Q3 2024 Seanergy Maritime Holdings Corp Earnings Call
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Speaker Change: Thank you for standing by Ladies and Gentlemen and welcome to the synergy maritime holdings called Conference Call on the third quarter and nine months ended September 30th, 2024 financial results.
Speaker Change: We have with us Mr. Stamatios Tsantanis, Chairman and CEO and Mr. Stavros, Giftakis, Chief Financial Officer of Synergy Maritime Holding Call.
At this time, all participants are in the list and opening mode. There will be a question and answer session, at which time if you would like to ask a question, please press star 1, 1 on your telephone keypad. And you will then hear an automated message advising your hand is raised.
Speaker Change: Please advise that today's conference call has been recorded today Tuesday November 5, 2024.
The Archives webcast of the conference call will soon be made available on the Synzie website www. SynzieMarretime.com Under the webcast and presentation section under the Investibilations page
Many of the remarks today contain forward-looking statements based on current expectations. Act for results may just materially from the results projected from those forward-looking statements.
Speaker Change: Additional information concerning factors that can cause the actual results to differ materially from those in the forward-looking statements is contained in the third quarter and nine months ended September 30th, 2024 earnings release.
Speaker Change: I would now like to turn the conference over to one of your speakers today, the chairman and CEO of the company, Mr. Stamatios Tsantanis. Please go ahead, sir.
Stamatios Tsantanis: Stamatios Tsantanis
Stamatios Tsantanis: Thank you, operator, and welcome everyone.
Speaker Change: Today I am excited to present our financial results for the third quarter and the first nine months of 2024, along with updates of recent developments at Synergy.
Speaker Change: Building on our record second quarter performance, we maintained strong momentum in Q3.
Speaker Change: Thanks to their robust KPS market and our innovative commercial strategy, we once again outperformed the index.
Speaker Change: In Q3 we delivered net income of $12.5 million and adjusted EBITDA of $26.8 million, a dramatic improvement from a prior year's Q3 net loss of $5 million and adjusted EBITDA of $9.5 million.
Speaker Change: For the first nine months, net income was $36.8 million and adjusted EBITDA reached $78 million.
Speaker Change: A remarkable leap from the previous year's 9-months loss and EBITDA of $8.5 million and $29.1 million respectively. Our Board of Directors has approved a dividend of $26 million.
Speaker Change: cents per share, a cash dividend, and we're continuing share buybacks representing an annualized yield of approximately 11.1%. This quarter alone buybacks amounted to $1 million and we're carrying this momentum into Q4.
Speaker Change: Including these buybacks, our total capital return per share this quarter is approximately $0.30 per share.
Speaker Change: These actions reflect our unwavering commitment to maximizing shareholder value and aligning with our focused capesize strategy, which has proven highly successful.
Speaker Change: Commercial Highlights
Speaker Change: Our Q3 Daily Time Setter Equivalent Rate of around $26,500 per day
Speaker Change: By locking in about 40% of fleet days at favorable rates, we maximized the returns and maintained a competitive edge.
Speaker Change: Looking ahead, we are well positioned to capitalize on the capesized market trends to continue rewarding our shareholders.
Speaker Change: For Q4, we expect an indicative time charter equivalent of approximately $23,400 a day, thanks to securing 42% of our days at a fixed daily rate of $28,000. Notably, the current spot rate is approximately $15,300 per day.
Speaker Change: For 2025, we've also locked in earnings for two vessels at an average rate of $24,000 a day, with one agreement offering additional profit sharing above the rate. Fleet update.
Speaker Change: In October, we wrapped up our 2024 acquisitions by taking delivery of the 2012-built Kaizenship.
Speaker Change: That's a cape size, completing another successful year of strategic fleet growth. The combined investment in IconShip and KaizenShip was $69.3 million, reflecting excellent value against their market estimates.
Speaker Change: Both vessels are on index-linked charters at a premium to the BCI, with contracts extending into 2025.
