Q3 2024 Diana Shipping Inc Earnings Call
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Speaker Change: Greetings and welcome to the Diana Shipping 3rd Quarter 2024 conference call and webcast.
Speaker Change: At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad.
As a reminder, this conference is being recorded.
Speaker Change: It's now my pleasure to turn the call over to Ed Nebb in Investor Relations. Please go ahead, Ed. Thank you, Kevin, and thanks to everyone who is joining us today for the Diana Shipping Inc. 2024 third quarter conference call.
Ed Nebb: With us today from management is Ms. Semiramis Paliou, Chief Executive Officer, who will introduce the other members of the management team. And so without further ado, I will turn the call now over to Semiramis Paliou. Please go ahead. Thank you.
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Speaker Change: Thank you, Ed. Good morning, ladies and gentlemen. Welcome to Diana Shipping Inc.'s 3rd Quarter 2024 Financial Results Conference Call.
Speaker Change: As I had said, I'm Samira Mispaliou, the Chief Executive Officer of the company. It's a pleasure to address you today alongside our esteemed team, Mr. Ioannis Zafirakis, Director, Chief Financial Officer and Chief Strategy Officer.
Speaker Change: Mrs. Maria Dede, Chief Account Officer and Mr. Dave Vanderlinden, Chief Commercial Officer of Steamship, Shipbuilding Enterprises, Inc.
Speaker Change: Before we begin, I kindly remind you to review the forward-looking statements on page 4 of the accompanying investor presentation.
Anastasios Margaronis, Semiramis Paliou,
Anastasios Margaronis Zafirakis
Speaker Change: The third quarter of the year has been a tale of two markets. Cape side vessels maintained their relative strength, averaging higher returns than in the previous quarter, while the smaller segments weakened significantly.
Speaker Change: This disconnect has persisted throughout the year, but became more pronounced as the market struggled to absorb the steady flow of CancerMax and Ultramax new buildings.
Speaker Change: That said, we successfully secured period employment for nine vessels during the quarter, achieving an overall average rate higher than their previous fixtures.
Speaker Change: Turning to slide 5, let's review our company's snapshot. Diana Shipping Inc., founded in 1972 and listed on the New York Stock Exchange since 2005, operates a fleet of 38 dry bulk vessels, 7 of which are mortgage-free.
Speaker Change: Our fleet has an average age of 11 years and a total deadweight capacity of approximately 4.2 million tons.
Speaker Change: We anticipate the delivery of two methanol-dual-fuel, new-building Camsomax drybox vessels at the end of 2027 and early 2028, respectively.
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Speaker Change: As of the end of September, we employed 984 individuals at sea and ashore.
Speaker Change: Financially, our net debt stands at 37% of market value, supported by $186.8 million in cash reserves and total secured revenues of approximately $135.3 million as of November 19.
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Speaker Change: On slide 6 we are outlining the key developments from the third quarter through November.
Speaker Change: In July, we issued 150 million Senior Unsecured Bonds that are listed on the Oslo Stock Exchange, maturing in July 2029, with a fixed coupon of 8.75%.
Speaker Change: The net proceeds were used to refinance the company's $125 million senior unsecured bond due in 2026.
Speaker Change: The approval and publication of the company's prospectus for the bond, listing on the Oslo Exchange, was completed in October.
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Speaker Change: In July, we signed a term loan facility with Nordia Bank, secured by 10 vessels, drawing $167.3 million to refinance two existing term loan facilities.
This refinancing released two previously financed vessels.
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Speaker Change: In October, we entered US$80.2 million seven-year secured term loan facility with Danish Ship Finance, maturing in April 2031.
Speaker Change: Secured by seven vessels. This proceeds, refinanced our existing loan with Danish Ship Finance, releasing two previously mortgaged vessels.
Speaker Change: In November, completed a $25 million U.S. tap issue under our outstanding senior and security bond due July 2029.
of the 2029 bond to US$175 million.
