Q3 2023 Diana Shipping Inc Earnings Call
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Good morning. Thank you for your patience the conference will be beginning in just a few minutes again, we want to thank you for your patience the conference well be beginning in just a few minutes.
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Greetings and welcome to Diana shipping incorporated third quarter 2023 conference call and webcast. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Ed <unk> Investor Relations. Thank you you may begin.
Well, thank you very much and thanks to everyone joining us for the Diana Shipping Inc. 2023 third quarter conference call with US today from management are a semi roomies Palio Chief Executive Officer, and other members of the management team, whom she will introduce and so without further Ado I will turn the call.
Over to MS. Paula you.
Thank you Ed.
So good morning, ladies and gentlemen, and welcome to Diana Shipping, Inc. Third quarter 2023 financial results Conference call I'm, assuming I'm its policy of the company and it is my pleasure to present alongside our seems team Mr. Stacy Margaret always director and President Mr. Yano Stuffy I keep.
Director CFO and Chief strategy Officer, Mr. Let's say three phone director and MS money out there that's chief accounting officer.
Before we begin I'd like to remind everyone to review the forward looking statement on page four the accompanying presentation.
Okay.
Excuse me 2023 has proven to be a profitable quarter for our company despite less robust market conditions.
Our disciplined chartering strategy once again has largely insulated us from market weakening and enabling us to generate positive free cash flows.
In line with the guidance provided during the company's previous earning calls we are pleased to declare the distribution of a dividend for this quarter amounting to 15 cents per share payable as common stock.
Since November 2021, we have paid one dollar and 45 cents per share a total of 130 million U S dollars and cash dividend.
In addition to that we have.
Have distributed to our common shareholders in kind dividends in the form of newly issued Diana shipping Inc. Common shares as well as ocean pilings common and preferred shares.
Turning to slide five our fleet comprises of 42 vessels with a total deadweight of approximately $4 7 million deadweight tons.
Our fleet utilization has remained consistently high reaching 99, 7% for the nine months ending September 32023.
It would be good.
So our prudent and efficient management of our vessels.
Additionally, as of the end of the third quarter, we employed 1040 people I see in the shore.
Moving on to slide six let's go over the key highlights from the third quarter at a recent development.
We recently announced our intention to order to a T 1200, deadweight methanol dual fuel new building comms semi dry bulk vessels built at Tunis P group for a purchase price of 46 million U S dollars. Each these vessels are set.
It can be delivered to the company by the second half of 2027, and the first half of 2028, respectively.
We take pride in our role as an industry leader continually striving to enhance our fleet and operations for the benefit of all stakeholders and the environment.
This investment underscores our dedication to sustainable shipping and positions us to meet the evolving demands of our industry, while reducing our carbon footprint.
In addition, we announced our participation in a joint venture entity that has ordered two high spec commissioning service operation vessels, otherwise known as C. S movies to be built at the bar yard with the option to acquire two additional offshore wind service vessel.
This is another reflection of our commitment to a greener and more sustainable shipping industry.
Furthermore, continuing to the renewal and modernization of our fleet, we have agreed to sell the motor vessel Boston for approximately 18 million U S dollars.
Also we have converted the vast majority of Ocean Power, Inc. Series C preferred stock into Ocean part of common shares at the point in time that we can say there is opportunity.
As of November 10, the company has secured revenue for 90% of the remaining ownership days of 2023 amounting to approximately $37 million of contracted revenue.
Additionally, the company has secured approximately 108 million of contracted revenue for the year 2024, representing 46% of the available ownership days for the entire year.
Yeah, Alex will provide a more detailed analysis of our cash flow generation potential based on the current market environment.
Today, we're pleased to announce a quarterly dividend of 15 cents per common share totaling approximately $16 2 million U.
U S dollars to be paid in the form of Diana shipping Inc. Common shares.
Moving on to slide seven let's review a summary of our recent chartering activity.
We have continued to implement our disciplined chartering strategy by securing profitable time charters for eight vessels since our last earnings presentation in August 2023.
To provide some detail we have charted to all time ax vessels with a weighted average daily rate of 13398 U S dollars for remaining average spirit of 351 days.
Additionally, three panamax camp there Max vessels have been chartered at the weighted average daily rate of 12642 U S dollars per day for our remaining average periods of 283 days and three Capesize, new catheter Max vessels have been chartered with a weighted average.