Speaker Change: We also exercised an amazing purchase option of $20,250,000 on the 2011-built Newcastle MAX Titan ship, reinforcing our growth strategy with prime assets.
Speaker Change: Notably, the current value of the Titan ship exceeds $35 million.
Speaker Change: We now operate 19 vessels and we will continue to explore strategic opportunities for disciplined growth. As always, our goal is to make well-timed acquisitions that maximize long-term returns, aligning with favorable cape size market trends.
Speaker Change: Legal and shareholder report
Speaker Change: As you may be aware, last week the High Court of the Marshall Islands dismissed the case brought against Synergy by George Economo.
Speaker Change: This ruling reaffirms our adherence to good corporate governance processes and clears the path to continue pursuing our strategic goals.
Speaker Change: Additionally, at yesterday's AGM, our common shareholders showed their resounding support for Synergy, our board and our strategy, approving our proposals and rejecting those of Mr. Economou. We greatly appreciate our shareholders' support for our board.
Speaker Change: We believe these results show that Synergy shareholders recognize the company's strategy and that the right board and governance is in place to continue delivering strong value creation over the near and long term.
Speaker Change: Over the past few years, Synergy's board and management team have successfully positioned the company as a leading public pure-play, growth-oriented capesize company. With our thoughtful and focused approach, we believe Synergy is well positioned to continue delivering strong outperformance through the cycle and attractive shareholder returns.
Speaker Change: Thank you again to our shareholders for the trust they have placed in our board. We look forward to continue to engage with our investors in taking actions that are in the best interest of all Synergy shareholders.
Speaker Change: Before I hand over to Stavros to go over our financial performance, I want to emphasize that we are glad to put this matter behind us.
Speaker Change: We are here today to discuss our performance and how Synergy is on track across all major goals with a powerful position in the KPSI sector and as such won't be commenting further on the matter with Mr. Economou.
Speaker Change: With that, Stavros, please go ahead, and I will return to provide a quick look at the capesize market conditions.
Stavros Giftakis: In the third quarter, we expanded our record profitability to the nine-month period, driven by a robust capesized freight market and our strategic hedging initiatives, as previously noted by Stamatis.
Stavros Giftakis: Our net revenue for the quarter reached 44.4 million, representing an impressive 80% increase year-over-year.
Speaker Change: Additionally, we reported adjusted EBITDA of $26.8 million, nearly tripling compared to the same quarter last year.
Speaker Change: Our net income stands at $12.5 million, a significant turnaround from the loss we experienced last year, translating to earnings per share of $0.61.
Speaker Change: For the 9-month period, our net revenue and adjusted EBITDA are $125.8 million and $78 million respectively, which reflects a substantial improvement over the prior year.
Speaker Change: Our profitability during this time frame has reached new highs, with a net income of $36.8 million, also a notable recovery from the net loss we reported in 2023, leading to an EPS of 1.8.
Speaker Change: Looking ahead, we remain optimistic that despite the temporary softening in the Capsaicin freight market, we will achieve another strong quarter and close the year with similarly solid performance.
Speaker Change: Our confidence is reinforced by our strategy, having secured 40% of our fourth quarter days at a fixed average daily rate of approximately 28,000, significantly above current market rates.
Speaker Change: Turning to our balance sheet, I am pleased to report a solid liquidity position. As of the end of the quarter, our cash reserves were 41.3 million equating to roughly 2.3 million per vessel.
Speaker Change: This has been maintained despite ongoing dividends, share buybacks and nearly $2.7 million equity payment related to the acquisition of the cargo ship along with our regular debt repayments.
Speaker Change: Our consistent task position enables us to pursue our strategic goals while ensuring operational flexibility and managing liquidity risks.
Speaker Change: Importantly, our success and stability have enabled us to declare nearly 13.6 million in cash dividends to shareholders thus far this year.
Speaker Change: Our outstanding debt as of the end of the 3rd quarter was $242.4 million with a net debt to total assets ratio of approximately 38%.
Speaker Change: Notably, the average market value for vessels exceeds our debt per vessel by over 20 million.
