Q3 2023 Safe Bulkers Inc Earnings Call
Thank you for standing by ladies and gentlemen, and welcome to the Safe brokers conference call to discuss the third quarter 2023 financial results today, we have with US Mr. Pullets How'd you want them.
Chairman and Chief Executive Officer, Dr. Lucas Bump Harris President.
Mr Konstantinos out of Marquis Chief Financial Officer of the company.
Mr domestic ethanol keys.
Mr Chief Financial Officer.
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Before we begin please note that this presentation contains forward looking statements as defined in section 27 out of the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act 1934 as amended.
Concerning future events.
<unk> growth strategy and measures to implement such strategy.
<unk> expected vessel acquisitions and entering into further time charters words, such as expects intends plans believes anticipates hopes estimates and variations of such words and similar expressions are intended to identify forward looking statements.
Although the company believes that the expectations reflected in such forward looking statements are reasonable no sure.
Terrence can be given that such estimates, which are inherently subject to significant uncertainties and contingencies many of which are beyond.
The control of the company.
Actual results.
May differ materially from those expressed or implied by such forward looking statements factors that could cause actual results to differ materially.
Include but are not limited to changes in the demand for dry bulk vessels competitive factors in the market in which the company operates risks associated with operations outside the United States and other factors listed from time to time in the company's filings with Securities and Exchange Commission.
<unk> expressly disclaims any obligations or undertaking through at least publicly any updates or revisions to any forward looking statements contained herein to reflect any change in the company's expectations with respect thereto or any change in events conditions or circumstances on which any statement is based.
And now I will pass the floor to Dr. Baum Paris. Please go ahead Sir.
Good morning, Andrew catch my body sprays in upstate buckets welcome to our conference call and webcast to discuss the financing is that split at quarter, two and 'twenty three.
During the headquarter out fine that's gonna put four months was weekend aligns with the chocolate market I said he's out of global economic growth and same thing Oh.
So the book with more efficient basis, and our environmental upgrades program on all of the existing fleet was complemented with the oldest for two methanol dual fuel you bill for the fourth quarter of 2026, and therefore, the first quarter of 2027, marking a significant step towards decarbonization.
At the same time, we took the liberty of Wild seafood, six you'll build and rewarded our shareholders with a dividend five cents per share of common stock Oh, Gotcha, Gotcha east coinciding with significant cash and reported a couple of ICP all the capex requirements had adequately covered by our contract with the teacher readiness and our balance sheet is strong.
After reviewing is the forward looking statements language like do we may move to slide three.
There has been significant volatility in the Cape market, it's worth noting that all of our eight capes on period charter with an average remaining charter duration of about of about two years and they know that it's not a daily rate of about 23.5 thousand doors, where the market currently at about 18.5 thousand on the plan.
Now matched with the choppy market to remain somewhat stable.
Moving on to slide four we present the development of the she had a big commodity index with the basic commodities future prices, which represent the leading indicators for shipping including energy agriculture Fisheries made those indexes make us commodity prices declined sharply over the past months according to the world.
Bank and its price index led by Cold minus 12, 5% all your minus three 4% and metal prices minus two 7%.
We continue to weakness that ISIL, but Jacob normally expect mutation English litigation of geopolitical tensions nothing because the middle Eastern region and increased Jobina. This fifth HOS policymakers aim to fight global inflation global headwinds continue to persist and maintains she probably due to the globe.
But he did at that age geopolitical tensions and sluggish global demand I see these as global economic growth is also set to slow down over the immediate term against it but go down well visa combines doctors resilience that the global economy economic activity excuse me at the end of this year might fade.
The forecast of biomass and he might be on the projected global GDP growth for 2023, 2% from 2.8, Sydney Nathan as global trade projections for 2023 stands at six 9% due to the war induced prices pressure on food and energy prices at the end of this.
Supply demand imbalances.
According to <unk>, the forecasted global dry bulk demand growth stands at 3% increase in 2020.
Go down as you say, especially continues to trade in a bunch of economies with high inflation receded soft landing expectation of royalty corn gross is emerging.
