Q1 2023 Seanergy Maritime Holdings Corp Earnings Call
Okay.
Thank you for standing by ladies and gentlemen, and welcome to the Sealy Jean Marie Time Holdings Corporation Conference call on the first quarter ended may 31st 2020 free financial results.
We have with US Mr Smartest, Sundanese, chairman and CEO and Mr. Stavros, <unk> Techies, Chief financial Officer of synergy Maritime Holdings' Coke.
At this time, all participants are in listen only mode.
There will be a question and answer session at which time if you wish to ask a question. Please press star one and one on your telephone keypad.
Yeah. We then here at night debated message advising you Haynes is raised.
Please be advised that this conference call is being recorded today Thursday May 25, 2020 free.
The archived webcast of the conference call will soon be made available on the synergy website www dot synergy might be time to come.
Many of our remarks today contain forward looking statements based on current expectations actual results may differ materially from the results projected from those forward looking statements.
Additional information concerning factors that can cause the actual results to differ materially from those in the forward looking statements is contained in the first quarter ended may 31st.
May 31st 2020 free earnings release, which is available on the send your website again www dot.
Synergy maritime Dot com.
I would now like to turn the conference over to one of your speaker today, Chairman and CEO of the company. Mr. <unk>. Please go ahead Sir.
Thank you operator.
Hello.
I'd like to welcome everyone to our conference call.
Today, we're presenting the financial results of the first quarter of 2023, while we're also pleased to announce the distribution of another cash dividends.
As we discussed in our previous earnings call. During the first quarter of 2023, we went through adverse seasonality in the Capesize market. The Baltic Capesize index averaged approximately $9100 per day, and obviously it has affected our financial performance considerably, whereas it would be this market weakness mainly to the tail.
And of the Covid restrictions in China.
However, following China's official reopening in March we have seen a strong rebound in industrial activity as well as vessel charter rates for Cape sizes. The overall fundamentals are quite encouraging for the remainder of the year notwithstanding the weak Q1, our board of directors has declared another regular cash dividend of $2 five.
<unk> per share, which brings our total dividend distributions since the beginning of 2010 to $2 30 per share or approximately $1 55 per share when including the shares of United Maritime at the current trading price.
I'll provide some financial highlights and our CFO Starbucks gift package will provide further analysis later in this call.
As I mentioned earlier the average PCI for Q1 was approximately a mere $9900 per day, but our daily time charter equivalent outperformance figure once again by approximately 20%. Our Q1 net revenues amounted to $18 million, our EBITDA was $8 2 million.
And we had a net loss of $4 2 million. The decrease from last year's corresponding figures primarily reflects the decline and the daily time charter equivalent from approximately $19300 last year to about $11000 per day. This year. However, we expect that our financial performance will improve significantly.
Along the recent rise in the Capesize charter rates, specifically in the second quarter of 2023 based on our actual fixtures to date, we expect to achieve a time charter equivalent of approximately $18850 per day consistent with our track record. This represents a premium to the average Baltic Capesize index.
Reported so far in the current quarter.
I'll provide an update on our current fleet commercial developments during the first quarter of 2023 will deliver the trader ship in good shape to their new owners pursuant to our agreement to sell them for an aggregate price of approximately 36 million recording an accounting gain of about $8 1 million. We're currently looking at Capesize.
Acquisition opportunities to partially replace the tonnage were sold and to further reduce our fleet's average age. Furthermore, following the decision to repurchase the championship from its sale and leaseback arrangement, we secured a new long term time charter agreement for a period of 34 to 30 months under the new terms of the vessel.
Earned premium for the Baltic Capesize index, and the scrubber profit sharing scheme will be significantly improved resulting in higher profitability. Additionally, we also agreed to extend the time charters of nitrogen Jimmy ships for periods between 11, and 15 months at substantially the same terms as before.
The repeat business with our charters is a testament of our excellent commercial relationships and of our solid technical and operational capabilities out of our 16 Capesize vessels. The scrubber fitted ships online we get the majority of the scrubber benefit on five of those ships I remind everyone that we did.
Not pay for any of distillation subscribers on any of our ships lastly, looking beyond specific features over the past weeks have taken the opportunity to convert some of our vessels index linked charters into fixed rates using the conversion option.
At the moment, we have fixed approximately 25% of our remaining calendar days for 2023 at a level of about $20500 per day moving on to other financing transactions during the quarter. We continued our focus in optimizing our capital structure and to that end.
We completed three financing transactions for a total amount of $53 8 million that led to the release of approximately $15 million liquidity starboard, who will go into the specifics of this transaction shortly but I wanted to point out the importance of balancing our capital requirements between shareholder returns and fleet renewal.
Over the next few years and we believe we have the appropriate liquidity for both last but not least so far this year I have already purchased synergy shares in the open market worth approximately $750000 at an average price of about $5 17 per share given the wide.