Daily rate of 17300, then AC U S dollars per day, and the remaining average period of 494 days.
Slide eight.
Straight to our commitment to strategically chartering our vessels in a staggered manner. Our emphasis is on securing positive free cash flows through our disciplined employment strategy and positioning ourselves in a balanced way to participate in the market efficiently.
I will now pass on the floor to Gary.
So the analysis of our furnaces.
Thank you.
The financial highlights.
This quarter can be summarizing these stable.
And we think that what is worth mentioning is the fact that.
Time charter revenues stood at $62 million compared to $73.8 million in the same three months.
In the previous year.
A year.
Earnings per common share I was wondering diluted basis, yes.
0.0, $6 compared to zero point 37.
At the same quarter the previous year.
At the same time.
Cash cash equivalents deposit and restricted cash.
At the end of September 2023.
<unk> hundred $73 million.
Barring something.
During the at the end of the year in 2022, it was 843 and <unk> 40.
Nine.
Our long term debt I'm, sorry, non certain liabilities.
This is net of deferred financing cost.
Well 6600, $57 $4 million compared to 663.
$4 million.
From December 31st 2022.
Moving to the next slide.
You can see.
What we said earlier the decrease on the time charter revenues.
And the increased number of vessels.
Although deal.
Operating expenses have been kept more or less at the same level.
The TCE equivalent rate cuts fallen due to market conditions to $15891 per day compared to 23.
$289000 per day.
In the previous year for the same three month period.
The same applies to the next slide.
In the nine months period.
Again, you can see the increase number of <unk> compared to a lower time charter revenue.
But we've had in these nine months period and that has resulted to a time charter equivalent rate of.
$17000 to 235 compared to 23 363.
In the same nine month period here.
The operating expenses.
More or less the same as we said 5000, if she's got any 91 compared to 5500 <unk>.
Okay.
The fact that.
Yeah.
How does it add exhaust the drop.
All four of our earnings per common share to zero 36 compared to one point.
And the same nine month period.
In the previous year 2022.
If we see the same for the quarter.
You can see that our earnings per common share diluted.
0.06.
That's for sure.
Compared to zero point 37.
During the three month period.
The same three months period.
Reviews here.
All in all.
This slide.
We are very happy that we have kept our debt level.
Uh huh.
Low.
<unk> at 657 point.
$4 million.
And at the same time, we have $173 6 million.
Gosh.
In our.
Gotcha and non accounts.
So the net debt level is.
Only $492 million.
Once again in the <unk>.
Next slide we would like to emphasize.
Prudent management of our debt.
And this basically shows to everyone that we have no maturities for.
For our loans.
2026.
At the same time, you can see that's more a reduction of the projected for the reduction of our debt balance.
Leading us to something like $340 million in 2026.
Hi.
A month.
Next slide.
Talks about our free cash flow breakeven.
And you can see that.
Our free cash flow breakeven is currently at 15000 points.
Housing.
And if you compare that with the average daily time charter rate of fixed revenues for 2023 for the 90 days.
And the 46% of the days in 2024.
Yeah.
The 116000 as the other 16000 anymore.
Five.
H.
Pretty much okay, well when she did in what is happening in the market.
And with that happy note I'm going to pass the floor to space them out of that.
For some.
For the market review.
Thank you Yanni.
Pleasure Stacey.
So dry bulk shipping earnings have exhibited interesting and somewhat surprising trends recently, mainly due to the geopolitical developments and tight monetary policies pursued by most central banks around the globe with the exception perhaps of the China Central Bank.
But dry bulk earnings have oscillated wildly, particularly in the last few weeks, but less so the 12 month time charter rates and these are shown on this slide.
Capesize, one year employment higher rate at around 16250 per day.
And the most recent peak being $30000 a day in March 2000.
Today, the 12 month rate for cancer Max's is $14250 a day.
And that was around the 2009 and a half thousand dollars a day at the end of March last year.
For ultra maxes, the 12 months' higher rate is 15, and a half thousand per day and the most recent peak was again in 2009 to 50 per day in March 'twenty two.
So back then it looked like a for approximately the same daily hire charters could pick the most suitable vessel size for their needs.
On the next slide we look at dry bulk demand.
It has been a well established by now that world GDP growth has a direct impact on demand for dry bulk carrier.
