Q2 2023 Diana Shipping Inc Earnings Call
Speaker 1: Greetings in Diana's Chipping Inc. 2nd quarter, 2023 conference call in webcast. At this time, all participants aren't a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
At this time I would like to hand the call over to Ed Nepp investor relations advisor with the company. Thank you You may begin Thanks, Daryl and thanks to everyone who is joining us today for the Diana shipping Inc 2020 second quarter conference call With us today from management are Samir Amis Palu chief executive officer who will introduce the other members of the management team
And so without further ado, I will turn it over to Simi Ramirez. Thank you, Ed. So good morning, ladies and gentlemen, and welcome to Diana Shippengings' second quarter, 2023 earnings call. My name is Simi Ramirez Paliu, the CEO of the company, and it is a great pleasure to have the opportunity to present to you today.
Dr Editor
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 second quarter 2023 presentation.
Q22 2023 has proven to be a profitable quarter for our company, despite less robust conditions prevailing in the market. 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 previous earnings call, we are pleased to declare the distribution of a dividend for this quarter amounting to 15 cents per share, which will be paid in shares or at any shareholder's election in cash.
We aim to continue rewarding our shareholders when conditions allow us to do so.
Turning slide five, I will provide an overview of the company's snapshot as of today. We currently own and operate a fleet of 42 vessels in the water, including a partial interest through a joint venture arrangement in one Ultra Max with a carrying capacity of approximately 4.7 million dead weight tons.
Our fleet utilization has remained consistently high reaching 99.6% for the second quarter of 2023. Additionally, we employed 1,024 people at sea in the shore as at the end of the second quarter.
Moving on to slide six and then seven, we'll go over the key highlights from the second quarter and recent developments. In April , we successfully secured a $100 million US term loan facility from Danish Ship Finance.
which has been drawn down to weeks and months in recent opportunities, secured by nine vessels.
Within the same month, we acquired the motor vessel DSI, Dramen, for a purchase price of $27.9 million. The vessel was delivered to the company in April and within the same month, we completed the joint venture for ownership and procured...
debt financing from Nordia Bank. Moving on to May 2023, we declared a quarterly dividend of 15 cents per common share, amounting to approximately 16 million US dollars. Shareholders have the option to receive a dividend in the form of DSX shares or cash, according to their election.
During June , we took further steps to optimize our financial position. We signed and utilized the 22.5-minute term loan facility with Nordia Bank to refinance existing loan facilities secured by four vessels.
Additionally, we entered into another US$100 million term loan facility with D&B Bank to refinance existing loan facilities secured by D&B.
After this refinancing, we do not have any debt maturities from now till the end of 2025.
Lastly, within the same month we repurchased approximately $6 million of our 8.375 undermate a system at an international level underELL embassist due to requires support from
In July , we signed an amended and restated term loan facility on the Export-Import Bank of China for the transition into the secured overnight financing rate software.
As a result, all our debt agreements have now been successfully converted into software.
Today we are pleased to announce a quarterly dividend of 15 cents per common share totaling approximately 16 million US dollars to be paid in the form of DSX shares or at the election of any shareholder in cash.
As of July 27, we have secured revenue for 80% of the remaining ownership days of 2023, amounting to approximately $87.5 million of contracted revenues.
Additionally, we have secured approximately $77.7 million of contracted revenues for 2024, representing 31% of the available ownership days for the entire year.
Yanis will provide a more detailed analysis of our cash flow generation potential based on the current market environment.
Turning to the financial highlights of the second quarter of 2023 on slide 8, as of June 30, 2023, we held a cash and cash equivalent position of $197.6 million including restricted cash and time deposit.
Compared to a $143.9 million US dollars as of December 31, 2022.
Our net debt, including deferred financing costs, stood at 671.9 million US dollars at the end of June 30th, 2023, compared to 663.4 million US dollars at the end of December 31st.
2022. Time charter revenues for the second quarter of 2023 amounted to $67.4 million compared to $74.5 million for the same period in 2022.