Kind of our share price to synergies intrinsic value and intend to continue purchasing shares over the next months always keeping in line with our internal trading policy jurisdictions, I remind everyone that I have never sold any of my senior T shares I will now pass the call to our CFO who's going to discuss our financial results before I return.
To discuss our market update so several please go ahead.
Thank you so Martin I would like to welcome everyone from my side as well to our earnings call. Let's start by reviewing the main highlights of our financial statements for the first quarter ended March 31.
Net revenue for the quarter was equal to $80 million, reflecting a decrease from the net revenue of $29 7 million in the same period of 2022. This was the result of the seasonally softer earnings environment, which inevitably impacted our results at the same time, our EBITDA was equal to $8 two.
Million below the $12 8 million in the same quarter last year, while we recorded a net loss of $4 2 million versus a net profit of $3 7 million in the first quarter of 2022, however, with freight rates, having already increased more than 80% compared to the first quarter average.
We are confident that our bottom line will improve going forward. This is also backed by our successful freight hedging strategy for the rest of 2023 as discussed earlier by commodities moving onto our balance sheet. Our cash at the end of the first quarter may have been reduced compared to the previous quarter, but remained satisfactory.
At $20 5 million or approximately $1 25 million per vessel.
Despite the $4 5 million payment of the dividend for the third quarter of 2022, which took place in the first quarter of 2023, and the repayment of $8 million of our only outstanding convertible note at this point it is worth noting that since the end of the first quarter. We have completed three new refinancing transactions, which have had.
Approximately $15 million of extra liquidity I'll come back with more details on this in a moment as regards to debt outstanding which stood at $210 6 million at the end of the first quarter translating to a modest loan to value ratio of 47%. After refinancings. The ratio has just margin.
<unk> increased to 49% finally total shareholders' equity amounted to $220 million as of December 31st 2023 practically unchanged from the end of 2022, let me now add some more details about our recent refinancings. During April we managed to refinance three of our vessels through two.
Sale and leaseback agreements and the new sustainability linked loan.
First new sale and leaseback agreement is with its primary lessor for an amount of $19 million for the night with a new agreement. The vessel was sold and started back on a bareboat basis for a six year period, we have continuous options to repurchase the vessel following the second anniversary as a bit of a charter while at the end of the six year period.
The second sale and leaseback facility was agreed with another Japanese lessor for an amount of $90 million and was utilized to partly finance and loan facility with a good bank secured with a low tip into other vessels.
<unk> was sold inserted backed on a bareboat basis for a period of four years in five months, while we have continuous option to repurchase the vessel following the second anniversary of the billable charter.
At the end of the available period with a final purchase option at $7 8 million with a new interest margin is 50 basis points lower than the previous financing. The 30 financing was performed through loan facilities begin to finance an existing lender for a company in particular, we amended and restated the existing facility.
This is linda execute by the sale of shipping plenty of ships to refinance a sale and leaseback agreement for the championship. We amended the facility includes a new tons of $15 8 million secured by the championship while sustainability adjustment mechanism was introduced in expecting the underlying interest rate of the entire facility.
The new plans has a five year term and the interest rate is 265% over three months term, so far which can fluctuate by five basis points based on certain emissions reductions thresholds. This is our fifth vessel financing entailing a sustainability element and we are glad to contribute on multiple fronts to the IND.
The street, the carbonization effort with the additional liquidity raises during these transactions. We are equipped to encounter any market conditions, while also being able to exploit an opportunity that may arise in the next quarters and ultimately create value for our shareholders through the series of transactions. We also managed to reduce our interest.
Sleep margin in a period of successive central bank interest rate hikes.
Moving on and before returning the call back to Marty I would like to remind the synergy has declared already $23 4 million in cash dividends since the beginning of 2022 and has concluded some $35 5 million in securities purchased in the same period synergy is committed to continue prioritizing.
Shareholders rewards utilizing our effective corporate and commercial strategies and the management has faced and the prospects of the company and the Capesize market. This and the surplus connection between our trading price and the fair value of synergy at the main reason for me joining some modest in his open market purchases earlier this year.
This concludes my review I will now turn the call bulk commodities, who will discuss the market and industry fundamentals.
Okay.
Thank you Sabra.
Q1 was a disappointing quarter for the Capesize market with the usual seasonal factors, playing the role and notably the tail end of the Covid researchers in China. The average PCI rates for Q1 was a mere $9100 per day led Capesize fleet growth in the quarter was one 9% year on year, but we're not accounting for.
The unwinding of port congestion the effective growth in ship supply was much higher.
To a large extent this reflects the front loading of new vessel deliveries for the year. While congestion has now reached very low levels of supply growth for the balance of 2023 is expected to be considerably slower and according to Clarksons total 2023, Capesize fleet growth is expected to be around 2%, which has already taken.
