Q4 2023 Seanergy Maritime Holdings Corp Earnings Call
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Operator: Thank you for standing by, ladies and gentlemen, and welcome to the Synergy Maritime Holdings Co-op conference call on the fourth quarter and year-ended December 31st, 2023 financial results. We have with us today Mr. Stamatios Tsantanis, Chairman and CEO, and Mr. Stavros Gyftakis, Chief Financial Officer, of Synergy Maritime Holdings Corp. At There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, please press stars one and one on your telephone keypad. You will then hear an automated message advising that your hand is raised.
Thank you for standing by ladies and gentlemen, and welcome to the synergy Maritime Holdings Corps Conference call on the fourth quarter and year ended December 31st 2020 free financial results.
We have with US today, Mr. <unk>, <unk>, chairman and CEO and Mr. Starbucks gift Jackie's, Chief financial Officer of synergy Maritime Holdings' Cole.
At this time, all participants are in listen only mode.
There will be a presentation followed by a question answer session at which time if you wish to ask a question. Please press star one and one on your telephone keypad.
We then had no tomatoes message advising you hint is raised.
Operator: Please be advised that this conference call is recorded today, Friday, March 15th, 2024. The archived webcast of the conference call will soon be made available on the Synergy website, www.synergymaritime.com. To access today's presentation and listen to the archived audio file, visit the Synergy website, following the webcast and presentation section under the investor relations page. Please now turn to slide two of the presentation. Many of the remarks today contain forward-looking statements based on current expectations. The actual results may differ materially from the results projected from those forward-looking statements.
Please be advised that this conference is recorded today Friday March 15th 'twenty 'twenty four.
The archived webcast of the conference call, we seem to be made available on <unk> website. Www you don't see that July was time dot com.
To access todays presentation and listen to the archival do you find visit the synergy website. Following the webcast and presentation section under the Investor Relations page.
Please now turn to slide two of the presentation.
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.
Operator: Additional information concerning factors that can cause the actual results to differ materially from those in the forward-looking statements is contained in the fourth quarter and year-ended December 31st, 2023 earnings release, which is available on the Synergy website again, www.synergymaritime.com. I would now like to turn the conference over to one of your speakers today, the chairman and CEO of the company, Mr. Stamatios Tsant Thank you, Operator.
Additional information concerning factors that can cause the actual results to differ materially from those in the forward looking statements is contained in the fourth quarter and year ended December 31st 2020 free earnings release, which is available on the synergy website again, www don't synergy maritime Dot com.
I would now like to turn the conference over to one of your speakers today are chairman and CEO of the company. Mr. <unk>. Please go ahead Sir.
Stamatios Tsantanis: Hello, I would like to welcome everyone to our conference call. Today we are presenting the financial results for the fourth quarter and full year period of 2023 together with an update on our main corporate developments. Let's move to slide number three.
Thank you operator, Hello, I would like to welcome everyone to our conference call.
Today, we're presenting the financial results for the fourth quarter and full year period of 2023, together with an update on our main corporate developments.
Let's move into slide number three.
Stamatios Tsantanis: 2023 was one of the most volatile years for the capesize market. We experienced a wild range of rates that bottomed at $2,200 per day in Q1 and peaked at almost $55,000 a day in Q4. Despite its extreme volatility, Synergy was very well placed to take advantage of a strong rebound in the capsized market that occurred in the fourth quarter of 2023. As a result, we delivered another profitable year, building on our robust commercial performance, our hedging activities, and the investments we have made in improving our vessel's efficiency over the years. In doing so, we have successfully navigated the extreme freight rate instability and achieved a healthy mix of lead growth, accretion, and cash dividends. We ended the fourth quarter of 2023 with a net income of approximately $10.8 million, which compares very favorably with a net income of $0.5 million reported in the fourth quarter of 2022.
2023 was all of the most volatile year for the Capesize market, we experienced a wide range of freight rates had bottomed at 2200 per day in Q1 and peaked at almost 55000 Boes a day in Q4.
Despite this extreme volatility synergy was very well placed to take advantage of a strong rebound in the capesize market that transpired in the fourth quarter of 2023 as a result, we delivered another profitable year building on our robust commercial performance, our hedging activities and the investments we have made in improving our vessels.
As you can see over the years.
In doing so we have successfully navigated the extreme freight rates and stability in it.
A healthy mix of fleet growth accretion and cash dividends.
We ended the fourth quarter of 2023 with a net income of approximately $10 8 million, which compares very favorably with a net income of zero point $5 million reported in the fourth quarter of 2022.
Stamatios Tsantanis: Following a strong 2023 fourth quarter, the capesize market is currently experiencing its best first quarter since 2011. This is a result of higher raw material trade flows, limited fleet growth over the past year, as well as disruptions in key areas. Consistent with our commitment to reward our shareholders, our Board of Directors declared a total cash dividend of $0.10 per share, consisting of a special dividend of $0.75 on top of the $0.25 regular dividend for the quarter.
Following a strong 2023 fourth quarter. The Capesize market is currently undergoing the best first quarter since 2011.
This is a result of higher raw material trade flows limited fleet growth over the past year as well as disruptions in key areas.
Consistent with our commitment to reward our shareholders. Our board of directors declared a total cash dividend of <unk> <unk> per share consisting of a special dividend of $7.05 on top of the two and a half cent regular dividend for the quarter.
Stamatios Tsantanis: This results in a dividend payout ratio exceeding 100% for the full year period of 2023, while we are currently evaluating our options to further increase capital returns to our shareholders, provided that the underlying conditions allow. In addition to our cash dividend distributions, since 2023, we have completed 2.5 million share buybacks, or about 2% of our shares outstanding, at an average price of $5.12, which is about 44% lower than the current market price. Additionally, in December, we repaid the $3.2 million outstanding balance under our convertible note, addressing a long-standing legacy overhang over our share price while simplifying our capital strengths. Apart from this, during 2023, we refinanced approximately 53.8 million of indebtedness, and following these transactions, there are no other debt maturities until the second quarter of 2025. We are pleased to see Synergy making parallel progress in our strategic objectives of rewarding shareholders, taking advantage of growth opportunities, and maintaining a strong balance. I would like to add that we view our balanced capital allocation as the best way to serve the long-term interests of our shareholders. Moving on to slide number four.