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Speaker Change: As of November 19th, we have raised 25.5 million US dollars through the exercise of 6,381,900 warrants under our ongoing warrant program, with the potential to raise an additional 64.9 million under the full scope of the program.
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Speaker Change: As of November 19th, we have secured revenue for 78% of the remaining ownership days of 2024.
amounting to approximately 22.1 million U.S. dollars.
Speaker Change: and 38% of available ownership days in 2025, amounting to approximately US$95.8 million.
Speaker Change: Ioannis will provide further details on our cash flow generation potential.
Speaker Change: Earlier this month we released our 2023 ESG report, the fifth in a row underscoring our ESG strategy and commitment to sustainability.
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Speaker Change: For the quarter ending September 30th, 2024, we are pleased to declare a quarterly cash dividend of 1 cent per common share, totaling approximately 1.3 million US dollars.
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On slide 7
Speaker Change: We summarize our current chartering activity. Since our last earnings presentation, we have secured favorable time charters for nine vessels.
Speaker Change: Three Ultramax vessels at a weighted average daily rate of $14,539 for 379 days.
Speaker Change: Five Panamax, Camp Symax and Post-Panamax vessels at a weighted average daily rate of $12,664 for 155 days.
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Speaker Change: Slide 8 highlights our disciplined chartering strategy. We focus on staggered medium to long-term charters to avoid clustered maturities, ensuring earnings visibility and resilience against markets downturns.
Speaker Change: Now, I'll pass the floor to Ioannis for a detailed financial analysis.
Thank you for watching!
Thank you, Semiramis.
Anastasios Margaronis, Edward Nebb, Ioannis Zafirakis
Speaker Change: We will go through very quickly the financial highlights for the third quarter 2024.
where you can see that...
Speaker Change: of being 62.1 million to 57.5 million for the third quarter of 2024. The net income has been 3.7 million and at the same period in 2023 it was 7.4 million.
Speaker Change: The good thing about our highlights is that we have managed to increase our cash and cash equivalent time deposits and restricted cash to $186.8 million.
Today, as we speak, the number is much higher.
Thank you very much, have you prepared?
Speaker Change: The long-term debt has gone down from 642.8 million dollars to 627 million dollars.
Speaker Change: and looking at our balance sheet, as we said earlier, we have managed to be in a position to have our net debt compared to the values of our assets at 37%, as we have already said.
Thank you.
Speaker Change: On the summary of selected financial and other data, you can see that in this quarter our time charter equivalent has dropped to $15,333,000.
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Speaker Change: compared to 15.8 thousand dollars at the same period last year.
Speaker Change: The operating expenses have increased to $5,964 compared to $5,621 at the same period last year.
looking at the 9 month period.
$5,700 approximately.
Anastasios Margaronis, Edward Nebb, Ioannis Zafirakis
Speaker Change: Having said all of the above, looking at our current debt profile and generally speaking our balance sheet, we think that we are in a very good position.
One of the indicators of that is our...
Speaker Change: At the bottom of this slide you can see how well the debt decreases and we end up in 2029.
with slowly getting to lower and lower numbers.
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Speaker Change: If we go to the breakeven versus estimated revenue, we still have some days that they are unfixed for 2024, but if we assume, based on the FFA rates, that we fix the unfixed date for around $15,000,
Speaker Change: That will bring us to a time-charter equivalent rate of 16,765, which...
Speaker Change: which is going to be above around $650 per day per vessel for all of our vessels.
Speaker Change: As regards 2025, more or less we think we are going to be very close to our break even if we take as an assumption the current FFA rates.
Speaker Change: Having said all of these things, if we move to slide number 14.
Speaker Change: We have just declared a dividend of 1 cent, but since 2021, the third quarter of 2021, we have never missed a dividend payment.
Speaker Change: and the intention is to keep that in the future as well.