Lastly, our earnings per share for the second quarter of 2023 came in at 9 cents compared to 42 cents per share for the same period in 2022.
Yanis will provide a more detailed analysis of these numbers later in the presentation.
We have continued to implement our disciplined chartering strategy by securing profitable time charges for three vessels since our last earnings presentation in May 2023.
To provide some detail, we have charted one Ultramax vessel with a daily rate of $13,800 for a remaining average period of 387 days. Additionally, we have charted one Camphermax and one Cape-side vessel.
with a daily rate of $12,660 and a remaining average period of 470 days.
and at a daily rate of 16,000 US dollars and the remaining average period of 439 days respectively.
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 efficiently.
I will now pass on the floor to Yannis to provide a more detailed analysis over financials.
Hello everyone.
Basically, all the numbers that we're going to be discussing, they are reflecting the fact that the market has deteriorated and on the other hand, the financing cost has increased for these six months and these quarters. So basically, as Semiram has said earlier, the times are the revenues for the three months and that's what we're going to be discussing.
But of course that was with a larger number of vessels, 41, instead of 35 as was in the previous year's quarter.
This can be seen also the decreased time charter rates at the time charter equivalent rate that we have at 17.3 instead of the 24,600 something that it was in the previous quarter and at the previous year. For the rest of the word for each of the days coming into the COVID-19 sea, that is one thing you cannot do. But you really have to do what you can to make a difference.
The daily operating expenses were close to $6,000 for this quarter.
compared to 5.7,000 in the year 2022. Next slide.
The six months I gained the same picture you can see the time chart is over than 24 million dollars.
similar to what it was in the previous six months in 2002, at the same period in 2022, where it was 104. Again, you can see that that was with a much smaller number of vessels. The time charter rate equivalent stood for the six months at 17,900.
The overrating expenses are more or less the same. 5.7 compared to 5.6 are the same period last year. Moving to slide number 12.
The income statement, you can see that we have an increased interest expense and financing cost.
We have slightly more dead and also that reflects.
the increased cost of financing based on the great environment that we are currently at. And that number was $23.8 million compared to $11.2 million for the same period, the 6-month period.
back in 2022. All in all, the earnings performance share diluted is for this six months $0.03 compared to $0.73 at the previous year.
For the 3 months period the picture is the same.
The earnings per common share diluted was for this quarter at 0.09, since compared to 0.42.
in the same quarter of 2022.
If we move to slide number 14.
At our balance sheet, I think Semiram has mentioned the $197 million plus that were cash and time deposits that we have.
This should be seen together with long-term and finance liabilities.
of $371.9 million. The previous December 31st numbers, we had 143.9 compared to million cash equivalent in time deposits compared to six months.
63.4% long-term debt and financial liabilities are putting those two together.
because it is important to notice the net debt position of the company today compared to what it was.
in the previous year. Slide number 15.
As you all mentioned, we have no maturities until the end of 2025. You can see that picture clearly here in this slide. This is the only maturity that we have in 2022.
It's for the Senior Land Secure Bond that matures in 2026, but as we have said in the past.
We will take care of that earlier and I see, once you do notice, that we have already decreased the number from 125 million dollars to 119.1.
the company repurchased some of the bond back. Slide number 16.
This depicts the fact that it looks very manageable, the amount of debt for the next years to come. We end up in 2026 with a
a total amount of a little bit less than $350 million.
And in 2024, we are at around...
$500 million, which is very, very manageable.
Slide number 17.
You can see our free cash flow break even based on this quarter and it is at around 15.6 thousand. Our average daily time chart rate fixed revenues for 2023 is above that number 16.8.
for the 80% of the fixed days and for 2024 16.7 for the 31% of the fixed days. This is slide number 18, this is the usual graph that we have.
about our chartering strategy. You can clearly see that.
that we are staggering the openings of the chapters of each of our vessels. And the average contract duration that we have for the moment is 1.3 years.
and we have secured $87.5 million for the remaining of 2023.
and have a look at slide number 19, you can see that even with the existing low FFA curve that you see below in this graph for 2023, if we assume that we will be fixing the vessels based on this curve.
for the remaining of the year, we will still be positive on the cash flow basis.