In markets and developing economies remain stable at 4% for 2020, 341% for 2020 for Bachelor Lake is not yet won with inflation expectations well anchored in major economies in China. The I M. S October protection for CTV grows.
It was a 5.1% even though there are signs that the consumption led BRCA, but he could slow Shane Eddy guy, but he seems to be losing steam or due to persistent domestic difficulties such as daily beta that weakness and you put up at the sector sexual partners, such as aging, which are way on growth with a Chinese GDP.
Imation for 'twenty to 'twenty four two stand at 4.4% leading to a weekend demand.
The other kind of English could also set to remain resilient. Despite the global challenges and the Pi underpinned by robust domestic demand some publically, but such investments and the same thing.
Oh, I see today actually collect at Nee and NEP.
But the projection for a six 3% increase in GDP for 2023.
Let's move now to the supply side, that's been hitting slight site.
The total dry bulk order book sense up single digits. What do you mean of course, you of course, you should be optimistic about the medium.
Through these two prospects over the trade market for the coming years due to the relatively low.
About 25% of the medium sized fleet is older than 15 years, that's the effects of aging and antibody the mandate regulations I'd expect it to accelerate scrapping.
It's up by nice big vessels have more efficient designs eight based on the votes fleet is up and it needs to be there huge 40 person of the global fleet, which means that our fleet can compete better in the forthcoming environmental base chocolate market, where one of the very few dry bulk companies, where they face the order book I hate about P. S b.
Place at lower prices than the present value should the market signifying our intention to compete on the batesville operational environment up there for us.
Must be sitting at slide six we recently took an additional significant step towards decarbonization with a contract for two methanol dual fuel usage. These days since wind powered by getting methanol will be able to produce close to shoot a greenhouse gas emissions based on a lifecycle assessment methodology was to propane.
It.
Following the extensive order book for the 12 phase III patients, which will place time yesterday at low prices and they are and when might that upgrades of the existing fleet. We set a clear path to watch they kept buena initiation of our fleet by placing as these two additional orders for methanol dual fuel vessels, we believe that the company we have one of them.
Most enviromental competitive fleets the following years.
Concluding our market view in slide seven.
There has been any increased interest any wide volatility driven by tight they buy tight monetary policies are rising fears from Jochen gehrke economic segmentation and growing signs of a global economic losing momentum.
Demand for technological efficiency creates opportunities for those willing to invest I see buckets that's done.
So that's environmentally efficient fleets, mainly to two tier market with shell in adding capacity offsets fleets. We believe that the combined effect of the aging of the fleet the low water book lowest selling speech and the regulations and the greenhouse gas targets, we favorable fleet comprising of efficient up I need it.
And basically the EBIT after 'twenty, two 2014 tightening tightening in the market, especially we have but as we said already about 14 vessel newbuild vessels that will be a brand new phase three vessels that they will be able to compete with and you're basically out there would you say that that is yet.
<unk> is increasingly important for the years to come.
Let me now present.
In brief in slide eight.
Our recent developments which include.
The declaration of a five cent dividend per common share from the boat.
The election of directors about ER during our annual shareholders meeting and the delivery of two phase three new builds as well as the order book as well as the older two.
To do all the fuel basis in slide nine we present system, all key characteristics, which differentiate us from our peers. They key fundamentals and our strong alignment of interest with a significant percentage of management ownership the comfortable leverage the ample liquidity and contracted revenues our track record.
And of course, the quality and competitiveness of our fleet.
Let's focus now on our liquidity or cash flows and they'll kept us actual asked me they didn't Miss light Tan.
We are maintaining a comfortable leverage over 55%.
Our debt or what kind of and 49 million remains comparable to our feet set up by your pick on 55 million. Although our fleet is only 10.6, yes, Oh Oh.
Our weighted average interest rate stood at $6 24 per cent for our consolidated debt with a portion of one 7 million Jewish being fixed at 295% coupon and an unsecured five year book.