This results in a dividend payout ratio exceeding 100% for the full year period of 2020, while we're currently evaluating our options to further increase capital returns for our shareholders provided that the underlying conditions allow.
In addition to a cash dividend distributions since 2023, we have completed $2 5 million in share buybacks or about 2% of our shares outstanding at an average price of $5 12, which is about 44% lower than the current market price.
In December we repaid $3 2 million outstanding balance under our convertible note addressing longstanding legacy overhang over our share price, while simplifying our capital structure.
From this during 2023, we refinanced approximately $53 8 million of indebtedness and following these transactions there are no other debt maturities until the second quarter of 2025.
We're pleased to see synergy, making parallel progress in our strategic objectives of rewarding shareholders taken advantage of growth opportunities and maintaining a strong balance sheet.
I would like to add that we view our balance capital allocation.
The best way to share with the long term interests of our shareholders moving on to slide number four.
Stamatios Tsantanis: Here we illustrate our priority in capital returns to our shareholders. Since March 2022, we have declared a total of approximately $26.4 million, or $1.45 per share, through a mix of regular and special cash dividends that represents about 16% of our current share price. In terms of buybacks, the total securities repurchased, including common stock, convertible notes, and warrants, amount to approximately $41 million. Moving on to slide number five. Here we review the commercial performance of our fleet. First, I would like to point out that we generally overperform the BCI index.
Here, we illustrate our priority in capital returns to our shareholders.
Since March 2022, we have declared a total of approximately $26 4 million or $1 45 per share through a mix of regular and special cash dividend distributions.
That represents about 16% of our current share price in terms of buybacks. The total securities repurchase, including common stock convertible notes and warrants amount to approximately $41 million.
Moving on to slide number five.
<unk> will review the commercial performance of our fleet.
First I would like to point out that we generally over performed the BCA index in the highly volatile capesize market. Our 2023 TCE performance of $17500 exceeded the Baltic Capesize index average of 16400 approximately.
Stamatios Tsantanis: In a highly volatile cape size market, our 2023 TCE performance of $17,500 exceeded the Baltic Cape Size Index average of 16,400, approximately. This makes two consecutive years of us overperforming the BCI index. In addition, we have focused on acquiring high-quality vessels for our fleet, comprised of Japanese vessels from the most reputed yards with significantly improved fuel efficiency characteristics. The qualitative improvement of our fleet that leads to increased earnings capacity is a continuous priority for us. Looking ahead to 2024, against the promising backdrop of the first quarter, we believe that our performance will remain solid. Assuming current FFAs, we expect our first quarter 2024 daily time charter equivalent to be equal to approximately $23,200.
This makes two consecutive years of ash over performing the PCI index.
In addition, we are focused on acquiring high quality vessels to our fleet comprised of Japanese vessels from the most reputable yards with significantly improved fuel efficiency characteristics.
The qualitative improvement of our fleet that leads to increased <unk> capacity is a continued priority for us.
Looking ahead 2024 against the promising backdrop over the first quarter, we believe that our performance will remain solid.
Assuming current Fas, we expect our first quarter 2024 daily time charter equivalent to be equal to approximately 23100 docs. We have also taken advantage of the recent upswing inflate futures and hedged approximately 58% of our second quarter ownership days at a fixed gross rate of <unk>.
Stamatios Tsantanis: We have also taken advantage of the recent upswing in freight futures and hedged approximately 58% of our second quarter ownership days at a fixed gross rate of approximately $28,300. Concerning our fleet growth initiatives, during the fourth quarter, we took delivery of our first Newcastle MAX vessel, which we had agreed to charter on a pair-boat basis. The underlying acquisition price is well in the money, and since its delivery, the vessel has commenced employment under an index-linked time charter at a significant premium to the BCI. Furthermore, in the first quarter, we agreed to acquire a Cape size vessel built in 2013 in Japan, and we expect to take delivery by the end of the second quarter. Both transactions have been very well timed. This concludes my recap of our developments in the fourth quarter and to date, and I am now passing the floor to Stavros before returning to discuss the outlook for the cape size market. Stavros, please go ahead.
Proximately $28300.
Concerning our fleet growth initiatives during the fourth quarter, we took delivery of our first Newcastle Max vessel, which we had agreed to charter in on a bareboat basis, the underlying acquisition price as well in the money and since its delivery. The vessel commenced employment under an index linked time charter at a significant premium to the <unk>.
Furthermore, in the first quarter, we agreed to acquire the Capesize built in 2013 in Japan, and we expect to take delivery by the end of the second quarter. Both transactions have been fairly well timed. This concludes my recap of our developments in the fourth quarter and to date and I'm now passing.
The floor to establish before returning to discuss the outlook of the Capesize market Stavros. Please go ahead.
Stavros Gyftakis: Thank you, Stamatis. Welcome, everyone, to our earnings poll. Let us start with slide 6, by reviewing the main highlights of our financial statements for the fourth quarter and the 12-month period that ended on December 31, 2023. We actually had a great fourth quarter on the back of a very robust capesize trade market and our effective operating platform. Our net revenues were equal to $39.4 million, 38% higher than the respective period last year based on a time charter equivalent of $24,900.
Thank you Samantha and welcome everyone to already exposed let us start with slide six but if viewing the main highlights of our financial statements for the fourth quarter and 12 months period that ended on December 31st 2023.
We actually had a great fourth quarter on the bulk of very robust capesize freight market and our effective operating platform.