Speaker Change: In terms of new financing arrangements, we have recently secured a 34 million loan facility from one of our existing lenders. This loan financed the 20.2 million purchase option for the Titan ship and refinanced the current 13.2 million indebtedness of the Paro ship.
Speaker Change: The loan has a five-year term with an interest rate of term SOFR plus 2.4% per annum, yielding a 50 basis points improvement compared to the prior loan for the partnership.
Speaker Change: The new facility will amortize through 4 quarterly payments of 1.2 million, followed by 16 payments of 0.9 million and a 14.8 million balloon payment at maturity.
Speaker Change: Additionally, we entered into a 28.5 million Seren Lispak agreement with the Japanese LESOR to partially finance the acquisition of the Kaisership.
Speaker Change: Under this arrangement, the vessel was sold and charted back on a bare-boat basis, with options to repurchase at specified prices after October 2028.
Speaker Change: Moreover, at the end of the Bell Boat period, Synergy will be obliged to purchase the vessel for approximately $8.3 million.
Speaker Change: This financing entails an interest rate of 1 month term SOFR plus 2.5% per annum with amortization over 72 monthly payments of approximately 0.3 million.
Speaker Change: Lastly, concerning our buyback activity, year-to-date we have repurchased 404,041 common shares at an average price of 9.58 per share, totaling 3.9 million.
Speaker Change: All repurchased shares have been cancelled and removed from our share capital.
Speaker Change: That concludes my review for financial results. I will now pass the call back to Stamatis, who will provide insights into the keepsize market and industry fundamentals. Stamatis?
Stamatis: In the third quarter of 2024, the cape size market continued its upward momentum, with the Baltic Cape Size Index averaging $24,900 a day, up from $22,700 in Q2.
Stamatis: For further perspective, BCI's year-to-date average of approximately 24,000 marks a significant leap from last year's 12,700. That's almost double.
Stamatis: Demand is driving the strong market, especially with increased cargo flows from the Atlantic Basin. Cape Seystone mile demand is up 4% in 2024, outpacing fleet growth of just 2%.
Stamatis: Key demand highlights include Brazilian iron ore. Exports are up 6% year-to-date, fueled by efficiency gains at Vale. This positive trend is likely to extend, keeping demand strong.
Speaker Change: Give me Bauxite!
Speaker Change: Exports surged 17%, driven by aluminum's critical role in the industry and energy transition. We expect steady growth here in the years to come.
Speaker Change: While typical inventory cycles and weather can create short-term fluctuations, demand for iron ore and bauxite has solid long-term potential.
Speaker Change: The Simandou iron ore project in Guinea is set to further boost cape size demand by 2026, with initial exports expected as soon as late 2025. Coal demand.
Speaker Change: China's coal imports are climbing as domestic supply struggles to keep pace with demand. While renewables will eventually become more dominant in the future, coal remains essential in China, India and Southeast Asia and will likely follow a steady demand path over the next 10 to 15 years.
Speaker Change: On the supply side, Cape Size Vessel additions are limited. The current order book stands at the lowest level of the last 20 years and upcoming environmental regulations will likely restrict growth even further.
Speaker Change: By 2025, net fleet growth could drop to 1% or even 0%, especially with a heavy dry docking schedule, as many vessels from the 2010-2012 build period will undergo mandatory surveys.
Speaker Change: New building orders face barriers, such as high costs, limited shipyard slots and environmental requirements.
Speaker Change: This tight supply outlook supports a very favourable market balance for the Cape Size owners in the coming years. To conclude, Synergy is positioned to leverage these positive long-term Cape Size trends with three main objectives.
Speaker Change: Capital returns. We prioritize shareholder returns through dividends and share buybacks.
Speaker Change: Fleet growth. We focus on strategic fleet growth and deliver strong returns on capital, positioning us for increased shareholder value.
Speaker Change: Financial Strengths
Speaker Change: We are committed to managing these goals alongside capesized market volatility, maintaining a balance sheet that supports flexibility while maximizing returns.