And with that note, I would like to pass the call to Stacey for a discussion on the market outlook.
Thank you, Yanni. Thanks and welcome to all the participants of this conference call on Diana's second of both the Financial Performance and the latest on Industry Outlook.
Without doubt the dry bulk carrier market clocked in the poorest performance this year to date of all major shipping sectors. We will look at the possible reasons for this and present the outlook given by the most respected shipping analysts. To illustrate the statement about dry bulk earnings in 2023 we only need to look at the board the indices.
since the beginning of this year. The Baltic Dry Index started the year at 1250 and closed yesterday, July 31st, at 1127. The Baltic Cape Index moved from 1653 on January 3rd to 1873 yesterday.
over the same period, while the Bortec Supermax index stood at 968 on January 3rd and closed yesterday at 719. So what about the freight market conditions prevailing? Now, according to Weinfeld,fb
have been led by slightly firmer trends in China, but these were accompanied by weaker trends in key other regions, which have marginally prevailed thus far. At the same time, lower levels of port congestion have added to active tonnage supply. For this year we will most likely witness more moderate...
Cape and Panamax delivery are equally split between 2024 and 2025, while most <unk> will be delivered next year and very few from 2025.
So let's look at the overall supply demand outlook occur.
According to Clarksons headline supply demand fundamentals and the bulk of the sector.
The balance of 2023 with about 3% projected ton mile demand growth.
Versus two 9% fleet growth.
Slower speeds are moderating active supply in the sector.
Clients with emissions regulations could reduce available bunker supply by an estimated 2% to 2.5% per annum on average across 2023 to 2024 through lower speeds and retrofit tie.
Uncertainty remains over the scale and timing of potential market improvement for the rest of the year and global economic weak spots need to be closely monitor.
Major coal port stockpiles keep falling according to Commodore research and so to the nation iron ore stockpile.
Also bullish was the most recent data showing that China's steel output. Most recently grew year on year by 7%.
So according to Commodore research, China continues to fare better than narratives continue to suggest on the other hand.
Commodore research believe that much of the rest of the world is performing worse than that it is continue to suggest.
The firm believe that dry bulk rates should rise in the near term taking into consideration near term supply and forecast demand.
However, weakness outside of China should be monitored closely in case things deteriorate going forward.
Looking ahead Clarksons also forecast some further improvements to the bulker market on the bank back of more positive supply demand fundamentals.
Right bulk tonnage demand as initially projected to grow by about 25% in 2024, while total fleet capacity growth is expected to come in at less than 2% given slower deliveries and potentially increased demolition for reasons stated above.
This environment is not making senior management the waiver in any way from a repeatedly stated business strategy, including the by selling in chartering of the company's fleet.
Balance sheet strength has always been one of our top priorities and he has been firmly supported by our CEO or senior executives and the board of directors.
So going forward. We believe we are prepared for any contingency good or bad and the things might look mildly positive going forward will not affect the strategy.
I will now pass the call to our CEO semiramis value.
For closing remarks.
Thank you Stacey and before we open up the call to questions and answers I would like to summarize the key points from today's presentation.
Our ongoing focus remains on generating in securing positive free cash flows.
Starting from November 2021, we have consistently distributed substantial cash and in kind dividends.
Certainly we have communicated our clear intention to declare a quarterly dividend of 15 cents per share for the upcoming quarter.
Secondly, our company maintains a strong balance sheet through active capital structure management, which enables us to act opportunistically in renewing and modernizing our fleet and taking advantage of enticing sustainable shipping projects.
Thirdly, we remain committed to our strategy of providing stability in a cyclical business, while maximizing long term shareholder value.
Thank you all for joining us today, and we look forward to addressing your questions during the Q&A session.
Thank you we will now be conducting a question and answer session.
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 have.
Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be.
It's starting to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.
Our first questions come from the line of Omar.
Doctor with Jefferies. Please proceed with your.