Net revenues was equal to $59 4 million, 38% higher than the respective period last year based on a time charter equivalent of 24900 are adjusted EBITDA and our net income were also significantly improved year on year amounting to $23 9 million and 10.
Stavros Gyftakis: Our adjusted EBITDA and our net income were also significantly improved year-on-year, amounting to $23.9 million and $10.8 million, respectively. On an annual basis, our net revenues were equal to $110.2 million, slightly lower than last year due to the slower-than-expected cape-size market recovery in the first nine months of 2023. However, we recorded an average time-charter equivalent of $17,500, outpacing once again the BCI by approximately 7%. Our adjusted EBITDA was equal to $53 million, and our net income reached $2.3 million, reflecting the challenges faced earlier in the year.
$8 million respectively.
On an annual basis, our net revenues was equal to $110 2 million slightly lower than last year due to the slower than expected keeps us market recovery in the first nine months of 2023. However, we call. It an average time charter equivalent of 17500 octane.
Once again, the Dci by approximately 7% our adjusted EBITDA was equal to $53 million and our net income reached $2 3 million, reflecting the challenges faced during the year.
Stavros Gyftakis: Moving on to our balance sheet, our cash position remained strong in 2023 at $24.9 million, or approximately $1.5 million per vessel. This is despite consistent dividend payments, securities buybacks, and a hefty debt amortization schedule. In slide 7, it is evident that despite the weaker than expected capesize market during the first 9 months of the year, we achieved another profitable year with an adjusted EBITDA of 53 million. This can be attributed to our effective commercial strategy throughout the year, which helped us hedge against some of the downward market pressures. Additionally, our solid operating leverage allowed us to capitalize on the strength of the market in the fourth quarter. On the expense side, we retain our daily operating expenses per vessel at practically the same levels as the previous year, despite inflation or repressions.
Moving to our balance sheet, our cash position remained strong in 2010, we see a $24 9 million or approximately one 5 million per vessel. This is despite consistent dividend payments securities My Inbox and safety data amortization scheduled.
In slide seven it is evident that despite the weaker than expected keeps us market. During the first nine months of the year, we achieved another profitable year with an adjusted EBITDA of $53 million.
This can get into beauty to our effective mid strategy throughout the year, which helped us kids against some of the downward market pressures.
Recently, our solid operating leverage allowed us to capitalize on the strength of the market in the fourth quarter.
On the expense side, we retain our daily Opex per vessel practically the same levels with the previous year, despite inflationary pressures.
Stavros Gyftakis: This reflects a strategic decision to increase the number of vessels managed on our in-house management platform. With all these actions, our adjusted EBITDA margin for the year remains strong at 48%, closely aligning with the previous year's performance. Moving on to slide 8, we discussed our data optimization and overall deleveraging efforts throughout 2023. Starting with our debt structure, our debt as of the end of 2023 was equal to $235 million.
It reflects our strategic decision to increase the number of vessels manav.
In house monitoring platform with all these actions our adjusted EBITDA margin for the year remained strong at 48% closely aligned with our previous year's performance.
Moving on slide eight we discussed our data optimization and overall deleveraging efforts throughout 2023.
Starting with our debt structure, our debt outstanding at the end of 2003 was equal to $12 55 million. This includes loans finance leases and the remaining payments under our variable in vessels, including with respect to strategic options and corresponds to approximately $13 9 million per visit almost half or.
Stavros Gyftakis: This includes loans, finance leases, and remaining payments under our bare-boat-in vessels, including respective purchase options, and corresponds to approximately $13.9 million per vessel, almost half of the average market value of our vessels as of the end of last year. Our debt repayments reduced our corporate leverage to 47% during 2023, with more than 90% of our debt covered by the scrub value of the fleet, based on the current scrub price. Here, it is worth mentioning that Synergy achieved another significant milestone this year by fully repaying the last outstanding convertible note, totaling $11.2 million. Additionally, during the year, we successfully concluded $53.8 million of refinancings, reducing the underlying pricing and overall terms, while also adding $15 million in liquidity at that time.
The average market value of our vessels are speed at the end of last year.
Our debt repayments reduced our corporate leverage to 47% during 2023 with more than 90% of our debt covered by the fair value of the fleet based on current scrap prices here. It is worth mentioning that <unk> achieved another significant milestone this year, but fully repaying the last outstanding convertible note.
Totaling $11 2 million.
During the year, we successfully concluded the $53 million of refinancings reduced UV underlying pricing in overall terms, while also adding 15 million liquidity at that time.
Stavros Gyftakis: Equally importantly, we have now addressed all loan maturities until the second quarter of 2025. Meanwhile, we are in advanced discussions with a potential lender for the financing of our latest Kipsis acquisition, as Stamatis mentioned earlier. This strategic move is anticipated to further enhance our interest margin profile and improve the overall structure of our debt. On the interest expense front, we did see an increase compared to the previous year, which was driven by the increased reference rate, despite the sharp decrease achieved in the interest margin of our facilities.
Equally importantly, we have now addressed all loan maturities until the second quarter of 2025.
Meanwhile, we are in advanced discussions with potential lenders for the financing of our latest keeps us acquisition as the months as mentioned earlier the strategic move is anticipated to further enhance our interest margin profile and improve the overall structure of our debt on the interest expense front, we did see an increase compared.
The previous year, which was driven by the increased reference rate. Despite the sharp decrease achieved and the interest margin of four facilities. We expect these costs to decrease in the coming quarters. Following the anticipated interest rate paths from central banks moved.