Speaker Change: Synergy is delivering on these goals as reflected in our financial performance and share price growth.
Speaker Change: On that note, I would like to turn the call over to the operator. So, operator, please take the call. Thank you.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question you will need to press star 11 on your telephone and wait for your name to be announced.
Speaker Change: Please stand by while we compile the Q&A roster.
Speaker Change: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: Our first question comes in the line of Liam Burke from B. Reilly Financial. Your line is open, please go ahead.
Speaker Change: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: Stavros Gyftakis, Stamatis Tsantanis
Speaker Change: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: Mr Liam Burke from B Reilly Financial, your line is now open. Please go ahead, you may ask your question.
Speaker Change: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: There seems to be a technical issue with Liam Burke's line. Are you happy to take the next question? Yes, please. And we can come back to Liam if he's back on.
Speaker Change: Fantastic, thank you.
Speaker Change: We're going to take our next question. And the next question comes from the line of Mark Reichman from Noble Capital Markets. Please go ahead, your line is now open.
Speaker Change: Stamatios Tsantanis, Stamatios Tsantanis
Mark Reichman: Thank you. Your guidance for operating days during the fourth quarter is a little above our estimate. I think we had fewer operating days associated with the Squireship, Premiership, and the Parrowship.
Mark Reichman: And so I was just wondering what your thoughts are on the first and second quarters of 2025. I mean, was any off-hire or dry docking activities deferred? Just some visibility there would be helpful.
Speaker Change: Stavros Gyftakis, Stamatios Tsantanis
Speaker Change: Hi Mark, good to hear from you. Yeah, I mean there will be some dry dockings where...
Speaker Change: usually trying to time those in the first quarter where the market is.
Speaker Change: Historically softer. So we expect to have, I mean, approximately six dry dockings next year. Three we expect to do in the first quarter and then another three in each of the remaining three quarters of the year.
Stamatios Tsantanis: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: Okay, so three in the first quarter.
Speaker Change: three over the course of the remaining nine months.
Speaker Change: Stavros Gyftakis, Stamatios Tsantanis
Speaker Change: Okay, great. So in the stronger cultures, yeah. Please, please go ahead.
Speaker Change: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: Well, the second question I had, you know, you mentioned, you know, the sustainable strong balance sheet, you know, as you position to, you know, expand your fleet, what are your expectations in terms of capital expenditures for the remainder of 2024 and 2025, and any thoughts on, you know, acquisitions, sales, or sales and leasebacks?
Speaker Change: Well, good morning from me, Mark. We're always open to explore strategic conservative acquisitions.
Speaker Change: So, there might be some acquisitions announced, maybe in Q4, maybe in Q1, but we intend to keep and maintain a very healthy balance sheet without disrupting the leverage facility. We're not going to go...
Speaker Change: You know, above our estimate, but there might be one or two ships announced in the following quarters.
Speaker Change: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: Okay, great. Well, that's very helpful. Thank you.
Speaker Change: You're very welcome. Have a great day.
Speaker Change: Thank you.
Speaker Change: We're going to take our next question. Please stand by. And the next question comes from the line of Lars Eid from Arctic Securities. Please go ahead, your line is open.
Speaker Change: Stamatios Tsantanis, Stamatios Tsantanis
Lars Eid: Hello, first of all, congrats on another great quarter.
Speaker Change: Thank you very much.
Lars Eid: My question is about the market. We've been reading recently that there's been some issues getting booked just as a governmental ban on export of TGA. Are you familiar with this situation or could you shed some light on this?
Speaker Change: Well, we've heard some rumors about potential disruptions in West Africa, but those rumors have not been substantiated.
Speaker Change: I'm pretty sure that whatever disruption is out there will come back into normality pretty soon. So we don't anticipate any long-term effect on that front at all.
Stamatios Tsantanis: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: Okay, so short-lived then. Okay, great. Thank you very much.
Speaker Change: Thank you. Have a good afternoon.
Speaker Change: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: Thank you. We are going to take our next question.
