Q2 2023 Costamare Inc Earnings Call

Thank you for standing by ladies and gentlemen and welcome to the Costa Maria Inc. conference call on the second quarter 2023 financial results.

We have with us Mr. Gregory Zikos, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. install Intellectual C

I must advise you that this conference is being recorded today, Friday, July 28, 2023. We would like to remind you that this conference call contains forward-looking statements.

Please take a moment to read slide number two of the presentation, which contains the forward-looking statements.

And I will now pass the floor to your speaker today, Mr. Ziko's. Please go ahead, sir.

Thank you and good morning ladies and gentlemen. During the second quarter of the year the company generated net income of about 69 million. At the end liquidity was 1 billion dollars.

In the container ship sector, the chartered market has been softening although rates still remain at healthy levels. The order book however remains a principal threat to the market.

On the dry bulk side, our own dry bulk basis continues to trade on a spot basis while the trading platform has grown to a fleet of 56 ships. Having invested $200 million in the dry bulk operating platform, we have a long-term commitment to the sector whose fundamentals we view positively.

Regarding Neptune Maritime Leasing, the platform has been steadily growing on a prudent basis, having concluded in total leasing transactions worth of $120 million, which are complemented by a healthy pipeline extending over the coming quarters.

Finally, during the quarter we proceeded with our self-buyback program and

and we have bought $50 million worth of common shares, highlighting our strong belief that the share price is heavily undervalued, considering both the company's performance and prospects.

Moving now to the slides presentation.

On slide 3 you can see our second quarter results. Net income for the quarter was roughly 63 million or 52 cents per share. Attracted net income was around 69 million or 56 cents per share. Our liquidity stands at over 1 billion dollars. On slide 4 you can see an update on our 30 passes program.

Since the beginning of Q2, we purchased approximately 5.4 million common shares for $50 million worth.

Slide five.

As far as EBI is concerned, we have chartered in 56 period vessels, with the majority of the fleet being on indexing chartered in agreement.

53 of those vessels have been already delivered and are running. Regarding our leasing platform, we have already invested around $50 million. Since inception, NML has financed 12 ships through sale and lease back transactions.

Slide six.

Our financing arrangements amounted roughly to $175 million without an increase in leverage.

amount to roughly $275 million without an increase in leverage.

Those deals were coupled with extension of maturities and improvement on work funding costs

We continue to charter all our dry-ball passes in the sports market, having entered into more than 50 chartering agreements since our last innings release.

On the quantitative side, our revenue days are essentially 100% fixed for 23 and 87% fixed for 24, while our contracted revenues are 2.9 billion with a deteriorated remaining time-stranded duration of about 3.9 years.

Slide 7. We have sold one dry bulk vessel and have agreed to acquire two capesized dry bulk ships. Both vessels will be purchased with cash on hand. In addition, we have concluded concurrent SAP transactions with your capital for two contingency bases while we have agreed to sell another contingency vessel.

For the remainder of 2023, the FFA market indicates financial recovery in Q3 and further strengthening in Q4.

Finally, we continue to have a long uninterrupted television track record boosted by strong sponsor support.

On slide 9, our liquidity has decreased significantly over the year, starting at above $1 billion. This liquidity gives us the ability to look for opportunities to grow the company on a healthy basis.

Moving to slide 10, charted rate of the continuous market have softer remaining 2.0 at the capacity remains a historical low levels of about 1%.

And finally, on slide 11, you can see the recent dry bulk market trends in the spotted forward market. Order book is at 7.4% of the total fleet. With that, we can conclude our presentation and we can now take questions. Thank you. Operator, we can take questions now.

Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star 2. That's star 1 to ask a question.

The first question comes from the line of Mr. Omar Nokna from Jefferies. Please go ahead. The first question comes from the line of Mr. Omar Nokna from Jefferies.

Thank you. Hi, Greg. Good afternoon.

Yeah, hi Omar, good morning.

Thank you. Good morning, or afternoon, sorry. Just wanted to check on how things are going operationally. You know, clearly, you know, custom ARIA has shifted more so into dry bulk over the past couple of years with investments in the, you know, the mid-sized segments previously. You've now got the capes that are coming on, and you also have, you know, CBI.

The sector has been obviously kind of soft here over the past few quarters. I just wanted to see kind of in terms of profitability in that business, it looks like it's eating somewhat into the container profits. In the release you show the container business earning $127 million in the quarter.

dry bulk or the dry book fleet lost just three but the trading business 24 and just wanted to ask about that 24 million.

