and welcome to the Costumer, Inc Conference call on the first quarter 2023 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.
That'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 now.
I must advise you that this conference is being recorded today Monday may 15th 2023.
We would like to remind you that this conference contains forward looking statements.
Please take a moment to read slide number two of the presentation, which contains the forward looking statements.
And now I'll pass the floor to your speaker today Mr. Speaker. Please go ahead Sir.
Thank you Ed good morning, ladies and gentlemen, during the first quarter of the year. The company generated net income of $542 million as of quarter end liquidity was about $1 billion, you think alternative market charter rates.
Rising trend with high demand cycles of both well it fixed with videos are increasing in duration.
However, they measure it but he supposed to enter the market.
Have covered nearly 100% of part a containership open days for the 2023, and we have proactively arrange long term employment on a forward basis for a number of container ships coming off charter between 2023 and 2025, having said you would put out a fleet contracted revenues of three point something billion dollars in debt.
See you weighted duration of about four years.
While the dry bulk side, our old dry bulk vessels continue to trade in the spot market. While the trading platform has been growing with a fleet of about 50 ships already fixed other Pedro charters, having agreed to invest up to $200 million. Our goal is to grow the dry part of cooperative classroom business when they put their bases and also realize scheduled it out.
What I was saying holders.
Finally during the quarter, we became the leader in the rest of the night to my time listening and growth oriented my time listening platform, having agreed to invest up to $200 million.
Considering current asset values, we do believe that's a natural and easy investment is a favorable employment of the company's increased liquidity.
This will eventually synergetic to the existing supporting platform and is expected to further in Congress is talking that you just went over the last decade with ship owners and commercial lenders in the suit financing sector.
Moving now to the slide presentation.
On slide three you can see how the first quarter results net income for the quarter was without any kind of a 42 million or $1 60 per share doesn't think on bus before the $6 538 cents per share our liquidity is up over $400 million year over year to more than $1 billion.
Slide for the first quarter of 2023 was the first full operational quarter of CPI without fixed 51, PTO as basis with the majority of the fleet being good index linked charter agreements 39 of the period's vessels have been already delivered and it's ironic.
Slide five.
We have become the leading in the best all in extra money that amazing having agreed to invest up to $200 million Neptune has a favorable opportunity for the deployment of the compound as excess capital.
In this slide you can also see an update on well known financing arrangements, which amounted to roughly $95 million without any material increase in leverage those deals have been coupled with extension of maturities and an improvement of our finding cost.
Slide six.
We continue to target all our dry bulk vessels going to sports markets, causing entered into more than 60 shopping agreements since our last earnings release, while the containership side, our revenues days out essentially having a person picks for 'twenty, three and 86% fixed for 24 without a contract that had been installed roughly three points of $1 billion with a D. You weighted remaining duration.
Oh, yes.
Turning to slide seven during the first quarter of 2023 of the IC Might've combined net capital from S&P activity stood at approximately 85 million gain.
We sold and then how about the sales total two containership Gen three dry bulk vessels.
At the conclusion of the transaction with your copper does the company will own 100% of one person versus initial combined ownership of 98% on two vessels.
Turning to slide eight.
Then I think that the market has shown an upward trends we've had the amount of across the board, whereas pixel pitch out introducing duration.
But the market remains volatile one for the remainder of 2023, the FFA market indicates the strength I think on the segments, where we owned vessels.
I believe we continue to have a long uninterrupted dividend track records boosted by strong sponsor support.
Slide nine.
Alright.
Increased significantly year over year staffing that's about $1 billion music, we didn't it gives us the ability to look for opportunity to grow the company I Wonder if you had a two basis.
Slide 10.
The other days of the container ships on a rising trend with high demand across the board. The latest one Dennis you pixels habit for longer periods.
I haven't got parcel to ease or the level of one 4%.
Slide 11, which is our final slide here you can see the recent dry bulk market rents in this waterfall with market. The order book stands at 649% of the total fleet and new ordering continues to remain subdued.
Without that concludes our presentation and we can now take questions. Thank you operator, who can take questions now.
As a reminder, if you would like to ask a question. Please press Star then one on your telephone keypad and wait for your name to be now.
If you wish to cancel your request.
That's star then two.
That's star then one to ask the question.
Yeah.
And your first question today comes from Chris Wetherbee with Citigroup.
Go ahead.
Yeah, Hey, Thanks, Good morning, guys wanted to touch base on the.
The leasing activity that you guys have undertaken in the platform. There. So maybe you could help us a little bit with sort of how to think about what the revenue profile of this business might look like over the course of the year just give us. Some help is sort of how that might play out in terms of how you want to expand it and what maybe the vessel exposure might look like as you go through the rest of the year.
Sure not a lot of this is our last question look Oh. This is a this is an amazing platform that was already established.
With some transactions already in place although off a smaller scale. So are we talking about greenfield invest of course subject to DSP.
After $200 million, Oh boy equity gradually as I said depend.
Depending.