The long term average rate of annual GDP growth. According to Clarksons stands at about 7% below the average long term dry bulk growth rates expressed in ton miles.
This helps us place into perspective, the size of the long term multiplier effects of about 125.
GDP growth rate on dry bulk carrier demand growth.
Latest statistics now from the IMF show, a forecast where China's GDP growth at four 6% in 2024 foot, India six 3% for the U S 1.5%.
The area of one 2% and for the world to 9%.
According to statistics published by Clarksons research demand for dry bulk cargo transportation in 2024 is estimated to grow by about one 8% in ton miles.
For 2025% forecast is growth of one 6%.
In terms of steel demand in 2020 for Braemar report that steel production is expected to remain flat in China, Inc.
Increase about 4% in the rest of the world.
These projections are primarily supported by increased.
Demand from India.
For the iron ore trade the forecast is that it will decline marginally in 2024 due to weaker steel production in China, which may be counterbalanced by improving industrial demand in the United States and Asia.
Coking coal demand is expected to increase somewhat next year, but thermal coal.
Is expected to initially shrink by one 5% to just over 1 billion tons in 2024 and by a further 1% in 2025.
The grain trade is anticipated to show growth of 3% next year and reached 550 million tons and increase by a further 5% in 2025 due to firm forecast for global grain production.
As for the minor bulk trade such as fertilizers, Agri Bulks and steel products.
These are expected to increase by 3% in 2024 and 4% in 2025.
The trade affecting the employment prospects primarily of Colter Max vessels.
On slide 20, we look at the dry bulk supply.
According to statistics provided by Clarksons dry bulk fleet capacity in 2024, it is expected to increase by two 2%.
And by only <unk>, 9% in 2025.
Overall dry bulk carrier new building orders span at about eight 1% of the existing fleet with.
With the figure for Capes being five 2% of the existing fleet for Panamax is 11%.
<unk> Ultra Max Supermax is at nine 2%.
That's what the age of the fleet overall, 12% over the Bulker fleet is 20 years or older.
For Capes the percentage is only 3%.
All of these are elderly ships will form potential scrapping candidates, especially in a weak market.
Average speeds have fallen this year, partly owing to softer freight market and as Clarksons point out the environmental regulation could keep speeds down for quite a while.
However, reduced congestion has helped increase the availability of tonnage worldwide.
Congestion seems to have reached levels marginally above pre COVID-19 levels.
As mentioned in previous calls environmental regulations could potentially reduce supply from this year to the end of 2025 by about 1.5% to 2% per annum.
Speed and retrofit time energy saving devices.
Looking at the new building deliveries and scrapping.
According to Clarksons, new building deliveries for Capes in 2020 forward I would expect it to stand at three 6 million tons.
Deliveries of Panamaxes, and <unk> will be $5 4 million deadweight and for Super IMAX Ultra Max deliveries will come to six 1 million deadweight.
On the demolition side, three 2 million deadweight worth of Capes are expected to be scrapped in 2024.
An estimated $2 9 million deadweight worth of Panamax capture Max's might be scrapped next year.
And around $2 4 million deadweight were for ultra Max Supermac tonnage with head for demolition in 2024.
If you're above forecast materialize the Capesize fleet will increase next year by just 1%.
The Panamax <unk> Max fleet by two 9%.
And they all Terramax supermax fleet by three 5%.
If we include forecast for smaller handy sized bankers in deadweight ton.
Overall bulk carrier fleet is expected to grow by just two 2% next year as mentioned earlier on.
A brief look at asset prices now.
According to Clarksons, new building prices across the board have increased by about 8% through the end of September from the beginning of the year.
For case practice have gone up by just under 7%.
$264 $5 million for Panamax <unk> prices have increased by four 5% to $35 million and four ultra Max Super IMAX or <unk>.
<unk> prices have increased by about 8% to $35 million.
These are prices for vessels with modern tier three main engines ready to comply with phase III <unk> regulation.
Increases in raw material and labor costs have been the main driver of these price increases supported obviously by firm demand for new buildings, primarily from other sectors.
<unk> bulk carriers in tankers.
As regards secondhand prices since the beginning of this year the five year old Clarksons bulk or index has dropped by about 3% through the end of October.
This trend is primarily driven by sentiment and environmental considerations as regards future regulation.
Turning to slide 21.
We look at several factors, which could affect positively the dry bulk market and some of them in a negative way.