Stavros Gyftakis: We expect this cost to decrease in the coming quarters, following the anticipated interest rate cut from the central bank. Moving on to slide 9, we highlight our great potential for profitability in 2024. We anticipate a significant increase in EBITDA compared to 2023, even if BCI rates average to the figures seen in 2023. If the current FFA curve materializes, our EBITDA profitability could be remarkable, reaching close to 115 million. It's worth mentioning that in 2023, our overall premium over the BCI for our fleet improved, reflecting our investments in the energy efficiency of our vessels and our effective commercial strategy. In addition, we have fixed almost 60% of fleet days for the second quarter at an average rate of approximately $28,300. In summary, we remain optimistic about our profitability in 2024 and our overall liquidity, affirming our ability to continue rewarding our shareholders while enhancing the composition of our fleet. This concludes my review. I will now turn the call back to Stamatis, who will discuss the market and industry fundamentals. Stamatis?
Moving on to slide nine we highlight a great potential for profitability in 2024, we anticipate a significant increase in EBITDA compared to 2023, even if Dci right of way through the <unk> 23 in recurrent FSA gave materializes, our EBITDA profitability could be remarket.
Reaching close to $150 million, it's worth mentioning that in 2010, three out of auto premium over the Dci for the fleet improved reflecting our investments in the energy efficiency of our vessels and our effective commercial strategy.
In addition, we have fixed almost 60% of the fleet days for the second quarter at an average rate of approximately 28300 in summary, we remain optimistic about our profitability in 2024 and out of that only we can be a feeding our ability to continue rewarding our shareholders while enhancing.
The composition of our fleet reached.
This concludes my review I will now turn the call back some of this when we discuss the market and the fundamentals for Marty.
Stamatios Tsantanis: Thanks Stavros. Let's move to slide number 10. Despite the gloomy predictions for 2023, tonne-mile demand for the year was actually 6% higher as compared to 2022. That resulted in a much greater number of cargoes of iron ore, coal, and bauxite that exceeded an incremental of 170 million tons.
Thank you Sabra, let's move to slide number 10, despite the gloomy predictions for 2023 ton mile demand for the year was actually 6% higher as compared to 2022 that resulted in a much greater number of cargoes of iron ore coal and bauxite that exceeded an incremental of 170.
Stamatios Tsantanis: As we repeated in our previous discussions, the freight rate volatility of the year was driven mainly by the effective supply of vessels during the year. Since the start of the fourth quarter of 2023, the cape size market strengthened considerably, which was carried forward into the Q1 of 2024. This has led to the strongest BCI average rate in more than a decade.
Million tons as.
As we reported in our previous discussions the freight rate volatility of the year was driven mainly by the effective supply of vessels during the year since the start of the fourth quarter of 2023. The Capesize market has strengthened considerably which was carried forward into the Q1 of 2024. This has led to the strongest.
BCA average rate in more than a decade. This positive effect has also been apparent in asset prices with capesize values rising since the end of the third quarter between 'twenty and even 40% depending on the vintage and individual vessel specifications.
Stamatios Tsantanis: This positive effect has also been apparent in asset prices, with cape size values rising since the end of the third quarter between 20 and even 40 percent, depending on the vintage and individual vessel specifications. Moving on to slide 11. In the current year, our outlook remains very positive. The recovery in global manufacturing, as well as extensive infrastructure investments, may drive further growth in the seaborne trade of raw materials. With the expectation of a gradually lower interest rate environment, manufacturing and infrastructure investments will continue to flourish.
Moving on to slide 11.
In the current year, our outlook remains very positive.
The recovering global manufacturing as well as extensive infrastructure investments may drive further growth in seaborne trade of raw materials with the expectation of gradually lower interest rate environment manufacturing and infrastructure investments will continue to flourish.
Stamatios Tsantanis: Overall, 2024 tonne-mile demand growth for Cape-sized cargoes is expected to be about 3.5 to 4% higher, and given the current momentum, positive demand growth is likely to continue into 2025 with projected tonne-mile growth of around 2.5%. Moving on to slide 12. Turning to vessel supply, in deadweight terms, the order book for cape-sized vessels currently stands at about the same levels of 2004, 20 years ago, while replacement needs have grown considerably since then due to stringent environmental regulations. Overall, net cape-sized fleet growth is expected at around 2.5% in 2024 and 1.5% in 2025, both lower than the respective ton-mile demand growth in nominal figures. Beyond the low order book, fleet efficiency has returned to historical average levels, which suggests that effective fleet supply is unlikely to grow further, except for short-term events. Cape-sized vessel speed has already fallen in the past decade from about 12-12.5 to approximately 10.5-11 knots.
Overall 2024 ton mile demand growth for Capesize cargoes is expected to be about three 5% to 4% increase and given the current momentum positive demand growth is likely to continue into 2025 with projected ton mile growth of around two 5%.
Moving on to slide 12.
Turning to vessel supply in deadweight terms the order book for Capesize vessels currently stands at about the same levels of 2000 and for 20 years back while our replacement needs have grown considerably since then due to stringent environmental regulations.
It all led Capesize fleet growth is expected at around two 5% in 2024, and one 5% 2035, both lower than the respective ton mile demand growth in nominal figures below.
Beyond the low order book fleet efficiency has returned to historical average levels, which suggests that effectively supply is unlikely to grow further except for short term events Capesize vessel speed has already fallen in the past decade from about 12 five to approximately 10 511 knots.
Strong dry bulk markets in the past three years have not resulted in speed increases and we believe that this trend is sustainable due to the implementation of C. III ESI and other regulations that will affect the efficiency of the vessels to close today's call. We want to emphasize that we are executing it.
Stamatios Tsantanis: Strong dry bulk markets in recent years have not resulted in speed increases, and we believe that this trend is sustainable due to the implementation of CEI, EXI, and other regulations that will affect the efficiency of the vessel. To close today's call, we want to emphasize that we are executing a clear strategy that includes rewarding shareholders through capital returns, investing in our fleet to drive growth and efficiencies, and maintaining a strong balance. The actions we have taken to grow our fleet substantially over the past three years with quality assets and strengthen our financial position have placed Synergy in a prime position to benefit from a healthy freight market, as the Cape Side segment enjoys the best demand and supply fundamentals in the dry bulk space. As a result, we expect to generate significant cash flows that will facilitate further shareholder value creation moving forward. This concludes our remarks, and I would like to turn the call back to the operator and answer any questions you may have. Operator, please take the call.