Speaker Change: Having said all of these things, now it's time to pass the floor to the Chief Commercial Officer of Steamship Seabroading Enterprises, Dave Vander Linden, for the market overview.
Speaker Change: Thank you, Ioannis, and welcome again to all participants on this call. Now for a brief market update.
Speaker Change: A recurring theme during this year's conference calls has been the important role that geopolitical developments have played in the shipping industry, and the third quarter of this year has been no exception.
Speaker Change: Rerouting of dry bulk vessels away from the Red Sea remains in focus with Suez Canal transits hovering at about 40% less compared to the second half of 2023.
Speaker Change: Clarkson's estimates that the Red Sea disruption has increased bulk carrier tonne mile demand by about 1.2 percent.
Speaker Change: However, the Chinese economy has continued to struggle, with the property sector being the biggest drag on economic growth.
Speaker Change: So far there has been little impact on imports even though demand has been weakening.
Speaker Change: The continued imports, coupled with lower domestic demand, have led to a significant build-up of commodity inventories.
Speaker Change: Having said that, the Chinese government seems determined to support the economy via several stimulus measures.
Speaker Change: The 12-month time travel levels unusually peaked in Q1 this year.
Speaker Change: That being said, Q3 levels were resilient on the back of increased congestion in South America and a steady cargo flow into India and Southeast Asia.
Moving to the next slide for some macroeconomic news.
Speaker Change: The IMF forecasts that the global economy will grow by 3.2% in 2024 and by 3.3% in 2025.
Speaker Change: The IMF reports a weaker outlook for China, Latin America, and the EU.
Speaker Change: The Chinese economy is projected to grow by 5% in 2024, 4.5% the year after.
and by 4.1% in 2026.
Speaker Change: These forecasts, however, have not considered the recently announced stimulus package in China involving the raising of debt to support the economy.
Speaker Change: For the Eurozone, growth predictions are a mere 0.8% this year and 1.2% in 2025.
Speaker Change: and the IMF prediction of GDP growth in India is 6.5% for next year, while for the US the prediction is 1.9%.
Speaker Change: For a brief commodities update, according to Commodore Research, global steel production excluding China is beginning to contract.
Speaker Change: According to Braemar, year-to-date global steel production stands at 1.25 billion tons, which is nearly 2% lower than at this time last year.
Speaker Change: Having said that, the World Steel Association is predicting a pickup of more than 1% in 2025.
Speaker Change: Regarding iron ore, Clarkson's expect this trade to remain flat both in 2025 and 2026 at around 1.6 billion metric tons per annum.
Speaker Change: It is understood that iron ore inventories in China stand at a 10-year high, around 160 million tons.
Speaker Change: Clarkson's projected coking coal volumes are also remaining steady for 2025 and 2026 at around 275 million tons per annum.
Speaker Change: And as regards to thermal coal, the projection is for volumes to drop.
Speaker Change: to 1.037 billion tons next year, which would be around 2% compared to 2024, and to 1.025 billion tons in 2026, which would be another 1% down over 2025.
Anastasios Margaronis, Edward Nebb, Ioannis Zafirakis
Speaker Change: The 2025 grain season is expected to grow to 552 million tons, which is an increase of 2% compared to this year, while for 2026 the grain trade might reach 565 million tons, which would be another 2% increase.
Anastasios Margaronis, Edward Nebb, Ioannis Zafirakis
Speaker Change: The biggest growth we will see, we expect to see, in minor bulks. Trade in minor bulks is expected to grow by 3% in 2025 and reach 2.3 billion tonnes and by another 2% in 2026 reaching 2.341 billion tonnes, supported mainly by growth in the bauxite and manganese ore trade.
Speaker Change: as well as an increase in cement petcoke volumes as global construction activity is expected to pick up.
Moving to slide 3
I'm sorry, moving to the slide.
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Seventeen
covering flea development.
Speaker Change: The overall bulk carrier order books stood at the end of October at around 10.3% of the existing fleet.