Place within the first quarter of the year the improvement in vessel earnings that has occurred since March is quite encouraging and a clear indication of the favorable market balance, let's now move to a discussion of the high level of demand and supply picture.
Regarding capesize vessels demand iron ore and coal ton miles are expected to grow by around 2% and 4% respectively. In 2023 with growth being sustained at similar levels into 2020 for bauxite seaborne trade, which has also emerged as an important source of demand in the recent years is.
<unk> to grow about 5% in absolute terms, the long term decarbonization lender organization trends lend support to increasing bauxite trade and aluminum consumption is expected to keep growing robustly.
One particular point I wanted to make is that the port inventories in China of iron ore have falling to multi year lows. So we believe we may face a 20 to 30 million ton a restocking process in the next months that can play a very significant role in the next quarters regarding the general economic environment. It should be noted that in 2010.
We saw solid industrial production driven by high inflation rising input costs rising interest rates and China being locked down for almost a third consecutive full year. During 2023, we're already starting to see a reversal of this trend and although this is a slow process and confident that overall.
<unk> is going to be quite healthy moving.
Moving on to vessel supply.
Outlook for the Capesize sector remains very encouraging the limited new building activity over the last few years has kept fleet growth at very low levels.
Going forward, most estimates point to a 2% fleet growth for 2023, and multi year growth of 0.3% for 2024.
The limited fleet growth the progressive slowdown trend due to the loan regulations is expected to reduce effective fleet supply and that will support further the freight rates. Once again, the Capesize order book as a percentage of the active fleet is currently in one of the lowest points within the last three decades.
Once again, we firmly believe that synergy is in a great position to deliver higher returns in this environment. Despite the challenging first quarter of the year. We have remained consistent with our pledge to reward our shareholders through capital distributions and we will continue doing so based on the expected strong markets. During the next few years.
Yes.
On that note I would like to turn the call over to the operator and answer any questions. You may have so operator, please take the call.
Thank you so as a reminder to ask a question you will need to press star one and one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one and one again once again, please press star one and one if you have any questions I'll comment at this time.
We are now going to proceed with our first question.
And the question comes from the line of Tate Sullivan from Maxim Group. Please ask your question.
Hello, Samantha seller service.
How are you.
Although it did have a good day how are you.
Great to hear you.
And.
I'll, let very active on the financing front and to summarize is it diversifying lenders are moving away from lenders that were less flexible on terms.
Firing facilities.
Could you summarize the overall strategy.
Was it mainly to add add your lenders. Please.
I take a establish.
Look for.
So different.
Three refinancings.
Dial basically four different regions the championship.
The sale and leaseback with Cargill was coming to an end in November . So we took a proactive stance there which was mainly commercially driven because we wanted to improve the terms of the chartering and.
The terms of the scrubber benefit so basically we took the decision to repurchase the vessel a bit earlier and were supported by one of our house banks Daily ship Finance.
Which catered also for lower interest expense now on the two financings.
Were done through the sale and leasebacks in Japan.
Strategically we want to do more financing with Japan, because the offer both flexibility and reduce cost.
Yes.
Sizable advances so it was I mean, firstly to improve the financing terms and secondly to release some liquidity.
In order to be able to firstly to take advantage of trading opportunities to grow or renew the fleet and secondly to have ample liquidity to face any market conditions.
Great Great. Thank you and yes, I mean meaningful debt reduction in the first quarter, but then you adding the added the extra liquidity this quarter and just can you with the market backdrop, I mean, encouraging with the supply already coming into the market, but then I think the rates of decline.
Somewhat recently I mean is there any short term factors that you can point to that.
Office should go away that should help us start to rebound to reflect a positive supply demand dynamic.
Well, yes, basically what happened is that everybody had a lot of high expectations for the Chinese are reopening.
But I'm afraid this did not live up to their initial expectations. So we're seeing some of that tied to deflate.
However, as I mentioned previously in the call, we're seeing multi year lows into the iron ore port stock inventories and that means that China will be forced or we expect China to restock that at a certain threshold and thats going to bleed into increased.
Increased loyalty towards China. So we have full confidence that the Chinese infrastructure investment is going to continue.
I will say that restocking taking place and generally we're very optimistic in the short term and in the second half as well so.
It's a temporary thing what we're seeing now it started out it started off with the best possible expectations.
I think that is kind of deflated now, but I think we will see.
A strong rebound in the market in the next few months.
And then with most of the supply growth already taking place I mean ships coming out of the newbuild yards that have newbuild prices started to decrease our yard seeking bids for new capesize.
Orders on that.
Contrary.
On the contrary, we don't see any new building capesize vessels being ordered.
The reason is multiple first of all you have a very high spread between 10 year old or a five year old ship as compared to a new building. So it doesn't make any financial sense at the same time.