<unk> strategy that includes a rewarding shareholders through capital returns investing in our fleet to drive growth and efficiencies and maintaining a strong balance sheet. The actions we have taken to grow our fleet substantially over the past three years with quality assets and strengthen our financial position.
<unk> placed synergy in a prime position to benefit from a healthy freight market as the Capesize segment enjoys the best demand supply fundamentals in the dry bulk space as a result, we expect to generate significant cash flows that will facilitate further shareholder value creation moving forward.
This concludes our remarks and I would like to turn the call back to the operator and answer any questions. You may have operator, please take the call. Thank you.
Thank you.
To ask a question. Please 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 on your telephone and wait for your name to be announced.
Operator: Thank you. Thank you. As a reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again.
We are now going to proceed with our first question.
Operator: Once again, please press star 1 and 1 on your telephone and wait for your name to be announced. We are now going to proceed with our first question. The questions come from the line of Tate Sullivan from Maxim Group. Please answer your question; your line is open.
And the question is come from the line of Tate Sullivan from Maxim Group. Please ask your question. Your line is open.
Great. Thank you for taking my question and great to see the special dividend did not.
Stamatios Tsantanis: Great, thank you for taking my question. And just first, great to see the special dividend; did not anticipate that. And just for modeling purposes, when is that payable, the special dividend and the quarterly? This quarter. Hello Tate.
Anticipate that just for modeling purposes when.
When is that payable does special dividend quarterly.
Quarterly dividend adjusted.
Please visit this quarter.
Yes.
Hey, good afternoon Lisa.
Hello, Terry Good morning, how are you.
Stamatios Tsantanis: Good morning. How are you? Good morning. Great. Thank you. Thank you very much. Well, as we have stated, it's going to be payable approximately on the 10th of April. Thank you very much.
Great. Thank you.
Thank you very much.
Well as we have stated is going to be payable approximately on the 10th of Paypal.
Okay. Okay.
Okay.
And then also the Capesize acquisition, the 2013 built Shepherd $34 million roughly in line with historical acquisitions from last couple of years has it been have you seen a good deal flow recently before the recent rally can you talk about the S&P market.
Stamatios Tsantanis: And then also the Cape Size acquisition, the 2013 built ship for $34 million, seems roughly in line with historical acquisitions in the last couple years. Have you seen a good deal flow recently before the recent rally? Can you talk about that?
Stamatios Tsantanis: The answer is yes; we have seen a big inflow, and a big activity of transactions in the last few weeks. People are buying a lot of capes, and we have seen all their ships, and the inferior ones to the ones that we have been purchasing being sold at very firm values. So we strongly believe if we compare this particular acquisition with the recent press that we have experienced in the market, it stands in a very, very advantageous position. So the answer is yes.
The answer is yes, so we have seen a big.
You know inflow.
A big activity of transactions the last few weeks.
People are buying a lot of capes and we have seen older ships and the inferior.
To the ones that we have been purchasing being sold at very firm values. So we strongly believe.
If we compare to this particular acquisition with Ericsson precedence.
That we have experienced in the market at this time in a very very advantageous position. So the answer is yes of course.
Stamatios Tsantanis: Can you talk about how much leverage you might add for that ship acquisition and the loan-to-value ratio for the whole fleet currently or after the recent escalation in values that you've experienced? Well, we're very conservative in all our transactions. So overall leverage of the company, as you know, stands at around 50%. It's something very logical here, and it's an amortizing leverage that we have, and in this particular transaction, we're going to play at around, I don't know, 50-60% combined maybe with other assets or, you know, leasing transactions. We're in the process of finalizing terms, so I cannot disclose anything further. Thank you. And then you announced the Safecraft announcement about installing a hydrogen tank and associated fuel cell equipment to generate electricity. Will this take place over the next year or so on one of your vessels? Has it already taken place?
And can you talk about how much leverage you might you might pad for that ship acquisition and the loan to value.
The ratio for the whole fleet currently after the recent escalation in values that you've seen.
Well, we're very conservative in all of our transactions so.
Overall leverage of the company as you know stands at around 50% so.
It's something very logical here and it's an amortizing levers that we have in this particular transaction, we're going to play at around I don't know 50, 60% combined maybe with other assets.
Sure.
Leasing transactions. So we are in the process of.
Finalizing terms I cannot disclose anything further at this point.
Okay.
And then Doug you would know the safe crossover craft announcement about installing hydrogen tank and the associated fuel cell equipment to generate electricity should we it will take place over the next year or so on one year vessel has already taken place can you talk more about that.
Stamatios Tsantanis: Yes, thank you for giving me the opportunity to speak a little bit more about that. First of all, we are the only, the first, and only Greek shipping company to participate in this innovative project that is being mostly funded by the European Union. So you can understand the importance that this project has for us. We are in the process of selecting the assets and finalizing the selection of the assets that will be, you know, eligible for this particular, how do you say it, conversion, installation of these devices that we need to install. So it's not just the hydrogen tanks; it's a more complicated element that we need to install on the ship, and it takes much longer.
Yes. Thank you for giving me the opportunity to speak a little bit more about that first of all we are the only the first and only <unk> shipping company to participate in this innovative project that is being mostly funded by the European Union. So you can understand the importance of this project has for us.
We're in the process of selecting the assets and finalizing the selection of the assets that will be.
Eligible for this particular.
How do we shape.
On various journal install installing of these devices that we need to install so it's not just the hydrogen tanks, it's a more complicated.
Element that we need to install under shipped relative takes much longer.
Stamatios Tsantanis: And we will hopefully finalize the selection in the next month or so, and the process of installing them will take place during the dry dock of 2021. We will require a very extensive study of the ship going forward and its impact. So once we finalize that and do the 3D scanning and all the laser placements and all that, we expect that to be finalized sometime by the end of 2020. So it's a long process. Thank you very much.