Speaker Change: The order book for capes and above continues to be the smallest of all types of valkyrs with 29.5 million dead weight tons, which represents
about 7.5% of the current trading fleet.
Speaker Change: The order book for Canceromaxis is 36.7 million dead weight, which is about 14%.
of the current fleet.
Speaker Change: And the order book for Ultramax vessels stands at a little less than 30 million tons, about 12% of the current fleet.
Speaker Change: If you look at projected deliveries, according to statistics prepared by Braemar, the Cape Size fleet is expected to grow by about 5 million net weight tons in 2025 and 6 million in 2026.
Speaker Change: For cancer maxims, the figures are 9 million dead weight pounds next year and 14 million the year after.
Speaker Change: Ultramaxes are expected to grow by 10 million in 2025 and by 7 million in 2026. All these figures are a net of expected deletions from the fleet.
Speaker Change: According to Clarkson's, only 5.2 million deadweight ton worth of bulkers are expected to be sold for scrap this year.
Speaker Change: And for 2025, the figure is expected to reach 9.2 million dead weight in 2026, in excess of 14 million ton dead weight. No environmental regulations are expected to drive many ships to the scrap yards.
Speaker Change: Ship demolition decisions are primarily driven by the state of the freight market, sentiment and age.
Speaker Change: For Capes and Supramaxes, the years 2010-2012 were the highest delivery volume years seen for a long time, and for Panamax and Gamzomaxes, the peak delivery years were 2011-2013.
Speaker Change: This means that a considerable number of vessels will soon become 15 years old, which particularly for capes is a crucial age barrier as regards the cost of a third special survey and the ability to charter to the main players in the dry-bought market.
Speaker Change: According to Clarkson's, 24% of Handimax Ultramax tonnage is 15 years or older, as well as 26% of Panamaxes and 17% of Capes.
Speaker Change: New building prices of capes, according to Clarksons, have moved up so far this year by over 14%, whereas new building prices of smaller ships have seen rises about half of that.
Speaker Change: Recent weakness in the charter market has seen some asset values come down from the peak levels seen earlier this year. Five-year-old CABZOA maxes are now around $34 million, and the 10-year-olds stand around $25 million.
which is done double ditches.
Speaker Change: Ultramax 5 and 10-year-old values are currently around $33 million and $24 million respectively.
Turning to slide 18
for The Outlook.
Speaker Change: According to Fernies and Clarkson, positive factors for 2025 are the following Continued import growth into India and South East Asia Possibility of a strong Brazilian soybean season
The Red Sea Transit
Speaker Change: Possible negative factors for 2025 are worldwide lower iron ore consumption, protectionist measures leading to trade wars,
Steel production outside of China falling back.
Bob Fleetgrove, Outpacing Demand
Speaker Change: and the easing of tensions in the Middle East, which could result in more Red Sea transits.
Speaker Change: Considering the entire picture of headwinds and boosting factors for the dry bulb trades, Clarkson projects a slight easing for bell carriers earnings in 2025, as tonne mile demand is expected to grow by about 1.3 percent.
Speaker Change: However, for 2026, Clark has predicted a cautiously positive outlook for the bulk carrier market.
Speaker Change: Even though dry bulb demand in Tonmas is expecting to grow again a little over 1% in supply projected to grow
Speaker Change: Again, by around 3%, they foresee impacts from environmental policies to remain in focus, with new regulations having a range of positive impacts for supply-demand.
Speaker Change: Also, slower operating speeds, longer dry dock stays, demolition of older units should help the market going forward.
Speaker Change: BIMCO and Clarkson's regard as a positive factor the Simandou iron ore project in Guinea, which starts production in late 2025 and will gradually contribute to longer shipping distance of high quality iron ore into 2026.
Speaker Change: And looking even further ahead, BHP Billiton states in their latest Economic and Commodity Outlook report
Speaker Change: that population growth, urbanization, the infrastructure of decarbonization, capital stock replacement and rising living standards are expected to drive demand for ferrous and non-ferrous metals as well as fertilizers for decades to come.
