Safe Bulkers Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 11, 2023

There are 4 speakers on the call.

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers Conference Call to discuss the Q1 2023 Financial Results. Today, we have with us Mr. Paulus Hajjianno, Chairman and Chief Executive Officer Doctor. Lucas Varmparas, President and Mr. Konstantinos Adamopoulos, Chief Financial Officer of the Company.

Operator

At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. Wait for your name to be announced. Following this call, if you need any further information on the conference call or on the presentation, Please contact Capital Link at 212-661-7566. I must advise you that this conference is being recorded today.

Operator

Before we begin, please note that this presentation contains forward looking statements as defined in Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended concerning future events, the company's growth strategy and measures to implement such strategy, including expected vessel acquisitions and entering into further time charters. Words such as expects, intends, plans, believes, anticipates, hopes, estimates and variations of such words and similar expressions are intended to identify forward looking statements. Although the company believes that the expectations reflected in such forward looking statements are reasonable, No assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the company. Actual results may differ materially from those expressed or implied by such forward looking statements.

Operator

Factors that could cause actual results to differ materially include, but are not limited to changes in the demand for drybulk vessels, competitive factors in the market in which the company operates, risks associated with operations outside the United States and other factors listed from time to time in the company's filings with the Securities and Exchange Commission. The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward looking statements contained herein to reflect any change in the company's expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. And now, I'll pass the floor to Doctor. Bonampass. Please go ahead, sir.

Speaker 1

Good morning. I'm Luca Saldaric, President of Sales Biographies. Welcome to our conference call with the aircraft to discuss the financial results for the Q1 of 2023. During the Q1 of 2023, we were prioritizing a relatively weak market compared to the previous year. Having comfortable liquidity and leverage in the United Way 2nd program, which has opened in June June September 2021, Our balance sheet is strong with significant price and development capacity.

Speaker 1

Our capital guidance Our subsumption covered by our contracted future revenues and our capital structure is conservative. Now let's start with Mike's update on Slide 3. With respect to the graphs, the current status of the market. Capes have recovered from the recent lowish and dryback freight markets overall may recover with China's easing 0 COVID policy and with the active Active supply and new deals. Peri possession has declined with lower input demand and decreases of supply chain issues.

Speaker 1

In the final markets, the very commodities market is likely to provide support to the 3rd market throughout the 2nd half of this year. Moving on Slide 4, we present the development of our CRD commodity index reflecting the basic commodity future, it features at future prices, After rising by 45% in 2022, commodity prices are projected to grow I'll turn the call back to you on for some in 2023. We continue to rate the rise in several banks of interest rates as sales in agents As global inflation projection of 23.7 percent, this is the growth induced to broaden price pressures on crude and energy prices And because of the lithium supply The World Bank Commodity Price Index declined by 32% after World Bank 20 20 So, in fact, it's only today, Otpor presses has 12 aircraft ships being after 2015 and the first support of the constraint of Tier 3 units, Such environmental efficient fleets may affect company valuations and need to put your market with the direct sale The low order book and the new integration in favor of fee was more efficient than financial services and that we delivered after 2014, Let me turn to Slide 8, second about 2 priorities, which differentiates us from all tiers.

Speaker 1

The Our track record, the creation of invested value through an extensive deep expansion program with curtailed 3 newbuildings and that are under We intend to compete on the basis of lower fuel consumption and environmental performance in the coming years. With lower profits and oil liquidity, Our cash flows and our cash flow structure as proven in Slide 9. We are maintaining a comfortable leverage of 43%, Our debt is $430,200,000 comparable to our fleet scrap value. Importantly, it is 3 In part, we have a number of reasons. Moving to our dividend policy on Slide 10, we declared a dividend of $0.05 per share over the last Furthermore, we have coordinated the gain generated operating program under the realized savings had occurred in September 2021.

