Q3 2024 Pyxis Tankers Inc Earnings Call
Good day and welcome to the Pyxis tankers conference call to discuss the financial results for the third quarter 2024, I must advise you that conference call is being recorded. Additionally, a live webcast of today's conference call and an accompanying presentation isn't there.
On Pyxis tankers website, which is www dot pyxis tankers dotcom.
The call is Mr. Eddie Melendez, Chairman and Chief Executive Officer of Pyxis tankers and Mr. Henry Williams, Chief Financial Officer of the company.
Speaker Change: I would like to pass the floor to one of your speakers today Mr. Eddie lenses. Please go ahead Sir.
Eddie Melendez: Hello, everyone and thank you for joining our call for results of the three months ended September 32024.
Eddie Melendez: The disruption in global seaborne trade from the Russia, Ukraine, and the expanding club conflict in the Middle East continues.
Eddie Melendez: Global economic activity remains resilient, despite the restrictive monetary policies by many central banks and.
Eddie Melendez: Encouragingly inflationary pressures that easing and we anticipate further interest rate cuts in the near term, which should support broader economic growth.
Eddie Melendez: The fundamental outlook for our core sectors product tankers and dry bulk carriers remains supportive with relatively firm asset values. Despite the recent softening of the chartering environment.
Eddie Melendez: Market conditions remain highly dynamic and can be significantly influenced by macroeconomic and geopolitical events, which are beyond our control.
Eddie Melendez: Before commenting on our operating and financial results for the most recent period. Please let me draw your attention to some important legal notification on slide two.
Eddie Melendez: When you read including our presentation today, which will include forward looking statements. Thank you.
Eddie Melendez: Turning to slide three.
Eddie Melendez: Our most recent quarterly results reflected solid financial performance with strong revenues and profitability driven by supportive market conditions and our successful expansion into the dry bulk sector. Following the acquisition of the 2016 based comes how much in late June.
Eddie Melendez: We entered the third quarter with a fleet of six more than mid sized tanker vessels, consisting of Sam our two product tankers, one rule amongst them to larger comes how much bond carries.
Eddie Melendez: In the quarter ended September 32020, before we generated consolidated time charter equivalent revenues D. C O N E.
Eddie Melendez: $11 7 million, marking an increase of over 25% from the same period in 2023.
Eddie Melendez: Our daily TCE for our fleet in Q3, 2024 was approximately $22000 with modest averaging almost 30000.
Eddie Melendez: While our main site bonkers earnings slightly less than 14000 per day.
Eddie Melendez: For the most recent periods, we reported net income of $3 5 million or 54 cents basic EPS and representing a five cents per share improvement compared to Q3 2020. Additionally, our adjusted EBITDA in the most recent period rose to six points.
Eddie Melendez: 7 million.
Eddie Melendez: The product tanker chartering environment remained strong and things in latter part of the first quarter 2024.
Eddie Melendez: Lower global economic activity, especially in China that was met with the worldwide impact from continued region regional facilities and tight inventories of refined petroleum products in a number of locations trained this location persistent with Monday ratings online growth globally.
Eddie Melendez: Refinery activity was supported in spite of lower crack spreads and slowing consumption, especially during the seasonally softer first quarter.
Eddie Melendez: We're guardedly optimistic as we move further into the last quarter of the year, which is typically a firmer view till the end of refinery maintenance and stronger seasonal petroleum product demand in the northern hemisphere.
Eddie Melendez: On November 20th 69% of available days in Q4 2012 before were booked for a modest at an average.
Eddie Melendez: TCE rate of $24630 per day.
Eddie Melendez: Hence the name, but about 5000 lower than that as reported for the three months period ended September 32024.
Eddie Melendez: One of our remarks, he's employed under a short term time charter and two are operating in the spot market.
Eddie Melendez: The supply and demand fundamentals for the dry bulk sector seem to be relatively balanced for the remainder of 2024 and into next year.
Eddie Melendez: On November 23, modern bulk carriers were booked for 55% of available days in Q4 at an average estimated TCE of 13190 per day, which is almost 5% lower than what we reported in the third quarter 2020 for all of our bulk con is unemployed and theirs.
Eddie Melendez: Short term time charters.
Eddie Melendez: Considering the constructive long term prospects for both tractors and our existing capital resources combined with the established mezzanine lending relationships, we remain committed to pursuing value enhancing accretive investment opportunities.
However, we have yet to find compelling acquisitions of modern remark given current prices, which are sitting here 10 years historical highs while buyers for older bulk has recently softened we have grown more selective in pursuing acquisitions in this sector in the meantime, we expect to stretch.
And our balance sheet amortizing scheduled debt and repurchasing additional common shares.
Please flip to slide four for information on our existing fleet unemployment activities.
Eddie Melendez: We continue to prudently maintain our mixed chartering strategy is time and spot charters with a focus on diversification by customer and duration.