All the deals that we see the pipeline then we.
We feel that it makes sense to invest now we have our investors as already mentioned I don't they are Duane Dewey.
And are they going to the.
Is it to have a L T.
Yes, he's done or now our investment this wouldn't be container lessors.
Myself gosh offshore whatever has to do with the shipping I mean, we're not confined to contact Nancy J for yourself.
We would fund towards these amazing lot for my at levels.
I would say we feel it would make sense that are at levels.
Which we might as well be I know not all of that asset. So if it's a 60 70, 80% level depending on the specific assets. So the goal is to have a it's a steady and a relatively secure the Chelsea a return on our investment as well.
But at the same time unnecessarily would probably not for my place. We find that's a 114 vessels per day, plus like we have the trading platform.
The lack of easy easy easy place for reporting for the.
Oh, we have in the future to have the technical or commercial management that goes by simple. Although this is not the purpose, but are they going initially would be to have instead, he and she entity.
Now our investment in the sector, we've been comfortable with.
Okay, and then just maybe a little bit more help in terms of how to think about as we're thinking about modeling. This business whatever you want to get that on EBITDA or some form of profitability or are there certain targets that you have that you'd like to be able to hit either on a margin basis or absolute dollars, whether it be this year or maybe on a run.
Right once you get capital fully deployed.
Yeah, I mean first of all in order to have the phone call about it.
Deployed I'm, not saying, that's going to say no, but most probably it's going to take more than a couple of quarters right that I think we'll find that there is something that we negotiate that we agree with document.
And then.
Sure.
Drawing to deploy the funds so it's going to take some of that would be the next quarter, although it would be growing so.
And the way we look at it we don't look at it from the terms of like EBITDA.
All EPS accretion that we look at it in terms of classroom concert that shows there are we would try to maximize our ever sort of equity investment Gotcha gotcha.
We've done which as you know.
According to what the leasing plan for them to say, how forgive me no I cannot give you an exact figure right now we just started with two transactions, but if you assume that yes, it does normandy chewed by them.
Shipping medium platforms I think.
You're going to be closer to that of course as we progress over the next quarters and then we have a more dealership what can't be more specific than that.
Also show EBITDA.
Okay got revenues EBITDA profitability.
Segment basis also.
Using business is this is this okay with you yeah.
Yeah, Yeah, no. That's helpful. I appreciate the I appreciate the color. Thank you very much.
Yeah.
The next question comes from Al Monaco with Jefferies. Please go ahead.
Thank you Hey, Greg.
Good afternoon.
Yeah. Thanks for the update I just wanted to check in.
On the dry bulk trading platform, obviously built up very aggressively to 50 plus ships. They can deliver I think you said 39, thus far.
A much bigger are you envisioning this getting to in terms of fleet size and then.
How do you feel or what what risk management protocols do you have in place you know given the trade in nature of the business.
Yeah, a couple of things first of all yes. It has grown too right. It's absolutely it other than the people who own vessels.
39 of those have been ideal image.
Considering that the they started like some months ago, Yes, I would say that the this is quite a.
If Australia.
If hospitals are.
Let us now but now.
It's a it is a business.
We do mind.
From a risk perspective, Ah I think we manage it appropriately it first of all we look out like we did it because he's the guy sitting dessert business.
We look on our exposure and then you might have exposure in a couple of those first of all do you have like schools or did he about David because you would have to utilize if it's as it is and it is a necessary tool you have explosion on ships that you may it's out there in Florida short videos.
At fixed rate.
And then you May also have a exposure if you do like a category, that's where like you pay fixed rate.
And then you try as floating rate and in general how did you don't have a lot of play in market. The esport shapes tend to eat a childhood in an index and as you will notice we mentioned that the multiple of the ships have been chartered in a help each other in there when they need the click basis.
Which means that today, the commerciality east Boulder market because there is.
It's really nice.
So are we look at our exposure.
And the physical market, we look at our exposure.
In the paper market and the epic phase and we do it on sensitivities and we look at our liquidity today and how this is going to evolve over the next quarters.
At the same time, we look at the operating side of the business.
There's also explore who are in the bank because when we when we take a position in the bank as we catch it and without a in place at Banca kitchen lines.
So it is a business, which has a lot of potential I mean potentially out not only to grow but our intent. So often it does simply because it is one that the island because it would be one of the I think in order to produce those are Dennis at the same time I agree with you that you need to have it tied to.
Can you just remind us of Memphis at OXXO.
Which is why I think we have put in place up to now.
Okay. Thank you and then maybe it seems that the you know the trading platform is a bit more top heavy with the Lotte JV exposure and then your own platform is more mid sized drybulk assets how are those two businesses related.
Functioning together or are they separate any kind of synergies that can be realized between both.
Yeah, you're right I mean in the trading platform, it's mainly capes and Panamax.
Normally you have capes that because capes are much more volatile by nature and are in the very platform are you need to have some volatility.
Because this is the nature of the business.