That's it for the market.
Speaker Change: I will now pass the call back to our CEO, Simiramis Paliou, to provide the most important financial highlights and takeaway points from our quarterly earnings call.
Thank you for watching!
Simiramis Paliou: Thank you, Dave. But before concluding today's presentation, I'd like to highlight our ongoing ESG initiatives.
Simiramis Paliou: Diana Shipping Inc. is committed to promoting eco-friendly technologies and modernizing our fleet. It's committed to transparently sharing emission data to ensure accountability.
Simiramis Paliou: to build on partnerships and collaborations to advance our sustainability goals, to develop an equity, diversity and inclusion program while continuously investing in our people.
Simiramis Paliou: Moving on to slide 20. To summarize, Diana Shipping Inc. stands on a strong foundation built on over 50 years of industry expertise and nearly 20 years on the New York Stock Exchange.
Assistant management team adapts at addressing industry challenges.
Strong stakeholder relationship and a discipline strategy approach.
Simiramis Paliou: A solid balance sheet with a strong cash position and a counter-cyclical mindset.
Thank you for watching!
Speaker Change: ongoing fleet modernization efforts, a robust ESG strategy and a focus on rewarding our shareholders when possible.
Speaker Change: And with that, thank you for joining us today. We now look forward to addressing your questions during the Q&A session.
Speaker Change: Thank you. We're now conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star 2 if you would like to remove a question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1.
One moment please, while we poll for questions.
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Speaker Change: Once again, if you would like to be placed into question queue, please press star 1 on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing Star 1.
One moment please while we poll for questions.
Speaker Change: Our first question today is coming from Clement Mullins from Value Investors Edge. Your line is now live.
Good afternoon. Thank you for taking my questions.
Speaker Change: I wanted to start by asking about your minority investment in four CSOBs. Could you provide an update on when the vessels are expected to be delivered and whether you expect any additional equity calls for these vessels?
Speaker Change: And secondly, could you talk a bit about how these vessels will be employed, be it on term contracts or in the spot market?
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Anastasios Margaronis, Edward Nebb, Ioannis Zafirakis
Speaker Change: Our total commitment on those vessels is 50 million euros and we have already paid the
Speaker Change: around 33 of those, 35, and we expect to pay the other 15 soon. The delivery of those vessels are scheduled to be...
the first one by September 2025 anniversary after
Speaker Change: And a vessel after every three months, we are supposed to have a delivery of the next three vessels, every three months.
Speaker Change: As regards the employment, we have not secured any employment yet, but if we were to share a preference, we prefer to enter long-term employment.
That's helpful. Thank you.
Speaker Change: I also wanted to ask about your capital allocation priorities. Could you talk a bit further about how you plan to balance fleet renewal, deleveraging, and shareholder returns going forward? And secondly, is there any appetite to potentially repurchase shares given the discount you're trading at?
Bye!
Now, being listed since 2005
Speaker Change: We have shown to everybody how disciplined we are as regards the questions that you have asked.
Speaker Change: Be certain that we will do what we have to do at the right time in the cycle. But being more specific with regards to your questioning, unfortunately we cannot be more specific.
Renewal of the fleet will happen at the appropriate time.
Speaker Change: And, of course, we have shown in the past that, again, at the appropriate time, fair repatriation can happen.
Speaker Change: The bigger picture for everyone is to look at our balance sheet and see that all of your questions, we have prepared the company to have the option to be able to do these things.
but it has to happen at the appropriate time.
Speaker Change: The answer to your question is indirect, and it is that we have the means of doing what you have asked. As regards to asset allocation, we are not in a position to respond.
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Speaker Change: Alright, makes sense. That's all from me. Thank you for taking my questions.
Thank you very much for the question.
Speaker Change: Thank you. We have reached the end of our question and answer session. I would like to turn the floor back over for any further or closing comments.