The shipyard slowed sharply much taken by containers LNG tankers. So there is no open slot until well into 12, 26%. So even if someone was completely crazy and wanted to placing new building orders to date, you will still have to wait three years before you take delivery of the ship. So having said all that we don't really see.
<unk>.
Problems arising from any new building order book in the near future.
And <unk> I'll go back to the balance sheet just my last question. Please.
Any what are the shortest term maturities after all the recent refinancing.
Out of the two and $23 million of total debt roughly if it happens.
We don't have any balloon coming up for the next 18 months, we have only.
The.
The delco remaining payment on the convertible which is $3 2 million in the fourth quarter, but this is I would say.
Tiny meaning balloon there.
And then next facility, which is coming up for refinancing.
18 months, and it's an alpha bank facility, which is very well covered by the value of the asset so there shouldnt be any issues there.
Alright.
Thank you very much.
Thank you Dave. Thank you data have a good day.
We are now going to proceed with our next question.
And that question comes from the line of Christopher <unk> from Arctic Securities. Please ask your question.
Hello, gentlemen, thank you for the presentation.
Thank you good afternoon.
Good afternoon so.
In terms of chartering Scott.
Thank you.
The license almost conversing.
The spot.
Spot vessels.
To the rank of strength on the half on the remaining remainder of the year. So so asking Pat.
Oh looks very nice.
Yes.
How the market is looking right now.
Going forward, what do you expect in terms of.
The market in the second half and what do you see.
So capitalist.
In the short term because <unk> all been waiting for a broader market to go from strength to strength, but we haven't seen that lately.
How do you think about that.
That's actually a great question.
And that is evident more on the smaller sizes.
On the Panamax and supermax is that has deflated a lot and due to other events and I am afraid that this has been driving the capesize.
Market.
Not significantly but it is starting to drive the capesize market quite a lot when people have now the opportunity to split cargos, especially short haul cargos from coal in the filings and all that and that has been affecting Cape sizes, a little bit I think this is going to normalize in the near future I think the biggest catalyst for us will be the restocking.
China without a law that has decreased down to three year lows, if I remember well, we haven't seen such low inventory as soon as the first half of 2021, so that is going to drive the market higher.
And overall I think demand will continue to be healthy, but the catalyst in the market is not going to come so much from demand is going to come from supply.
<unk> seen since the beginning of the year the implementation of two major new regulations have not <unk>, but effectively nothing really has changed in a day to day life as a shipping company, yes, everybody.
Everybody has been reporting speeds and has been recording CFO admissions and all that but from a regulatory point of view nothing has really happened. The ships are actually growing with the same speed and we havent seen the anticipated.
With reduction as.
It was predicted last year I see right now vessels <unk> from east to west with speeds like 14 knots, and I'm wondering why it would somewhat balanced those ships at 14 knots, you know it doesn't make any sense. So people still do that.
I'm pretty sure that the next few months, we will see vessels starting to slow down as we empty recording year for the CIA and generally the restocking of China with iron ore and all that I think that this is going to drive market tire and obviously when the grain corridor in the Black Sea is going to reopen that is going to absorb.
A lot of Panamax is back there. So we will see a health care market and the Panamaxes and we will not say split of cargoes for the capesize. Its only matter of time to see all of that so.
This is going to happen, it's a multi faceted.
No.
<unk> here.
But the most important thing is that we have a very very given supply of ships, we have no new buildings coming in.
<unk> fleet is aging so one way or another this is going to start making an impact into the market.
Thank you.
Looking to take on more term coverage char.
Rate levels do you need to see in order to enter into one year or two years on shelf books.
Well the answer is yes, we tend to play that a little bit short term. If you ask me in hindsight, we would have done or we should have done more Q1 last year, but we.
All have different expectations, everybody had different expectations. So we're still over performed the PCI, but not to the extent that we wanted.
I think that we're going to start making a little bit more cover in the following quarters. If we feel that we see spikes in the market like we saw a few weeks ago, we're going to take advantage of that.
But I wouldn't bet on anything maybe cover Q1 of 'twenty four as well but.
With the predictions that we have in the market on the demand and supply I wouldn't really want to be so much locked in for Q2, 'twenty four and onwards, I think that we're going to see a major environmental market them.
I totally agree.
Thank you guys have a great day.
Thank you you too.
Sure.
You have no further questions at this time I will now hand back the conference to Mr. Timothy Compton is for closing remarks.
Well everyone.
Thanks for attending our call today.
As I said the Q1 at.
Significant weakness, which is well behind us rates in Q2 have already been trading at almost double as what we experienced in Q1. So obviously things will look much much better than the Q2 call, which is going to be in about a month and half from today. So thanks for two and half months from the day sorry.
So once again, thanks for attending our call and looking forward for more positive things to come in later in the year. Thank you Raj. Thank you.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect. Your lines. Thank you very much.
Okay.
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