Would you say that is just simple? Is that commercial performance or is it more of just startup costs and building up a CVI?

Yes, it's two things. First of all, regarding our participation and our investment in the dry-pals sector, we are there for the long term. So this is a long-term commitment of the company, as I think I have also stated in my commentary.

Now, more specifically regarding CBI, the company started operations within the last six months and has grown quite substantially, starting from a zero-sips chartering to a zero-sips chartering and 53 of those have been...

deliveries which are from day one eating gas without the ships having operated for a full period. So, I would say that it's mainly a set-up cost and the rollover of a new business. We have invested $200 million.

and we are very happy with the way the company has grown over the last six months. At the same time we are patient. So I think it's mainly set of course and we are now at the initiation phase. We need to allow more time.

In order to see the results that this entity will be yielding. Also we know that the dry bulk is quite volatile environment especially right now but I think we kind of need to look, it is much more livable and it is not achieving what everyone wanted

the right setup and the right people and the experience in order to capitalize on the market upside whenever that comes.

Okay, thanks, Greg. That's helpful. And then just in terms of, you mentioned giving it some time, do you think you've got 53 of the 56 ships in-house now, so maybe the meatiest part of the startup costs have taken place? Is that the case, or do you potentially look to maybe, does that 56-ship fleet, is that going to be...

Are you aiming to get that to 75 or 100 or is 56 sort of the going number?

It depends on market conditions. Our goal is to grow the company and to have a meaningful size within that sector as an operator. Now whether we're going to go to a bigger number of ships sooner or later, there's also a lot of commercial considerations. We have the Bitcoin equity, there's a lot of What good about it that's good about it party equity,

We have the capacity to grow, but we also need to look at the market conditions. So most probably I would say that it's a question of like when, rather than of whether we're going to be growing or not. But I think the growth needs to be on a healthy basis and step by step.

Um, and you know, you paid roughly about $9 a share, a little above that. The stock is up a little bit from there. Um, do you still see the price today as attractive and can we expect that remaining 40 million to be put to work quickly?

Look, regarding the first part of the question, I do consider that the stock is undervalued, whether someone looks in terms of NAV, in terms of profitability, in terms of prospects, in terms of track record, however you look at it.

This is the reason we bought those common stock shares, 50 million worth over the last quarter. Now, I cannot predict also for legal reasons, I cannot tell you now what our plan is for the remaining 40 million of the program or like the weather.

this program is going to be extended and add more capacity there. I cannot predict this now, but I can tell you that we generally believe that the stock is undervalued and we feel that buying back common stock at those levels is definitely my chance.

Okay, that's clear. Thanks, Greg. I'll turn it over.

Thanks, Greg. I'll turn it over. Thank you.

The next question comes from Mr. Ben Nolan with Stevell. Please go ahead.

Hey, good morning, good afternoon. It's actually Pranela on for Ben, but thank you for taking our question.

um

I wanted to ask about at the moment both container and dry bulk asset prices have come down although in each case both are still historically elevated but at the moment do you see Kostamari as a better buyer or seller of each type?

Yes, you are right. I mean, asset prices have come down but not to a level where they reflect today's chartered rates and especially for the containers, not at a level where they reflect consensus about how the chartered rates are going to be developing over the next quarter.

So, regarding the container ships, for the time being, we are not biased and as you know, we haven't bought any container ships over the last couple of years and also we didn't put any new building orders because we felt that asset prices, both for second hand and for new buildings were elevated.

So there we wait and see. But I agree with you that although asset values have come down still, they are not at levels that are so attractive, the way

We like normally buying vessels now regarding The dry bulk market again as usual we bought it to a to cape size of middle-aged...

We felt the price made sense, but for the time being we haven't.

We've seen substantial correction in asset prices at levels close to levels we bought our dry bulk fleet a couple of years ago. It was actually two years ago. So there we wait and see. So we have the equity.

We have cash together with available liquidity of slightly above 1 billion. We have access to commercial back debt. So when we feel that asset prices do make sense, also judging from a track record, we have the ability to buy and execute quite fast. For the time being we are sitting and waiting and...

Seeing no further questions, this concludes the question and answer session. I will now pass the floor back to Mr. Ezekiel for his closing remarks.

Thank you for dialing in and thank you for your interest in Costa Maria. We look forward to speaking with you again during our next quarterly results call. Thank you.

Thank you. That does conclude our conference.

Thank you all for participating. You may now disconnect.