And we will hopefully finalize the selection of these.
Vessels.
In the next month or so and the process of installing them will take place due to the Drydock of 2035, we will require a very extensive.
Excuse me will required a very extensive study of the ship going forward.
And the impact that so once we finalize that and do the <unk> scanning and all the laser placements and all that we expect that to be finalized sometime by the end of 2025, So it's a long process.
Okay, Alright, thank you very much.
Stamatios Tsantanis: Thank you. Thank you. We are now going to proceed with our next question, and the questions come from the line of Michael Heim from Noble Capital Markets. Please ask your question. Your line is open.
Thank you David.
Thank you.
Proceed with our next question.
And the question is come from the line of Michael <unk> from Noble capital markets. Please ask your question. Your line is open.
Stamatios Tsantanis: Thank you for taking my question. Regarding the acquisition of the ICONS ship, will that $34 million expenditure fall into the second quarter when the ship is received? Well, yes, I mean, we have already paid a deposit on the ship. So, you know, the actual full expenditure and delivery of the vessel will most likely happen within May, we expect. But, you know, just to be a little bit more conservative, let's assume that we are within by the end of the second quarter.
Thank you for taking my question regarding the acquisition of the ICANN ship will that 34 million dollar expenditures fall into the second quarter. When the ship is received.
Well, yes, I mean, we have already paid a deposit on the ship so the actual.
Full expenditure and delivery of the vessel will most likely happen.
But within May we expect but just to be a little bit more conservative lesser so.
Within by the end of 2000.
Stamatios Tsantanis: Okay, and then would you review your plans for dry docking ships in 2024? Well, um, you know, we are pretty much, um... I have to say it's flexible on that front. It all depends on the schedule.
Our second quarter, yes.
Okay.
And then would you review your plans for dry docking ships from 'twenty to 'twenty four.
Well.
We are pretty much.
Having said flexible on that front and control depends on the schedule.
Stamatios Tsantanis: We have a very light schedule for 2024 altogether, so it's not going to be a heavy year on dry docks altogether. So it's something very manageable, in our view. Okay. And then finally, I noticed a big rise in the interest and other income line in the fourth quarter, even though the cash position was relatively the same. Could you explain what other items might fall into that line item?
We have a very light schedule for 2024 altogether. So it's just going to be a heavy year on drydocks altogether. So it's something very manageable in our opinion in 2000.
24, the Drydock schedule.
Okay, and then finally I noticed a big rise in the interest and other income line in the fourth quarter, even though the cash position was relatively.
The same could you explain what other items might fall into that line item.
Stavros Gyftakis: Well, there are no other major items to expect now, Mike. On the expense, on the cash expense side, I mean, we expect interest expense to remain at pretty much similar levels, so around 2,500 per vessel per day, 2,500 to 2,75,000 per vessel per day. And that's about it. I mean, also on the GNA front, you should expect 2023 to provide a good proxy for 2024. We don't expect major movements from these figures.
Okay.
No no other major items, we expect now Mike.
On the expenditure cost expense side I mean, we expect interest expense to remain at pretty much similar levels. So around 25000 per vessel per day, two and a half to $2 75000 per vessel per day and Thats about it I mean.
Also on the <unk>.
G&A front you should expect.
<unk> 2003 to provide a good proxy for 2024, we don't expect major.
Stavros Gyftakis: Now, of course, as everybody expects, base interest rates should start coming off, and this will have a direct reflection on our bottom line. We have done what we should have done from our side in reducing our interest margins to a great extent over the last couple of years. So as soon as you see base rates decreasing, that will reflect very nicely on our bottom line. Okay. Thanks, Mike.
Movements out of these figures now of course as everybody expects Internet base interest rates should start coming off and this will have a direct reflection of our bottom line. We have done what we should have done from our site in reducing our interest margins to a great extent over the last couple of years.
As soon as you see base rates decreasing that would reflect very nicely in our bottom line.
Okay. Thank you.
Thanks, Mike.
Operator: Thank you. We are now going to proceed with our next question, and the questions come from the line of Liam Burke from B Riley Financial. Please ask your question. Thank you. Good afternoon, Stamatios. Good afternoon, Stavros. Hello Liam.
Thank you we are now going to proceed with our next question.
And our question comes from the line of Liam Burke from B Riley financial Please ask your question.
Thank you and good afternoon, good afternoon <unk>.
Stamatios Tsantanis: Hi, good morning. Stamatios, the outlook for the Capes looks very, very strong for 2023. It's anticipated that China's steel production will be relatively flat from last year. So looking at the iron ore trade, where do you see some of the offsets to flat Chinese steel production? Well, first of all, we are very happy with the figures that we experienced in 2023. If you recall, at the same time last year, everybody was talking about the bankruptcies of Evergrande, you know, the other big developer in China. So everybody was very gloomy about the Chinese demand for iron ore, as well as steel production. And, of course, it was for the local demand and the housing crisis in China. It was, it appeared to be quite severe.
Hello, Liam Hi, good morning.
So modest.
The outlook for the Capes looks very very strong for 2023.
It's anticipated that China's steel production will be relatively flat from last year.
So looking at the iron ore trade.
Where do you see.
Some of the offsets to flat China steel production this year.
Well first of all we are very happy with the figures that we experienced in 2023. If you recall at the same time last year, everybody was talking about the bankruptcies over there a grant.
And the other big developer in China. So everybody was very gloomy about the Chinese demand for iron ore as well as the scale of production.
And of course, it was for the local demand in the housing crisis in China. It was it appeared to be quite severe however.
