Q1 2023 Diana Shipping Inc. Earnings Call
Speaker 2: You may press star 1 at any time to be placed into question queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Ed Nebb, Investor Relations. Please go ahead, Ed. Thank you, Kevin, and thanks to everyone who is joining us today for the Diana Shipping, Inc.
Speaker 2: 2023 first quarter conference call. With us today to lead the call from management is Samiramis Paliu, chief executive officer, who will introduce the other executives of the company and begin the presentation.
Speaker 3: Thank you, Ed.
Speaker 3: Good morning ladies and gentlemen and welcome to Diana Shipping Inc's first quarter 2023 earnings call. My name is Samira Mispalu, the CEO of the company and it is a great pleasure to have the opportunity to present to you today.
Speaker 3: As mentioned by Ed earlier, I'm joined by our esteemed team, Mr. Stacey Margaronis, President of Diana Shipping, Mr. Ioannis Zafirakis, CFO and Chief Strategy Officer, Mr. Lefteris Papatrice, Director of Diana Shipping Inc.
Speaker 3: Ms. Maria Dezde, the company's Chief Accounting Officer.
Speaker 3: Before we begin, I would like to remind everyone to review the forward-looking statements applicable to today's presentation, which can be found on page 4 of the accompanying first quarter 2023 presentation.
Speaker 3: Q1 2023 has proven to be a profitable quarter for our company, despite less robust conditions prevailing in the market.
Speaker 3: Our disciplined chartering strategy, once again, has largely insulated us from the market weakening and has allowed us to generate positive free cash flows. In line with the guidance provided during the company's end of year earnings call, we are pleased to declare the distribution of a dividend for this quarter amounting to 15 percent per share.
Speaker 3: with a carrying capacity of approximately 4.7 million deadweight tons. Our fleet utilization has remained consistently high, reaching 99.4% for the first quarter of 2023. Additionally, our fleet utilization has remained consistently high, reaching 99.4% for the first quarter of 2023.
Speaker 3: We employed 1,013 people at sea and ashore by the end of the first quarter.
Speaker 3: Moving on to slide six and seven, let's review the highlights of the first quarter and recent development.
Speaker 3: In January , we concluded the en bloc deal signed in August 2022 to purchase nine Ultramax vessels with the delivery of the motor vessel DSI Aquarius.
Speaker 3: Also in January , we agreed to sell the motor vessel Aliki for a price of 15.08 million US dollars. She was delivered to her office in February 2023.
Speaker 3: In February , we agreed to sell the motor vessel Melia for an aggregate sale price of 14 million US dollars with a portion paid in cash and the remainder in Series Z convertible preferred shares issued by Ocean Palink. Motor vessel Melia was delivered to her new owners in February . Furthermore, within the same month we purchased the motor vessel Melia.
Speaker 3: No idea back
Speaker 3: Also in February , we declared a cash dividend of 15 cents per common share for the fourth quarter of 2022, amounting to approximately 16 million US dollars.
Speaker 3: Additionally, we announced the special stock distribution of all Series B convertible preferred shares of Ocean Pal Inc. held at the time by the company.
Speaker 3: In March, we filed the 2022 Annual Report on Form 20S, which is available on our website.
Speaker 3: Moving to more recent developments.
Speaker 3: In April , we signed a $100 million US dollar term loan facility with Danish Ship Finance SAS, which has been drawn down to refinance existing loan facilities. Last week, we entered into two separate term sheets with two major European banks for two senior secured term loan facilities.
Speaker 3: to be paid in the form of CSX shares or cash at the election of each shareholder.
Speaker 3: As of May 22nd, 2022, we have secured revenue of 79% for the remaining ownership days of 2023, amounting to approximately US$128.3 million of contracted revenues.
Speaker 3: Additionally, we have secured approximately $66.4 million of contracted revenues for 2024, including 26% of the available ownership dates for the entire year.
Speaker 3: Yannick will provide the more detailed analysis of our cash flow generation potential based on the current market environment.