Speaker Change: Please stand by.
Speaker Change: Your next question comes from the line of Kate Sullivan from Maxim Group. Please go ahead, your line is now open.
Kate Sullivan: Thank you. Hello. Good day. Stamatios, can you go into background on the dividend decision to increase the dividend slightly from $0.25 to $0.26? I was thinking maybe a slight decrease with what the rates did quarter over quarter. Did you decide to reduce your cash reserve?
Speaker Change: Good morning, Tate. Nice to hear from you and happy election day. Stavros is going to give you the background of the decision for the dividend, which we discussed internally with the board, but Stavros is going to give you a little bit of a background about that.
Speaker Change: Thank you so much. Bye.
Stavros Giftakis: So, basically the dividend we are distributing is 50% of operating cash flow. The board, we had extensive discussions, they have decided not to reserve any amount.
Stavros Giftakis: and not to account also for the buybacks that we concluded during the quarter. The reason for that is that we are very positive on the market. The cash position of the company is very strong and at the same time we have very decent coverage for this quarter. We have 40% of our days at 28,000 and basically the average is coming out nicely.
Stavros Giftakis: So, we saw no reason to do an extraordinary reserve or to deduct the buybacks.
Speaker Change: Can you talk to confirm the total cash outflow or the amount for the Kaizen ship in the current quarter and then the purchase option for the Newcastle MAX. Is it about a $60 million cash outflow and how much of that will be financed?
Speaker Change: There was only 2.7 million of the kaisership. I mean, we have paid part of the equity as an initial advance back in the second quarter. So in this current quarter, I think we had only put 2.7 million.
Lars Eid: and then there is basically zero outflow for the Titan ship, the purchase option...
Lars Eid: favorable. It came out at around, I don't know, it's around 60%, 65% of your market value. So, we took financing for the entire amount. So, basically, no outflows for these ships. The outflow was minimal.
Lars Eid: OK.
Speaker Change: Great. And Stamatios, you covered the market outlook too, and it looks like a good increase in the supply of iron ore from the largest mining companies. Does that, I mean, overtake the amount of China demand, or how has it worked historically, or should not be too concerned about too much supply in the market?
Speaker Change: Well, I mean
Speaker Change: As far as the vessel supply is concerned, then...
Lars Eid: We feel that 2025 is going to be a zero increase or even a negative increase on the vessel supply.
Lars Eid: And the reason is, number one, because the order book is very limited, and also we expect a very heavy dry dock schedule, because I remand you, Tate, that the majority of the ships were built in 2010, and they're now going to be undergoing their third annual space pressure survey. That means that we expect to see a lot of tornads.
Lars Eid: entering the dry docks starting after the Chinese New Year and thereafter. So there will be a lot of tonnage unavailable for a big part of the year. And again, you have pretty much zero increase of the fleet, which is not really going to make any...
Lars Eid: and Pacto League.
Lars Eid: At the same time demand
Lars Eid: It appears to be quite strong. I mean, the actual trade flows of the volumes is very healthy. We don't see any disruptions. And China, again, I remind you that no matter the local slowdown,
Lars Eid: It appears that the steel producing industry is continuing to be exporting a lot of steel. So, we don't really see any slowdown as far as the steel production is concerned. Moving on to coal and bauxite.
Lars Eid: That is also quite strong. We don't see any slowdown in coal and bauxite. So overall the picture for Q4 of 2024 as well as the overall picture of 2025 appears to be quite favorable, to put it this way.
Lars Eid: Stavros Gyftakis, Stamatios Tsantanis
Lars Eid: Stamatios Tsantanis, Stamatios Tsantanis
Stavros Gyftakis: Thank you. And last, from you, Stavros, on the leverage, along with discussions with the board, are you comfortable going, I mean, keeping around two to three times leverage ratio in that, or are you looking at it relative?
Stamatios Tsantanis: Yes, we are comfortable with that, but the matter is dynamic. We might be taking some more leverage than the targeted leverage in some acquisitions, but then we have very steep amortization in the facilities.