Stamatios Tsantanis: However, we've had a 6% increase in ton miles, so a huge import increase in China of raw materials associated with that trade, like iron ore, coal, and bauxite. And, of course, a very big increase in the exports of steel products. So even if, you know, there were gloomy predictions in the beginning, the actual trade, inbound and, of course, outbound from China, has been very, very strong. So the big variations of freight rates in 2023 are not attributable to demand; demand was particularly strong. And one of these was attributable to the effective supply of ships. While we did not have a big increase in the fleet on a nominal basis through deliveries of new buildings in 2023, we had big variations in respect of congestion and various other trade problems in various areas.
We've had a 6% increase in ton miles for a huge.
Increase in China of our materials associated with that trade like iron ore coal and bauxite and of course, a very big increase in the exports of steel products. So even if there were gloomy predictions in the beginning the actual trade environment of course outbound from China has been very.
Very strong so the big variations of freight rates in 2023 is not attributable to demand the demand was particularly strong in one of the strongest demand we've seen in the last five years. It was attributable to the effective supply of ships. While it did not have a big increase of the fleet on a nominal basis by.
Orders of new buildings in 2023, we had the big variations in respect of congestion.
And various other trade.
Stamatios Tsantanis: The reason why we saw a sharp decrease in the second quarter of the year and, of course, in Q1 was the fact that the grain corridor in the Black Sea was unwound, and a lot of Panamax and Kamsaramax and Supramax vessels were automatically released. About 200 ships were released looking for employment. From September onwards, we saw congestion creeping up to the historical averages. Then we had the Panama Canal situation where it kind of locked a number of smaller ships in that area. And then the Red Sea.
Problems in various areas.
The reason why we show the sharp decrease in the second quarter of the year and of course in Q1 was the fact that the grain corridor in the blocks. It was unwound and a lot of Panamax that comes out of Maxim Super Alex vessels were automatically released about 200 ships were ordered at least looking for employment from September onwards, we saw consistent.
Creeping up to the.
Historical averages then we had the Panama Canal situation, we're kind of locked in number of.
Smaller ships at that area, and then that would see the.
Stamatios Tsantanis: The Red Sea situation is something that we still wait to see the effect of those problems and the fact that vessels are deviating around the Cape of Good Hope. So overall, I strongly believe that demand will continue to be very healthy in 2024, even if it remains at the same numbers as in 2023. It's a very strong and very healthy demand. The less ships available and the bigger the deviations to avoid, you know, conflict areas, the higher the rates.
<unk> situation is something that is still we still wait to see the effect of that.
Problems.
The vessels are deviating around the capable goodwill. So overall I strongly believe that demand will continue to be very healthy in 2010 before even if it remains at the same numbers like 23. It is a very strong and very healthy demand and the actual variation of the freight rates will be a derivative of the FX.
With supplier vessels so.
The less ships available in the bigger the deviations to avoid.
Conflict areas.
Stamatios Tsantanis: And I strongly believe that the effect of the Red Sea, the full effect of the Red Sea deviation, is yet to be seen. We will see that towards, you know, the mid to end of Q2, in our opinion. I hope that covers you. Yes, it sure does.
Higher rates and less strongly believe that the effects of that etsy is the full effects of LHC deviation is yet to be seen we will see that towards.
<unk>.
Mid to end of Q2 in our opinion I hope that covers your question.
Stamatios Tsantanis: Thank you. The other question I had is on the special dividend. Is that going to be incorporated in your normal capital allocation program?
Sure. Thank you.
The other question I had is on the special dividend is that going to be incorporated in your normal capital allocation program.
Stamatios Tsantanis: Well, for us, you know, it's very important to reward our shareholders, and we have demonstrated historically that we've paid hefty dividends to our shareholders to the extent that, you know, cash flow and cash balances allow. When we had experienced a very volatile year like 2023, where rates ranged from two and a half thousand dollars a day to fifty five thousand dollars a day, you can imagine that we must be cautious with the distribution of our cash. However, as we've stated in our release, we have already fixed the number of our vessels for Q1 and, of course, for Q2, so we have crystallized a large amount of our cash flow, and if the situation allows, we might incorporate the special dividend into the regular dividend or further increase the special dividend. We have not decided yet. We will wait and see, but the overall strategy is to reward the shareholders as much as possible. Great Thank you very much.
Well for us.
It's very important to reward our shareholders and we have demonstrated historically and we've paid dividends to our shareholders to the extent that.
Cash flow and cash balances allows.
Whether we had experienced a very volatile year like 2023, where rates are range from $2 $5000 to date to $55000. A day you can imagine that we must be cautious with the distribution of our cost. However.
As we've stated in our release, we have already fixed the number of our vessels for Q1 and of course for Q2. So we have crystallized a big amount of our cash flow and if the situation allows we might.
Incorporate the special dividend the regular dividend or further increase the special dividend, we haven't decided yet whether we're going to say, but.
But our strategy is to reward the shareholders as much as Luca.
Great. Thank you very much.
Operator: Thank you. It's nice to hear from you. Once again, as a final reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. Once again, it's Star one and one on your telephone and wait for your name to be announced.
Thank you and nice to hear from you.
Once again as a final reminder to ask a question. Please press star one and one on your telephone and wait for your name to be announced once again, it's still one and one on your telephone and wait for your name to be announced thank you.
Operator: Thank you. We are now going to proceed with our next question, and the questions come from the line of Christopher Barsky from Arctic Securities. Please answer your question. Your line is open. Hello, guys. Thank you for taking my question. How are you?
We are now going to proceed with our next question.
And the question comes from the line of Christopher Bosque from Arctic Securities. Please ask your question. Your line is open.
Hello, guys. Thank you for taking my question how are you.
Stamatios Tsantanis: Hello and very good afternoon. Nice to hear from you and sorry to hold the conference call on a Friday so late for European time. I don't know. That's perfectly fine, and obviously congratulations on a very good quarter, a strong finish to the year, and I must say that the capesize transaction seems to have been extremely well done. I mean, we have a generic capesize built in 2013 valued at $40 million now, so we're already deep in the net money, so congrats on that. I was just wondering if you could comment on what there has really been recent strength in the market during Q1 and sort of if... If the strength in Q1 is driven by very strong volume growth, what should we expect from the remainder of the area if the upside of volumes is already taken out? What's your view on that? Well, thank you.