Speaker 1

First I'll point in this uncertainty of the capital markets and the world economy is that we continue to direct a portion of our free cash flow to clients' unique Safe Thank you, Lucas, and good morning to all. I will then note during this quarter, we operated in a Increased earnings from scrubberfield vessels, increased operating expenses and higher interest expenses due to increased interest rates. On Slide 12, we present our strong start in performance and example of our management alignment. The year over time charter equivalent of $3,760 compared to $21,352 during the same period in 2022. Net income for the Q1 of 2023 reached $19,300,000 compared to net income of $36,700,000 in the same period in 2022.

Speaker 1

Our daily earnings expenses stood at $5,550 Virtues $5,732 last year, while our daily earnings expenses excluding drydocking and pre delivery expenses $5,132 versus $4,922 for the Q1 of 2022. Our earnings OpEx and G and A for Q1 2023, which we believe is one of the most competitive compared to our peers, It's about $7,043 and we know that this includes all our dry development to deliver expenses as well as All our directors and officers' presentation. Moving on to Slide 13, we have quarterly financial highlights for the Q1 of 2023 compared to the same period in 2022. Our adjusted EBITDA for the Q1 of 2023 stood $33,100,000 compared to $46,100,000 for the same period in 2022. Our adjusted diluted The insurance for the Q1 of 2023 was $0.10 calculated on a weighted average number of 100 and 18,400,000 shares compared $0.24 to $0.24 during the same period in 2022, Calculated on a weighted average number of 121,600,000 shares.

Speaker 1

We presented Slide The key are quarterly operational highlights for the Q3 of 2023 compared to the same period of 20 22. We operated 43.83 vessels on average earnings on average times over dividends $15,760 compared to 39.54 vessels On Slide 15, we present our low breakeven point for Q1 'twenty three, which we believe is one of the lowest in May of 20. The global economy is experiencing multiple challenges. Inflation is higher than seen in several decades, altering financial conditions in more regions, That's our main focus is being operations based on inflationary environment. Based on our satisfactory financial performance, The company is going to direct us to net a $0.05 dividend per common share.

Speaker 1

We would like to emphasize that the company is maintaining a healthy Cash position was about $90,700,000 as of May 2023 another $119,000,000 in Our combined liquidity in capital resources of $351,000,000 provides us with significant 35 power. Additionally, we have contracted revenue from our main council at the Spelman period and Cyprus and Rights In excess of $285,000,000 net of commissions and excluding standard revenue from certain vessels As well as additional building capacity in the merchant to 7 and encompasses in vessels and 5 new bids at tender delivery. We believe that the strong liquidity in relative with low leverage will enable us a deflexity with our capital structure, expand the fleet relatively working on to our vendors

Operator

Thank you. At this time, we'll be conducting a question and answer session. Thank you. And our first question is from the line of Chris Wetherbee with Citigroup. Please proceed with your questions.

Speaker 2

Hey, thanks. Good afternoon, guys. Maybe I can start on the fleet And curious how you guys think about fleet opportunities from here. Obviously, a pretty tight order book relative to what we've seen over The past and so I'm curious how you guys think about approaching it. Are there going to be new building opportunities for you that you'd like to execute on at this point?

Speaker 2

Does secondhand make more sense or given where vessel values, does it make sense just kind of to stand pat and sort of see how things develop over time? Just kind of curious how you're thinking about that right now.

Operator

Yes. Hi, Chris.

Speaker 1

I believe you have asked about UBIT, I guess, Whether that has opportunities included in the world?

Speaker 2

Correct, yes.

Speaker 1

Okay. Because the line is not So clear. Okay. Right now, I think the new peak market is little bit confusing Because we see prices rising because of demand created from other sectors. We don't have a clear path what would be the next fuel available For newbuilds, since we have Still 8 vessels, 9 vessels should be delivered from our existing newbuilding program in Phase 3 Low consumption yearbuildings.

Speaker 1

We are not rushing to making some investment In real insurance, because simply we don't have a clear view. We know We are trying to monitor the market, but we don't have a clear view, shall we? I think like us, there are many people with the same confusion at the moment, At least in the drybulk sector. I think the market is not clear. They have more options there.