Eddie Melendez: You can see three of our vessels are on the staggers short term time charters, providing us with an attractive fixed revenues over defined periods of time, while optimizing optimizing working capital, notably the average age of the vessels in our fleet is materially below the industry averages with RMR.
Here's a nine year, so better for but it gives us. The next special surveys are scheduled to occur during the first half of next year for two of our bulk carriers that can kind of stay on the convention.
Eddie Melendez: Please turn to slide six to review several macroeconomic and global oil market considerations would support the fundamental product tanker demand.
Eddie Melendez: Market conditions, especially for refined petroleum products continued to be relatively healthy and support a positive outlook.
Eddie Melendez: 2025 over the longer term, we expect demand for the product tanker sector to benefit from the refinery additions, but particularly in the middle East and Asia. According to <unk> $3 7 million barrels per day of net new refinery capacity is scheduled to come online. This year through 2028 most of the incremental.
Eddie Melendez: Refining capacity will be expert driven which should lead to further expansion of ton miles.
As you can see on slide seven the impact of the ongoing Russian Ukrainian award and the Middle East conflict have continued to sustain elevated charter rates lengthen sailing distances and expand Sun life. According to Clarksons product tanker ton miles increased 6% during the first nine months of 2010.
Eddie Melendez: <unk> versus the comparable periods in 2023 for next year, they expect demand growth moderating to two 9%. However, there are certain parts of these armed conflicts kind of multiply effect no end markets I think more volatility to the product tanker sector.
Eddie Melendez: Let's move on to slide eight.
Eddie Melendez: So chartering conditions since early 2022, coupled with continued positive outlook.
Eddie Melendez: <unk> has resulted in a significant increase in orders for the construction of new product tankers since the beginning of 'twenty three the pace of or this was a consensual Marcos has picked up substantially according to auto ship broking as of November 1st They might order book stood at 301 seven vessels.
Eddie Melendez: Representing 16, 5% of the global fleet by the end of 2020 505 or more of those scheduled for delivery, but the rate of Newbuild deliveries remain slow with only 30 of them delivered during the first nine months of this year and sleepers is likely to affect the actual number of.
Eddie Melendez: Deliveries.
The other significant backlogs many Asian yards don't have available construction slots for months with delivery dates now rolling into the first half of 2027. It is important to note that 13, 7% of the global name or two fleet or 254 tankers at 20 years of age or older.
Sure.
Eddie Melendez: Given this large number combined with declining economics of operating older vessels major scrapping should occur over the next five years, however, with a relatively solid market demolition activity has yet to pick up overall.
Eddie Melendez: Overall, we continue to estimate the net fleet growth for them are those to be 2%. This year very low by historical standards with unexpected at the NK cell approximately 5% in 2025.
Eddie Melendez: Turning to slide nine we see this.
The strong chartering conditions have led to substantial increases in them or to price across the board asset values for second hand tonnage remain well above 10 year averages with S&P activity okay.
Eddie Melendez: <unk> base. The majority of tanker sales continued to be concentrated in older tonnage mainline construction contracts for the new buildings in South Korea, and remain close to 52 million excluding yard supervision.
Eddie Melendez: And add ons.
Eddie Melendez: License for young acquisition them are two vessels with a preference.
Eddie Melendez: I'm very expensive, making viable acquisition candidates difficult to identify in our opinion.
Speaker Change: Now I would like to provide some updates for the dry bulk sector. So please flip to slide 11.
Speaker Change: Overall, the supply demand fundamentals for the sector looks reasonably balanced for the remainder of 2425, considering a moderate correlation playing on global GDP growth of three 2% for 2025 demand for dry bulk commodities should remain positive.
According to Arctic Securities seaborne dry bulk volumes are forecast to grow by two 2% and 25, we don't mind, increasing by 3% over the long term durability is currently forecasting total dry bulk demand to increase at a compound annual growth rate of two 4% for 2020.
Speaker Change: Nine to a certain extent the supply picture for dry bulk guys. It looks manageable in the near term auto shall broken and currently estimated at a low number for the dry bulk sector at 11, 7% of the worldwide fleet with nine 8% of tonnage at 20 years old or more for the Panamax sector.
Segment, which includes comes how much glass lessens. The order book is currently 362 vessels or.
Speaker Change: All 14, 3% of the global fleet, However, a higher percent of higher percentage of these class 16, 7% is 20 years of age or more which should eventually lead to more scrapping at November 1st loan amongst all the book to that 478 units.
Speaker Change: Or 77% of the global fleet of this highly versatile and then.
Speaker Change: Relatively young vessel class. According to ally chartering net fleet growth of about 3% in 2025 is a reasonable forecast for two vessel segments.
Speaker Change: How do you see on slide 12.