Speaker 3: Turning to the financial highlights of the first quarter of 2023 on slide 8, as of March 31, 2023, we held a cash and cash equivalent position of $115.7 million including restricted cash and time deposit.
Speaker 3: compared to 143.9 million US dollars as of December 31, 2022.
Speaker 3: Our net debt, including deferred financing costs, stood at 630.8 million US dollars at the end of the first quarter of 2023, compared to 663.4 million US dollars at the end of December 31st.
Speaker 3: 2022. Time charter revenues for the first quarter of 2023 amounted to 72.6 million US dollars compared to 65.9 million for the same period in 2022. Lastly, our earnings per share for the first quarter of 2023.
Speaker 3: Let's review a summary of our recent chartering activities.
Speaker 3: We have continued to implement our discipline chartering strategy by securing profitable maritime charters for nine vessels since our last earnings presentation in February 2023.
Speaker 3: To provide some detail, we have charted one Ultramax vessel at a daily rate of $18,250 for a remaining average period of 326 days.
Speaker 3: Additionally, we have charted three camper maxes, one panamax and two post-panamax vessels with an average daily rate of $14,010 and the remaining average period of 446 days per vessel.
Speaker 3: Furthermore, we have charted two Cape size vessels with an average daily rate of 19,316 and the remaining average period of 466 days per vessel.
Speaker 3: We intend to continue chartering our vessels in a staggered manner, focusing on locking in cash flows and positioning ourselves in a balanced way to participate in the market efficiency.
Speaker 3: I will now pass on the floor to Yanni to provide a more detailed analysis of our financials.
Speaker 4: Thank you, Samiramis.
Speaker 4: All in all, I think this has been a good quarter.
Speaker 4: As we have already said, our times are the revenues for the quarters to that $72.6 million compared to 65.9 the same quarter in 2022. Of course, you understand that this is mainly because of the increased number of operating days, i.e. number of vessels.
Speaker 4: The timeshafter rate was at $18,500 compared to $22,000.
Speaker 4: almost 22 something thousand dollars per day in 2022 for the same quarter.
Speaker 4: This is showing the market, the current or the previous quarter's market conditions.
Speaker 4: An important point to pinpoint, someone, for this slide is the daily operating expenses where we are at similar levels like a year ago or even a little bit lower.
Speaker 4: Moving to slide number 11.
Speaker 4: The important point on this slide is the earnings per common shares diluted as we have already said. We managed to have 0.22.
Speaker 4: dollars per share compared to 0.31 dollars for the previous year's quarter.
Speaker 4: same quarter of the previous year.
Speaker 4: Moving to slide number 12.
Speaker 4: Moving to slide number 12.
Speaker 4: Again, we have kept our balance sheets at a very healthy condition.
Speaker 4: You can see the cash and cash equivalent in time deposit to be at the level of $115.7 million.
Speaker 4: and the total debt is only at 630 plus something million.
Speaker 4: If you do the math, this leaves the company with a net debt position of only $523.something million.
Speaker 4: And if you do the math, this leaves the company with a net debt position of only $523.something million. slide number
Speaker 4: As we have mentioned many times, managing our amortization profile is very important.
Speaker 4: Taking into account the two last loan agreements, the last two loan agreements we did, the one for $100 million and another one for $22 million, we have successfully managed not to have maturities for the remaining of 2023.
Speaker 4: and the entire 2024 and 2025. The entire 2025.
Speaker 4: Of course, this should not be news for you since you know that from the beginning we have been very prudent with the management of our liabilities.
Speaker 4: Slide number 14. In addition to the previous slide, looking at the total data in each composition,
Speaker 4: it can clearly be demonstrated how reasonable is the dead amount for the years to come. And also each composition of values financial instruments.
Speaker 4: some with fixed interest rates, others with variable, and that gives a good head position in this unstable interest rate environment.
Speaker 4: Slide number 15.
Speaker 4: Our break-even course also has been kept at very low levels.
Speaker 4: We are talking here approximately $14,600.
Speaker 4: Looking at the average time chart rate for fixed revenues for the remaining of 2023, it is at 17,170 and for 2024, of course only 26% of the days.