Thank you Hey, guys good afternoon.
I wanted to just checked on.
Good afternoon, just wanted to check on how youre viewing things strategically you just gave us a pretty solid update just on your views, but just wanted to.
Kind of get a.
The better sense, you've reaffirmed the 15th dividend for next quarter, you know in the past Diana has during times of market weakness you've held back on dividends and maybe looked at acquiring tonnage on the cheap.
We're in somewhat of a soft period right now how do you think about capital allocation today versus back then and our dividends.
A key part of the story for Diana at this point.
Hi, Omar this is yaniv.
The truth of the matter is that our we made the acquisitions have to being at the low part of the cycle for the way I have to.
To remind you that the market was at the lower back.
For two to three years before we started buying back are they buying vessels Shaw.
Buying back our stock and they're staggering mind again and the investment period took around three years to do that so by no means I don't think we are at this level, where we see attractive opportunities to purchase more vessels.
Regardless the cash allocation you can see the existing car.
And we feel comfortable.
Comfortable paying another 15 fence.
As a dividend.
We continue having the same chartering strategy, we are not in a position to say whether the market is going to be kept though go even further down materially and we.
We have also to distinguish the spot market with the time charter market.
The leverage that we see today theyre not the lowest that you can see or very very low that you can say that we are at the lowest part of the cycle. We have shown somewhere in the middle are even Ah now I forgot if the time charter rate.
What the market is not good for sure.
So to cut the long story short we do not think that this is an investment period for us.
On the other side, we are prepared to play defense, but we still have.
The means of paying another dividend.
Okay. Thanks Dennis.
That's pretty clear and it seems that in terms of acquisitions and you mentioned nothing really looks compelling at the moment.
Is that just simply is it.
Except.
Sure.
Omar I was an investment and nothing looks particularly attractive today.
Hum.
Having said that you realize that the things are changing in the in the fuel.
Consumption of the vessels are fuel.
Burdening.
What type of fuel I mean, we're gonna be using etcetera, and we have to follow this type of changes and if you see us doing something to lots of respect and it would be only two to follow the challenges and the changes that are.
I'm gonna be happening, but as investment opportunities, we don't see a clear investment today.
That makes sense.
Sure. Thank you.
No no that was helpful. I just wanted to maybe kind of maybe dig into that just a little bit more and understand is the.
Is it more of just because we're in a soft period in the market today spot rates are soft or is it that asset values are just too elevated.
Relative to where you think they should be.
I know that's somewhat related to the circular reference but.
Could you qualify Venezuelan classes. So the vessels that have not gone as usually there's a time lag there have not gone to the levels, where the rates are today and the big question is whether they're going to stay at this level for a while or whether they're going to keep.
Keep going even further down or they won't change of course sounds like it will go higher.
I'm, saying is that this will not be operating very quickly.
When you see market movements, and especially on the charter.
And of course, you know better after so many years.
The bottoms of the vessels they do not.
Paulo immediately there is a time lag between what the market, where the market is and where the vessel advisory shot and also they are correlated to the sentiment and I have to remind everyone that the way the market has dropped from a high level.
Usually the expectation that this is going to be temporary and that people think that.
Are they there is plenty of wishful thinking and the way they see the market and this is why the vitamin shoppe.
Kept hires I don't know what the the charter rates are big States.
So at this time I don't think that anyone is in a position to foresee or to guess, what's going to happen after three months.
So you'll know that we are one of these companies, we definitely don't do that but we keep of course, regardless of how the market is going to evolve.
Indeed definitely now you started to take too long term.
Allocation policy, so I will end and deployment of our fleet. So I will I'll leave it at that thank you.
You're welcome thank you.
Thank you as a reminder, if you would like to ask a question. Please press.
Star one on your telephone keypad.
Yeah.
Yes.
I am showing no further questions in the queue I'd like to hand, the call back over to management for any closing remarks.
Thank you all for joining US today, we look forward to speaking to all of you again at our next earnings call Conference call. Thank you very much.
Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.