We paid we have paid savings 1 million without capital expenditure requirements in relation to our order book of eight new builds and the remaining capital expenditure.
253 media, including the recent order.
But the dual fuel vessels outlook, where do you think that that shows just as things stand strong at approximately 290 million, which together with a contracted revenue of about 250 million clicks.
Flexibility wealth management and capital allocation.
Furthermore, we have additional borrowing capacity of innovation, where it exists and how can you get the vessels in six new builds upon they believe it.
Before passing the floor to all our system CA pools, and I said, the Nitro, what I would say to you. Let me make a note about our strategy of directing cash flows to find themselves Newbuild program, which will provide us with a distinct competitive advantage in terms of fuel consumption and environmental performance, we expect that by maintaining a comfortable leverage.
There's some balance sheet. These creates the basis for rewarding our shareholders and the airports you shouldn't see bikers among those companies that we can successfully navigate the environment outside of just what the energy transition and the aging.
But he.
And now she's the floor is yours.
Thank you Luca and good morning to everyone.
As a general note during the third quarter of 2023, we operated in a weaker market environment compared to the same period in 2022, which decreased revenues.
Due to lower hires decreased earnings from scrubber fitted vessels increased operating expenses and higher interest rates increasing in Tennessee.
Moving on to slide 11, with our Boston financial highlights for the third quarter 2023, compared to the same period of 2022.
Our adjusted EBITDA for the third quarter of 2023.
39 million compared to $66 9 million for the same period in 2022.
And adjusted earnings per share for the third quarter of 2023 was <unk> <unk> calculated on a weighted average number of 111 6 million shares compared to 39%. During the same period in 2020 do calculated on the weighted average number of 102 N.
One 4 million shares.
We presented slide 12, our Guadalupe operational highlights for the third quarter of 2023 compared to the same period of 2020 do.
During the third quarter of 2023 or <unk>.
44, going 13 vessels on average ending a D C over $14861 compared to 43 point 25 vessels and you can now go to T C.
$3403 during the same period in 2022.
The company's net income for the third quarter of 2023 was 15 million compared to net income of $51 million during the same period in 2022.
Including on Slide 13, we present, our breakeven point for Q3 2023.
It is evident that the global economy is exceeding multiple challenges inflation higher than two several decades tightening financial conditions in most of the regions.
Invasion in Ukraine, and the crises in the middle East all weighed heavily on the market outlook.
Based on our financial performance the company's board of directors declared a five cent dividend per common share.
We would like to emphasize that the company is maintaining a healthy cash position of about 67 million tons of November 'twenty, two 'twenty three and then another 158 million.
Yes.
53 5 million.
In Undrawn borrowing capacity and combined liquidity and capital resources of two Honda and $78 6 million.
Furthermore, who have contracted revenue from our known customer base. Both in PTO time charter contracts with 253 million net of commissions and before with Schlumberger revenue.
And additional borrowing capacity at in relation to eight unencumbered existing vessels and six new big simple in their delivery.
We believe our strong liquidity and are constantly leverage will enable us to expand the fleet Wednesday recording artist holders.
We're ready now for your questions.
<unk>.
Yeah.
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I'm on the police.
And our first question comes from the line of Chris Wetherbee with Citigroup. Please proceed.
Hi, guys. Good morning. This is Matt on for Chris. Thank you very much for taking the question.
First I wanted to just take some time to see what you might be hearing in the market from some of your customers. How are they looking at you know dry bulk and the rate environment moving into year end and further sort of thinking more so than in 2024, particularly as it relates to the sustainability of increased Chinese imports.
And.
Is that should be you know.
Key business driver moving forward. We're just just any details there I think what I would be very helpful.
Yes.
Good morning to you.
All of this.
The the Chinese activity meaningful the impulse, we're not seeing that.
Uh huh.
The increase nicely.
Illinois.
And we.
We have seen.
Uh huh.
Initially this month.
Sure.
Uh huh.
It's a little consolation to India from all over.
That was not the loophole.
Okay.
And the upfront payment from the Atlantic Basin.
Given a more simple.