Speaker 4: But still, we're talking about $17,248 per day.
Speaker 4: $17,248 per day.
Speaker 4: Slide number 16, I'm pretty much certain that you are bored looking at this slide, but this is the usual graph that depicts the essence of our chartering strategy, which is exactly the same since 2005.
Speaker 4: a strategy that is proven...
Speaker 4: that provides the best risk-reward ratio for our revenues.
Speaker 4: The specific numbers we have already mentioned on the previous slide.
Speaker 4: Slide number 17.
Speaker 4: Using the May 15th FFA's
Speaker 4: which of course are not on the high side. It looks as if we can have a cash flow surplus of $16.0 million for 2023 and $1.6 million for 2020.
Speaker 4: million dollars for 2024. And now I will pass the call to Stacy Margaronis.
Speaker 4: of the Drybark market outlook. Stasi. Thank you, Yanni. And welcome from me as well to the participants of this conference call on Diana's Q1 financial performance and a look at the industry outlook.
Speaker 4: I'd like to start by looking at recent bulk carrier earnings development.
Speaker 4: The bulk carrier sector has experienced softer earnings recently across all size ranges.
Speaker 4: Average bulk carrier earnings are down to around 12,000 per day. I mean limited inquiry in key cargo loading regions and weaker sentiment.
Speaker 4: Looking at the indices, we observe the following trends which help us put into perspective the present state of the market.
Speaker 4: The Bortech Dry Index started the year at $1,250 and closed yesterday at $1,250. The 2022 high was $3,369.
Speaker 4: The Baltic Cape Index moved from 1,635 on January 3rd of this year to 1,758 yesterday.
Speaker 4: The 2022 high was 4,602 and the 5cc route earnings peaked at 38,169 per day.
Speaker 4: The BOTIC Panamax index started the year at 1,438 and closed yesterday at 1,141. It reached a high of 3,416 in 2022 with the 5 TC average earnings peaking at 30,000.
Speaker 4: 746 dollars a day. The Baltic SupraMax index stood at 968 on January 3rd and closed yesterday at 980.
Speaker 4: The 2022 high was 3,033 and the 10 time charter average earnings peaked last year at $33,366 per day. The 12 month time charter rate for Kate stands at around $15,000 per day.
Speaker 4: For Panamaxes the rate is a low 12,500 per day, while for UltraMaxes it stands at around 11,500 per day.
Speaker 4: Now, let's try to explain the reasons behind these rather wild movements in earnings and indices.
Speaker 5: On slide 19
Speaker 5: We can have a look at macroeconomic development. According to the latest forecast published by the IMS.
Speaker 5: World GDP is expected to grow by 2.8% this year and 3% in 2024.
Speaker 5: Uncertainties which may create headwinds for the bulk area market include the US banking stability, monetary policy trajectory, energy prices, inflation, and the US banking economy.
Speaker 5: the Chinese economy and the continuing Russia-Ukraine conflict.
Speaker 5: According to Clarkson, the Chinese GDP grew by 4.5% during the first quarter of this year, which was up from 2.9% in the last quarter of last year.
Speaker 5: Manufacturing and infrastructure spending were supportive, while domestic consumption and the property sector have not performed as well. New construction spending was down 19% during the first three months of this year. So, 2023, China's GDP is anticipated to grow by 5.2%.
Speaker 5: and by 4.5% next year. The United States is expected to grow by 1.6% this year and only 1.1% in 2024, while the Eurozone area is expected to grow by 0.8% this year.
Speaker 5: and by 1.4% in 2024. A quick look at the grain trade now. The global seaborne grain trade is projected to grow by 3% this grey season from a reduction of 3% in 2022. Last year, several factors including the Russia-Ukraine conflict put pressure on seaborne volumes.
Speaker 5: This year the Black Sea grain initiative came up for renewal on 18 May. It appears that a fresh agreement is now in place and Ukrainian exports will not be disrupted further, at least by these regulations.
Speaker 5: Ukrainian grain exports reached 29 million tons this year to May 1.
Speaker 5: For 2024, world seaborne grain trade is expected to increase by a further 4%.