Hello, and good afternoon, nice to hear from you and sorry for all of the conference call on a Friday, so late for European time.
Ill.
Good luck for personal can opine.
Obviously congrats on.
Very good quarter.
Strong finish to the year.
I must say that the Cape saw strong question.
It seems to be extremely well and we have a generic.
Hilton <unk> 14 million outflow already.
I'll now.
Congrats on that.
Just wondering if you could comment on what those may have been recently strength in the market during Q1.
On solo.
Yeah.
So the strength in Q1 is driven by a very strong volume growth should we expect from the remained roughly areas sort of the upside.
Walgreens is already taken out.
What's your view on that.
Stamatios Tsantanis: As I mentioned to Liam before, I believe that the current strengthening of the cape size rates is a combination, first of all, of the restocking of China. I remind you that in December, Chinese iron ore stockpiles were down by 105 million tons. Now it's the beginning of the construction season in China, so they need to restock. They produced a very strong amount of steel last year, and we expect them to be consistent this year as well, for a number of reasons. I believe that the, and we have discussed this extensively internally, that the variation of the rates for 2024 will be a function of how the effective special supply is going to be moving around the world. We still see the Red Sea disruptions affecting...
Well. Thank you as I mentioned to layer in before I believe that the current strengthening of the capesize rates as a combination first of all of the restocking of China I remind you that in December the Chinese iron ore stockpiles were down at 105 million tonnes now at the beginning of the construction season in China, So they need to restock.
Iron ore they produce a very strong amount of steel last year, and we expect them to be consistent this year as well.
For a number of reasons.
I believe that and we have discussed this extensively internally the devaluation of the rates for 2024.
It will be a product of.
The file will be effective vessel supply is going to be moving around the world.
We still see the relative disruptions affecting in our case they have affected about 20% of our fleet, which is very strong assuming that the rest of the market. The capesize market is careful with how much we have affected or even a quarter of that you still have anywhere between five and 10% of the global fleet being affected by that Etsy.
Stamatios Tsantanis: In our case, they have affected about 20% of the world, which is very strong. Assuming that the rest of the market, the cap-size market, is half of how much we have affected, or even a quarter of that, you still have anywhere between five and ten percent of the global fleet being affected by the Red Sea. And that, you know, when you're moving products in such long distances, prolonging the voyage by anywhere from 15 to 25 days, that's a material increase in the tonnage.
And that when you are moving products and.
In such long distances prolonged.
Prolonging the voyage by anywhere 15% to 25 days, that's a material increase.
The ton mile. So assuming all of that remains the same and we don't see any normalization anytime soon I believe that the supply deficit will continue to be dominant in the market and we will see a very strong.
Stamatios Tsantanis: So assuming all that remains the same and we don't see any normalization anytime soon, I believe that the supply deficit will continue to be dominant in the market, and we will see a very strong, you know, supply will continue to be constrained. I agree, and thanks for answering my question. With regard to capital allocation, I mean, obviously, the distribution of the special dividends was very positive for the price going forward into 2024. But how do you sort of consider additional buybacks? Compared to potential special dividends, how do you weigh those two against each other? Well, that's an excellent question.
The level of rates now is in the summer the war and the fortress allow.
Just to continue.
There is no conditions nowhere.
Then we might see some softening in the market, but overall I think the predictions right now are that that vessel supply will continue to be.
Constraint a lot.
I agree thanks a lot.
Okay.
<unk> My question.
With regards to the capital one location on enrollment slowdown.
The distribution of the special dividend.
Well, it's very positive surprise.
Going forward into it once before.
There is auto.
Consider additional buybacks.
Compared to.
Potential.
A special dividend.
So how do you weigh those two things.
Stamatios Tsantanis: As you have seen, we have done a perfectly balanced approach. We acquire ships, which we believe will contribute very significantly to the cash flow of the company going forward. We also buy back the stock, and at the same time, we pay a dividend. So, you know, we're doing all three that we can in a perfectly balanced way. It's going to be pretty much the same.
Jonathan.
Well Thats an excellent question as you have seen we have done a perfectly balanced approach.
We acquire ships, which we believe will contribute very significantly to the cash flow the company going forward.
We also buy back the stock and at the same time, we pay a dividend.
So we're doing all three that we can in a perfect.
Rebalanced away, it's going to be pretty much the same I mean, assuming that the rates and the cash flow allow us we will continue to reward our shareholders and of course doing buybacks as well.
Stamatios Tsantanis: I mean, assuming that the rates and the cash flow allow it, we will continue to reward the shareholders, and of course, do buybacks as well in the event that that allows it. But let us all be reminded that buybacks are kind of restricted by the trading rules. I mean, there's only so many buybacks of shares, so much buyback of shares that we can do. In many cases, we have kind of maximized that, and the stock price has been increasing.
The event that allows but let us all be reminded of buybacks.
And of restricted by the trading rules I mean, there's only so many buyback of shares so much buyback of shares that we can do.
In many cases, we'll have kind of maximized back in the stock price has been increasing so we're doing the best to comply with.
Operator: So, we're doing our best to comply with all three major balanced allocations of capital. Okay, great. Thanks. Have a nice day. Thank you and you. We have no further questions at this time, so this ends the question and answer session and concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.
All three major balanced.
Allocation of capital.
Okay, great. Thanks.
Last weekend.
Thank you and Youtube.
Yeah.
Thank you we have no further questions at this time, so this and the question and answer session and concludes today's conference call. Thank you all for participating you may now disconnect your lines. Thank you.
Okay.
Yeah.
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Yes.
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Okay.
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