The market remains at low.
Nevertheless.
24, the expectation is that we will see better demand.
Separately.
No big surprises.
Thanks.
And then something happening in various parts of the world.
So we expect demand to do better and we expect capacity utilization to be better.
Awesome.
I'll just limit.
It's quite possible.
Market.
Again.
Something our assumption.
Yeah.
Leverage.
But in 'twenty one 'twenty.
Although the cost of sales.
Nevertheless.
And before that.
And on expenses.
Yes.
Any kind of thoughtful.
In March.
Got it.
Hello, Steve.
Right.
It's Larry.
Very good.
All those things on the continent in various parts of the world.
Yeah.
Fantastic Yeah, no. Thank you very much for the detail I'm certainly very helpful on that front and then.
So it looks like a it looks like you couldn't contracted revenue took a nice step up in the quarter versus to Q. You know could you just touch a little bit more on what is driving that.
Market weakness and sort of how you see that backlog moving into 2024.
Yes.
Product revenue, mainly we have is for malware capesize bulk carriers.
Capesize is.
When the market is moving higher.
Two things for us.
Yes.
Okay.
Awesome.
Ken.
Paul.
Got it.
Good market centers.
Pennsylvania market the sponsor over the next three or four quarters close enough to pursue.
Yes.
Long term charter.
You know.
So we have some cape sizes up to six months.
Uh huh.
Thank you identified who would have won on vessel legislations in 'twenty, one they start giving us.
Yeah, that's totally yes, I'm on a new building.
Yeah.
One year Tc rates.
People know about it.
And what I'm very optimistic also for the next year when we will have the U N T S.
Implying about a.
The vessel is very low.
Be well.
One four P M.
Charters when they try it.
These are basically the rest of the.
In terms of European business at the moment, it's not happening because.
No what I'm, saying.
Paying attention.
Yes.
Well with that.
Thanks.
Next.
Scotland office about seeing.
<unk> for the modern ships.
Sure.
Right, Yeah really helpful very very insightful detail and and then it just for just for my last question.
Given the developments going on in the Middle East currently with you know our international turmoil.
Have you noticed this impacting specific trade lanes that you operate in or do you see it impacting you know any areas that you operate in just trying to get a little bit of a better understanding of how that could potentially.
Impacting international trade routes.
It's currently too.
Sadly.
Tangible rail Boston cultural.
Or do something in the middle East.
Also during the <unk>.
Okay great.
Sometimes we see that we show the.
The changes from the trade lanes.
Mostly because of essential.
Oh great.
The mines.
And.
Oh.
Okay.
I'm going to pull the tanker owners.
The reason this is so much capital going into.
It's not the same thing.
And local dry bulk won't mental illnesses.
Because I was.
So same thing.
So sustainable.
And he says he and the multiple of money all kinds of stuff a lot of hospitals in the past.
Yes.
Uh huh.
The content of all the guidance.
That's one.
Uh huh.
But we don't know how Egypt.
Sure.
Is.
Yes.
Installation work is going on in.
And so we hold this there won't be bumps are.
Uh huh.
There is some movement of people.
This.
It will take some steps into reducing debt.
The.
Uh huh.
The amount of commercial sheet, Boston, who will share some of this inflation.
Well the months' of gone again with both of them.
And because of that.
No.
Nice to see.
Company.
It's evident is uncertain I think within the next two to three months ago to understanding how this falcon will be resolved because one of the wheel and all of that has to be disrupted.
So look almost be fall.
Hopefully things will not escalate.
Because you said against.
Against demand.
So at the moment is broadly stable.
Yeah.
Okay.
Understood understood got it okay. Thank you very much for the detail and then I will turn it over on that note.
Thank you.
Ladies and gentlemen, I was around longer so asking a question. Please press star one on your telephone keypad.
And our next question comes from the line of Cuomo Marlins, well value investors Judge. Please proceed.
Good morning, Thank you for taking my questions.
I wanted to start by asking about the order for it to Massimo dual fuel comes from Axis could you provide some commentary on the main drivers behind the decision to go for methanol.