Speaker 5: As you got coking coal, global seaborn coking coal trade is currently projected to grow by 2.9% this year compared to 2022, which will follow a drop of about 0.5% last year.
Speaker 5: China is expected to import less coking coal than last year, while India will probably increase imports by 9% to 78 million tons.
Speaker 5: In 2024, seaborne transportation of Coquing Co. is expected to increase marginally by about 1%.
Speaker 5: Thermal cold. Global seaborne thermal cold trade is currently projected by classrooms to grow by 2.8% this year and reach 991 million tons.
Speaker 5: India's imports are once again projected to grow by around 10% this year, while Chinese imports are also expected to increase by 6% to 210 million tons. Indonesia is expected to increase its coal exports by about 32% this year. In 2024 thermal coal exports as a whole are expected to grow by a further 1%.
Speaker 5: On the all-important iron ore trade, the global seaborne iron ore trade is projected by classrooms to grow by around 2% this year at 1.5 billion tons. Chinese imports are expected to grow by 1.6% and come to 1.127 billion tons on the back of improving sentiment in the steel sector.
Speaker 5: The main concern here is the Chinese government's decision to place a cap on steel production at 2022 levels.
Speaker 5: If implemented, this could reduce iron ore imports over the rest of the year. According to Commodore Research, Chinese iron ore stockpiles are at their lowest level since last July .
Speaker 5: Strong steel production in China has helped this de-stocking.
Speaker 5: Turning to the minor bulk tray.
Speaker 5: The global seaborn miner bulk trade is currently projected to increase marginal this year by 1% after contracting by 4% in 2022.
Speaker 5: Agri-bulks, fertilizers, metals and minerals are all affected one way or another by sanctions against Russia and trade restrictions between the warring parties in the Ukraine.
Speaker 5: Furthermore, microeconomic pressures and other headwinds have been responsible for weakness in demand for minor bulk commodities.
Speaker 5: One bright spot has been the bauxite trade. According to Clarkson's China's imports of bauxite, mainly from Australia and Guinea, last year was such that without them, ton-mile demand for bulkers would have been 0.6% lower than it actually was. This is something Clarkson expects will continue this year as well. Turn to slide 20 now and looking at the new building over the book and the supply side.
Speaker 5: According to Clarkson's high new building prices, limited birth availability at shipyards, uncertainty about fueling technology options and economic uncertainties has had a negative impact on owners' willingness to place new building orders.
Speaker 5: The overall bulk of all the books stood at 7% of the entire fleet at the end of March.
Speaker 5: For CAPES, this percentage was just 5%, for Panamax it's 8.9%, and for HandyMax UltraMax this is 7.7%.
Speaker 5: Ordering this year has been down by an average of 65% across the size spectrum of bulk areas.
Speaker 5: New buildings ordered this year will not be delivered before late 2025 due to the backlog of ordering of LNG carriers, car carriers and container ships.
Speaker 5: Checking now with fleet development. According to Clarkson, the Cape Side fleet is expected to grow by 2.2% this year and only 0.3% in 2024. The Panamax Campshermax fleet is anticipated to grow by 3.3% this year and 0.7% in 2024.
Speaker 5: The Handymax UltraMax fleet is expected to grow by 2.2% in 2023 and just 1.8% next year.
Speaker 5: Still on the supply side, port congestion has also dropped, with the class on the index having dropped to about 33% of CAPE and Panamax capacity globally in early April , down from about 36% a year ago and closer to the 2016-19 average of about 30%.
Speaker 5: A quick look at fueling transition.
Speaker 5: According to statistics published by Clarkson and the American Bureau of Shipping, 93 alternative fuel-capable ships of all types were ordered during the first quarter of this year, which is 49% of the total tonnage order.
Speaker 5: While LNG remained the most popular option in Q1, there was some interest in methanol, with 32 ships ordered, primarily container vessels, which were 21.
Speaker 5: Some owners are ordering ships with full fuel optionality by ordering vessels with LNG, methanol or ammonia ready notations. The extent of readiness is directly proportional to the premium payable for these very few ships ordered.