At the same time, if you like if you look at the costs a lot of ink dry bulk owned vessels, which are basically 100%, which have been in place prior to starting the trading business. You guys said that Congress will put a mark says I always look at the average size that is close to 50 657000 deadweight and ER.
And I think it's mainly economies are we'd see it completely.
Segment EBITDA.
Ah that the dry, but one vessel and the trading loss for my each one of them that is run by different people.
And by different you know management teams at the same time of course introduces those people talk to each other and.
We have a full view of the all the whole market without at all our internal research would you say utilized within the whole financial there are a lot of synergies. However, it's two different things.
So people managing each business and I think this is how it would be and the trading platform kind of hold off Gabe suites, I say simple we don't own.
Initially we did they buy games because we didn't like this volatility however in the trading platform game has got to be there because they are by default are more volatile asset.
Got it.
That makes sense I'll turn it over thanks Brett.
Thank you.
As a reminder, if you wish to ask a question. Please press star one to enter the question queue.
Your next question comes from Ben Nolan with Stifel. Please go ahead.
Hey.
Touch on both the leasing and the.
And the dry bulk platform, but maybe starting with the Drybulk platform.
It you know it seems like in the near term here it has been.
Well unequivocally it it has been.
Costs did the company I mean your earnings would have been twice as high had it not been there.
The.
Is there is it part of the ramp up process of no even even on a rate basis. It was substantially you you can kind of back into the numbers would have been substantially lower than market level. So is this just part of the ramp up basis and not on a go forward are fully built platform. How do how should we think about what you expect the profitability of that business to look like.
Yeah. Its two things first of all the dry bulk platform the trading platform that I see somebody abacus team like we have all those chartered in vessels. This is practically a start that we're starting to some months ago.
So initially average thought that way you have a increase their liquidity needs and Oh should ramp up as sort of you rightly pointed out.
Initially you don't expect it to have a XD and brokerage, but you'll be the platform for the future and of course, you'll have some set up and startup costs.
That's why I'm, saying now regarding the dry bulk own vessels, which I think would fit into that.
That case. The result was affected because we did a lot of the open positioning in the first quarter due to market conditions. A show. This is not something that I think in general.
It sounds good.
To take place in the.
The next quarters as well, although I can never predict the market, but normally we don't show booth.
Yes, yes.
During the same quarter. So normally this is not something that they have.
Shouldn't be happening over the next quarters as long as that's happened in the quarters before I would normally treat it as a one off item I those repositioning costs.
Now in our adjusted EPS, we didn't adjust for it we'd have to do something from an accounting and the like.
Presentation perspective, I was like sounds like we just don't think that ordinary but practically I wouldn't expect this to be a recurring item over the next quarter Theres no way normally because of the dry bulk vessels. They are trading on sports show, we followed the spot market and Oh of course.
To be a sufficient as profitable as possible.
Okay, and with respect to the leasing platform I mean, I I sort of understand the rationale behind it but.
As I think through the capital allocation you guys haven't been buying back shares although the share price has been under some pressure here can you maybe talk through the capital deployment strategy from a return basis, I mean would seem to me that the shares it would be a pretty compelling.
Investment opportunity, maybe relative to the leasing platform.
Yes, I know, it's a it's a couple of things regarding capital allocation disciplines that hasn't been discussed internally.
We will also be discussed the internalization.
Because we have cash on balance sheet of like close to 1 billion AR would definitely have a means to buy back shares.
We publish a buy back program.
In Malaysia with 19 million.
Dollar survival are still available and at the same time, we could also gradually increase the dividend on a quarterly basis or even in one of our big dividend payment or both.
This does see some things that are the dividend policy, which is part of the capital allocation. It is being discussed internally, which didn't have the ability to do it irrespective of the trading platform and also the capital assigned to the leasing business.
The leasing businesses after 200 million gradually over the you know the following quarters.
They do provide though they are expected to provide that this is our goal.
She has to return upwards.
Eh and shipping them compared to other sectors can be kind of a question.
And that's our whole shouldnt be one does not exclude.
It's not that Oh work out the allocation.
They need to pay more dividends over buybacks overseas.
In any way.
I either.
Or for somebody about gosh I want to make this clear.
We just feel that we normally deploy our capital.
In either buying ships.
Ownership now are too expensive steel, we didn't put any new building orders because we felt the market was too high and the same applies for the dry bulk secondhand ships today, he's not at levels that we feel it would be interesting for us. So it was thought about at Cushing and.
Next in my time leasing these aren't they don't think Microsoft.
To deploy capital, which we think it's gonna be way on an.
I agree with your basis buy back shares and dividend increases potentially at something that is discussed separately and we are discussing this at the board level, but they wanted does not exclude the other.
Okay, Alright, I appreciate it thanks, Greg.
Okay. Thank you.
This concludes our question answer session I would like to turn the conference back over to Mr. Because any closing remark.
Thank you very much for dialing in today and for your interest in cause somebody to Inc.
We look forward to speaking to you again Julien 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.
Okay.
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Okay.
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