On the positive side. According to Braemar now Indian major infrastructure projects, we have positive implications for dry bulk commodities are in the pipeline and include ports steelmaking coal fired power generation and airport construction.
According to Commodore research Chinese iron ore imports will increase in coming quarters to make up for the continuously dropping iron ore.
Stockpile.
Chinese importers have reportedly entered into agreements to purchase record volumes.
U S agricultural goods, mainly soybean if these shipments materialize. They are expected to provide strong support to capture Max earnings during the forthcoming grain shipment season.
A small new building order book provides a high degree of confidence that the market will not suddenly become flooded with new buildings, which would increase supply and disrupt what appears to be a balanced supply demand situation, which we have been going through over the past few quarters.
Finally, due to persistent drought.
Frictions in the Panama Canal have been imposed which have led to significant delays. According to maersk broker and are having an impact on global vessel availability.
On the negative side now.
There are plenty of geopolitical disruptions around the globe, which could easily have a negative effect on global GDP growth and consequently.
Demand for the shipment of dry bulk commodity.
Unpredictable weather condition.
A result of the.
The change in climate.
And have an adverse effect on grain cost and separately lead to the closure of loading ports of bulk commodity putting pressure on bulk carrier rates by reducing the availability of commodities ready to be shipped.
Finally sentiment might play a negative role as well, even though today's sentiment is neutral to slightly negative.
Suddenly turned positive and lead to the influx of new building orders for ships, which would come from 2026 onward and joined the fleet.
Regardless of all the above as we have repeatedly pointed out in our conference calls and meetings with analysts and investors.
He Diana shipping chartering strategy is being determined by taking the agnostic view as regards the future alternatives.
This policy has served us well through the years and will in all likelihood continue to do so into the future.
As regards our balance sheet strength has always been and will remain a priority and all future investments will be done with its preservation has a major criteria in the decision making process.
I'll now pass the call to our CEO Ms Semiramis value for a summary of the company's priorities and future goals. Thank you.
Thank you Stacey.
So before we open the call to the questions and answer session I would like to summarize the key points from today's presentation.
First our continued emphasis is on generating in securing positive free cash flows we have pulled our robust balance sheet through proactive management of our capital structure.
We see opportunities to renew and modernize our fleet capitalizing on appealing sustainable shipping projects as part of our up to opportunistic approach.
And thirdly, our dedications persists and adhering to a strategy that offers stability in a cyclical business, while striving to maximize long term shareholder value.
So we look forward to addressing your questions during the Q&A session.
Thank you we will now conduct a question and answer session.
If you would like 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 press star two.
To remove your question from the queue.
For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment, while we poll for questions.
Our first question is from Benjamin.
<unk> chosen.
Clarksons Securities. Please proceed.
Thank you.
With regards to the seats will be jointly.
Sure you mentioned that this is sort of the initial phase.
Two to find vessels on the two new builds that you have.
Sure.
How should we think about Diana going forward.
In terms of growth between the wholesale market.
Okay.
Right.
Part of that.
Hi, This is John speaking.
I see.
We have said many times.
Also during this call we have.
We are interested in green projects.
Everything has to be in the amount of <unk>, our core business shouldn't be any major dry bulk.
Having said that.
All projects are related to.
Hum.
And.
But we have a green element to them.
It's something that we look carefully.
And we may have in English and we are.
Not in a position to tell you that this may end up.
Ah is a major investor and investment for us or not.
Currently what you see is what it is.
Well, we hope we are participating with their percentage in the building of two <unk> and that is still pending option for another two.
Okay.
Okay, perfect and do you have.
Any color to give us some.
So the joint ventures.
Can you repeat your question because you were breaking up.
Oh, yes, sorry.
Can you tell us anything about that sure.
The joint venture.
Sure who the other pockets are.
The moment you have to stay with the press release.
Certainly in the future you will be able to have more information on that but.
Whatever you read in the press release that we have issued.
The major information that you kind of have to date.
Okay. Thank you.
Yeah.
As a reminder, the star one on your telephone keypad, if he would like to ask a question we will pause for a brief moment to Paul.
Any final questions.
Yes.
There are no further questions at this time I would like to turn the conference back over to management for closing comments.
Thank you all for joining us today, and we look forward to talking to you again on our next earnings call.
In a few months thank you very much.
Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
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