Speaker 5: At the beginning of this year, at least 38% of the order book in gross-time terms will be fitted with at least one energy-saving technology.
Speaker 5: This is the result of the IMO short term measures on EEXI, the Energy Efficiency Existing Ship IndexExactly
Speaker 5: result of the IMO short term measures on EEXI, the Energy Efficiency Existing Ship Index, and CII, the Carbon Intensity Index.
Speaker 5: It is estimated by granular capital that by the end of 2023, around 30% of the world's fleet, all types of ships, will be modern eco-tonnage, 6% will be alternative-hued and 25% will be equipped with some sort of energy-saving technology.
Speaker 5: such as bow enhancement, hull fin, propeller ducts or other bulb, among others.
Speaker 5: A quick look at the demolition. The forecast published by Clarkson's was right back to the demolition this year. It's for 13.5 million dead weight tons.
Speaker 5: While for next year the forecast is for 30.9 million deadweight, mainly due to the aging fleet and the environmental regulations coming into force.
Speaker 5: The benchmark price for bulk area scrapping candidate stands at around $550 to $575 per lightweight ton displacement. Finally the outlook for our industry.
Speaker 5: We agree with Clarkson's on supply backdrops over our industry. The order book stands near the 30-year low of around 7% of ships managing the water, as mentioned earlier. Improvements to bulk earnings are broadly anticipated in 2023 with supply demand fundamentals and supply-demand
Speaker 5: appearing marginally positive for this year, with ton-mile demand expected to grow by 2.5%, against a fleet growth estimate of about 2.4% overall.
Speaker 5: Furthermore, compliance with emissions regulations mentioned earlier could reduce bulk air supply by an estimated 2 to 2.5% per annum during 2023-24 through lower speeds and retrofitted time. In 2024, Clarkson forecast some further improvements in the bulk air market.
Speaker 5: potentially increased demolition.
Speaker 5: If these forecasts come to pass, and considering the fact that for the last few quarters the bulk carrier market has been evenly balanced, with no significant shortage or surplus of time McDonald's reported a necrotic collapse during aHO related TYP Thrones
Speaker 5: Earning should indeed improve. However...
Speaker 5: Klarssen highlights uncertainty over the scale and timing of potential market improvements and weaknesses in the world economy which still need to be monitored closely.
Speaker 5: This uncertainty makes us more cautious about the prospects of our industry, as adverse developments could easily influence future demand growth and ruin the benign supply-demand forecasts for 2024 and beyond.
Speaker 5: We continue therefore adopting the agnostic view in the chartering and commercial management of our fleet, and at the same time strengthening our balance sheet.
Speaker 5: with, among other things, actions mentioned by our CFO Ioannis Zafirakis earlier on in this conference call. I will now pass the call back to our CEO , Semiram Ispaliou, for an overview of our corporate strategy and goals going forward. Thank you.
Speaker 3: Thank you, Stacey. Before we open up the call to questions and answer sessions, I would like to summarize the key points from today's presentation.
Speaker 3: Firstly, we continue putting emphasis on generating and securing positive cash flows. Since November 2021, we have consistently distributed substantial cash and in-kind dividends.
Speaker 3: Additionally, we have provided clear guidance of our intention to declare a quarterly dividend of 15 cents per share for the next two quarters of 2023.
Speaker 3: Secondly, our company maintains a strong balance sheet, allowing us to pursue creative growth opportunities and fleet renewal initiatives. Third, we are working with the
Speaker 3: We remain committed to our strategy of providing stability in a cyclical business while maximizing long-term shareholder value.
Speaker 3: Thank you all for joining us today and we look forward to addressing your questions during the Q&A session.
Speaker 3: for joining us today and we look forward to addressing your questions during the Q&A session.
Speaker 2: Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 at this time. One moment please while we poll for questions.
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Speaker 2: If there are no questions at this time, I'd like to turn the floor back over to management for any further closing comments.
Speaker 3: Thank you. Once again, thank you all for joining us today. We look forward to talking to you on our next earnings call. Thank you very much.
Speaker 2: Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.