Speaker Change: Prices will drive bonkers.
Speaker Change: Also substantially appreciate that the price of a five year old who tell much approximates the cost of the new big fiber asset prices fall. The daughters have recently softened, but still remain at historically high levels continuing to support <unk>.
Speaker Change: Findings.
Speaker Change: So at this point I would like to turn over the call to Henry Williams, Our Chief Financial Officer, who will discuss our financial results in greater detail.
Henry Williams: Thanks, Eddie on Slide 14, Let's review our unaudited results for the three months ended September 32024, our time charter equivalent revenues for Q3, 24, which we define as revenues net minus voyage related costs and commissions rose to $11 7 million.
Henry Williams: An increase of almost 24% as we benefited from high.
Henry Williams: Emerge income from spot charters favorable market conditions, and an increase in operating days due to the addition of the dry bulk vessels to our fleet.
Solid chartering rates, reflecting in our Mars, which achieved 6% improvement in daily TCE, reaching $29826 for Q3 2020 for our dry bulk carriers reported and average daily TCE of 13841.
Henry Williams: For the same period, however, the third quarter was sequentially lower than Q2 in both segments due to softer charter rates and seasonal factors. During the most recent quarter. The overall fleet generated respectable average TCE of $22060 per vessel or a mix.
Henry Williams: Short term time and spot charters moving.
Henry Williams: Moving to slide 15, we generated net income to common shareholders of $3 $6 million for the three months ended September 32024, or 34 basic and <unk> 31 diluted EPS.
Henry Williams: Compared to a net income of $3 1 million or 29 basic and 26 cents diluted income per share for the same period in 2023.
Henry Williams: Please note that for accounting purposes, the fully diluted earnings calculations assume the potential conversion of all the outstanding series a.
Henry Williams: 775% convertible preferred stock into common shares and the elimination of the associated dividend in.
Henry Williams: In Q3 2024, the increase in TCE revenues of $2 $2 million was partially offset by a $1 $1 million increase in operating expenses, leading to a $1 $2 million improvement in adjusted EBITDA $6 $7 million.
Henry Williams: Now flip to slide 16 to review our capitalization at September 32024 at quarter close our consolidated leverage ratio of net funded debt stood at 22% total capitalization our weighted average interest rate was approximately seven 8% for the most recent quarter.
Henry Williams: And our next bank loan maturity is in about two years I should point out that at the end of September 2024, our total cash position aggregated $43 $7 million.
Henry Williams: Most of our excess cash is invested in short term money market instruments, which currently earn 485%.
Henry Williams: As previously disclosed with a payment of approximately $7 $6 million in late October.
Henry Williams: We had redeemed all remaining outstanding series, a convertible preferred stock.
Henry Williams: Since the start of our common share buyback program in June of 2023.
We have acquired 578000.
Henry Williams: The excess shares in the open market for a cost of about $2 $4 million.
Henry Williams: The pyxis redemption of the preferred stock in full has eliminated potential dilution of one 8 million shares in aggregate, we have avoided dilution of almost two 4 million shares.
Henry Williams: Other enhancing earnings and net asset value per.
Sure.
Henry Williams: Currently we have approximately $10 6 million common shares outstanding of which $4 5 million shares are broadly held in the public float.
Speaker Change: With that I'd like to turn the call back over to Eddie to conclude our presentation. Thanks Henry.
Eddie Melendez: We are guardedly optimistic about the chartering environment for product tankers and dry bulk carriers for the near term.
Eddie Melendez: Modest global demand growth for our seaborne cargoes across a broad range of refined petroleum products on dry bulk commodities is expected to continue with their respective order books remaining relatively managed.
Longer term supply and demand fundamentals remain constructive, especially given the fleet age profile of both sectors.
Eddie Melendez: Even though inflation is decelerating with the possibility of further interest rate cuts and continued moderate global economic growth and uncertainty surrounding macroeconomic conditions and unfolding global events necessitates continued prudent risk management beyond the expected uptick in demand for the winter season.
The product tanker sector may benefit from the prospect of a greater restrictions against certain sanctioned countries, which may help offset the effects of the possible deescalation.
Eddie Melendez: Armed conflicts however, the potential expansion of studies amongst major trading partners is likely to lead to further market dislocation and volatility.
Eddie Melendez: Looking ahead, we expect to utilize our solid financial position and extensive industry relationships to selectively pursue additional investment opportunities that maximize shareholder value, including potential vessel acquisitions also we aim to continue our common share repurchase program.
Eddie Melendez: Paid that are scheduled all while maintaining the strength of our balance sheet.
Eddie Melendez: We appreciate your interest and thank you for joining our call today, we look forward to reporting on future progress Pyxis tankers.
Speaker Change: And ladies and gentlemen that does conclude today's teleconference. You may disconnect. Your lines at this time and have a great rest of the day.