Stamatios Tsantanis: so by the time we do the follow-on acquisition and again I mean we
Stamatios Tsantanis: Stavros Gyftakis, Stamatios Tsantanis
Stamatios Tsantanis: Stamatios Tsantanis, Stamatios Tsantanis
Stamatios Tsantanis: Thank you for all the comments. Have a great rest of the day. Have a great day. Thank you.
Lars Eid: Thank you.
Lars Eid: Thank you.
Lars Eid: Stamatios Tsantanis
Speaker Change: We're going to take our next question and the next question comes from the line of Mark Regman from Noble Capital Markets. Please go ahead, your line is open.
Mark Reichman: Thank you. I just had two follow-ups. The first is on the return of capital.
Mark Reichman: that have been issued under options programs, or how do you think about that relative to maintaining a good level of float in the market?
Speaker Change: Well, thanks. That's a great question. We prioritize dividends over share buybacks.
Speaker Change: There are days that we feel that the stock might be a little bit more pressured, there's a selling pressure on the stock and that
Speaker Change: Those days we initiated some buy-back programs.
Lars Eid: That's how we do it. So it's very dynamic. We monitor the stock performance on a daily basis. When there is a need for us to do buybacks, we do buybacks. Overall, we prioritize dividends over buybacks.
Mark Reichman: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: Thank you. And the second question is just related to the whole, you know, theme of emissions reductions.
Stamatios Tsantanis: How are you thinking about your fleet? I mean newer fleets tend to have lower maintenance
Speaker Change: expenses. Perhaps they can get better rates in the market. I mean, how do you feel like your fleet is positioned?
Speaker Change: You know, I know there's some uncertainty with rules and regulations and fuels, so how are you and your board kind of thinking about that?
Stamatios Tsantanis: Stamatios Tsantanis
Stamatios Tsantanis: That's a great question. Synergy has been a pioneer in that field since 2015-16 by installing a number of energy-saving devices and telemetry on board of our ships.
Stamatios Tsantanis: We have taken the strategic decision that we will not move for now in new buildings because we are not convinced that the new vessels actually offer any tremendous improvement versus the existing ones.
Mark Reichman: especially if you factor in the amount of money you pay for those ships which is almost double than a quality ten-year-old vessel.
Lars Eid: So, having said all that, we are skeptical about the new buildings. We do not really see any impact.
Lars Eid: from a financial point of view.
Lars Eid: given that the forward market is anywhere between, let's say, $20,000 and $23,000, it doesn't really justify an investment. A $75 million ship has a break-even of close to $30,000 or above $30,000 a day. So it doesn't really justify that investment, in our opinion.
Lars Eid: so
Lars Eid: We invest in the existing ships, we make them more economical, we have done a number of improvements, there is a big spectrum of things that we do to improve our ships, so we're very happy with the results so far and we're taking a wait and see approach that the solution of
Lars Eid: the so-called vessel of tomorrow, the ship of tomorrow is going to appear in the following years. But so far we will just uh
Lars Eid: Enjoy the cash flow of the existing ships.
Lars Eid: Stamatios Tsantanis, Stamatios Tsantanis
Speaker Change: That's great. Thank you very much. Bye-bye.
Speaker Change: Thank you. Bye-bye.
Lars Eid: Thank you.
Speaker Change: Stavros Gyftakis, Stamatios Tsantanis
Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.
Lars Eid: Stamatios Tsantanis, Stamatios Tsantanis
Lars Eid: Stamatios Tsantanis, Stamatios Tsantanis
Lars Eid: Stamatios Tsantanis, Stamatios Tsantanis
Lars Eid: Stavros Gyftakis, Stamatios Tsantanis Stavros Gyftakis, Stamatios Tsantanis
Lars Eid: Stavros Gyftakis, Stamatios Tsantanis Stavros Gyftakis, Stamatios Tsantanis Stavros Gyftakis, Stamatios Tsantanis Stavros Gyftakis, Stamatios Tsantanis