Instead of say LNG or ammonia dual fumes.
And secondly have you seen a lot of interest from potential charterers for these kind of assets.
Hey, Hey, Lloyd will take this.
Yes.
I mean take this the sports Lucas.
A little Crystal ball.
The first part of it we discuss about ammonia or.
Methanol.
I basically ammonia, it's not well develop yet that there is a it's a concept there's a show we need some more development, we cannot discuss at this stage and availability of ammonia sheep say out there maybe you just kind of hop in and after two or three or five yes.
While Mcdonald's seats that are out there.
The question about Mcdonald's ships is whether they're at the end of the day, we will be able to find getting methanol instead of them, but our own methanol and that will.
Which means that if we are able to use green methanol. The vessel we looked at it closely to a zero greenhouse gas emissions are what capella now the second.
Another part which is interesting is that that's why we need to have a dual fuel Mcdonald Simpson not only met all the ships because in the first period, we expect that the vessels were gone up with the with all the other ships and they will be phase three as are the other ships that are capable of red yard.
And the important thing for us is out there.
In total we have about 14 ships.
Well timna.
14 vessels or what we call phase three and just think if fleet I mean, I've got a couple of years 234 years from now.
Would you sell of a sideshow between 40 and 50 million.
And the 50000 vessels that will consist of a 14th face these ships and to enter and dwell. The eco ships are about 56% of the fleet I'll go from 40 to 45 basis will be.
Is there any more than that to compete.
And we will have one of the most.
We young modern fleet and a bullet to tackling all new environmental regulations, and why we need to go to awards Oh.
Let's say a tenant to purely the equation is simple back in 2019, we started auditing seeps core.
Phase III.
It's basically a chipset that will be there at the company.
Design after 2025 and that was the first step and of course, we upgrade our fleet and environmentally.
And show by the end of this year granted vessels will be upgraded with no friction painting have a substantially better efficiency.
D C is a logical step to a two hour.
Yes.
Ah study and complete.
And alternative for design, which leads to a decarbonization so it's not something.
Something we'd see some peculiar crafts, because we're always in the forefront of Oh technology, we want to be the most.
Yes.
Advanced dry bulk company and we couldn't I mean to me says the tactical stopped ordering.
Since we use aerial solution, while it makes him well ammonia is not.
And one other point that I want to make is that sometimes some people may ask about our.
Yeah, Yeah yeah.
Oh, Oh, opex and they want to just to again once more clarifying that notebooks. We include the cost of a pain and of course, they have not the almac ties. They are expense that immediately so that's why sometimes we have we are showing some additional opex because of a large number of dockings are we'd say.
Included in our environmental upgrades.
I think.
Thanks for the color there are fleet will indeed be bearing modern I actually also wanted to ask about the operating expenses, which declined significantly quarter over quarter.
Drydock what were the key drivers behind the decline towards more normalized levels and looking ahead should we expect them to remain at levels similar to this quarter.
Hey, you means the opex.
Yeah.
Exactly yeah, I think that's it yes, I think that the according to our.
It's a weird about there where we expect to have a similar opex lets say there.
I mean, we can let's say about quarter to quarter, because sometimes we do more.
But I don't see one quarter before they can go higher but during a period of it here I think we have a similar amount of her dry docking scheduled for next year I think was before should we expect it to.
The building in our Opex.
I think Nigel this is sometimes some quarters are more opex intensity and then the other part that is less intensive sometimes it happens like this but you should see there other than the average of the year.
And this makes them adult for me I'll pass it over thank you for taking my questions.
Yes. Thank you.
Okay.
Thank you.
Gentlemen, there are no further questions at this time I'd like to pass the call back to talk to parse.
Yeah.
Thank you very much for attending this conference.
Conference call lots more and yeah.
Looking forward to see you again and discussing again with you next quarter. Thank you very much and have a nice day.
Thank you Mike.
Yes.
This concludes today's conference you may disconnect your lines at this time.
And for your participation.
Okay.
Okay.
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