Speaker 1

But in that regard, we don't have that many options. So at the moment, you will see very small For 2025, the yards are almost full. And if someone wants to consider designs of Yes. The availability is May 26, 30.7. So it's very, very far away.

Speaker 1

So, also for that, the EBITDA dilutions, you have to bear in mind the Hi, Ethan. It's Costa with the inventory installments. So right now, I don't think that the market will see many more

Speaker 2

Okay. That's helpful. I appreciate that color. And then I guess as you think about Scrubbers in particular, I know you've highlighted some of the hurdles and Opportunities, I guess, as well in terms of emissions and sort of how much the fleet sort of meets in the current and I guess as you think about your approach to that market and then maybe scrubbers in particular, is that still an investment that is Worthwhile, so I guess two questions on existing vessels, is there a desire or a Idea that you might do more of that. And number 2, the vessels that you have the scrubbers on, do you feel like they're earning a reasonable return, understanding that probably some of those Or most of those were underwritten by your customers.

Speaker 2

So just kind of wanted to get a sense of your thoughts on scrubbers generally.

Speaker 1

As scrubber spreads below $150,000,000 the option to invest in scrubbers, it's not so attractive Because you have to remember at the same time, owners are making environmental investments and they are reducing 10% of the consumption of investments. So we will see scrubber spread going in the future above $150,000,000 then we may see more scrubbers being placed. But the current spread is heading towards 120. It's not so attractive to make new investments there. As said, we have done we have all the scrubbers in our Capes, by the end of the year, then they have Yes.

Speaker 1

Scrubbers, it keeps turning around 35 to 40 tons a day. So there is a more viable proposal. But smaller ships, I don't think anymore is viable to It's both scrubbers. I think that the payback time is much longer than what used to be. Okay.

Speaker 3

All right. That's helpful. Thanks very much. Having

Speaker 1

said that, companies that are invested in Stavros in 20 2019, 2018, 2019 and then I think there's no tax revenue.

Speaker 2

Okay. Yes, that's a fair point. Great. Thanks very much for the time. I appreciate it.

Operator

Thank you. Our next question is from the line of Omar Khnakta with Jefferies. Please proceed with your question.

Speaker 3

Thank you. Hi, guys. Good afternoon. Just wanted to maybe touch a little bit on capital allocation. Obviously, your strategy there has been fairly balanced.

Speaker 3

Got the dividend, the buyback, which was fairly active recently, acquisitions with the new buildings and focusing on the balance sheet and Making sure that debt is getting

Speaker 1

paid down. Just wanted

Speaker 3

to ask about how you are thinking about the fleet as it is going forward. You outlined in the report, You have the 44 vessels, of which 12 are eco designed, both after 14, and you have the 3 very modern ones, the Phase 3s. You've also got the 9 new buildings that are coming on. How should we think about those new buildings as they deliver and what the plan is for So that existing fleet today, that isn't mentioned as being in the eco portion of the business. So basically, we call it 20, 25 vessels that make up your older age fleet.

Speaker 3

What's your plan with those, especially as you start taking delivery of the new buildings?

Speaker 1

Okay. First of all, I will say a few things about our capital allocation. So basically, At an early stage, when we decide about the dividend, we both have a meaningful dividend policy and also To divert a reasonable question about free cash flow towards The investment in EBIT show our level of our loan to value will not be embedded in the following years. Sure. We want to see something like the range of 10% to 35% or so loan to value.

Speaker 1

We feel very comfortable. The second point of our policy is that we have a substantially contracted Revenue show we have the liquidity in order to support our dividend. And we also have a substantial liquidity in order to So to be able to break in the actual potential that they arise in the market. Now in terms of our fleet, You can see that by going to 2020 5, half of the fleet basically We'll be either a LCAP share of 32 vessels. It will be, I think, a very impressive period.

Speaker 1

The other half, 20 of them will be updated within 2023. This means that an efficiency in the range of 10% in Q4 P60 in the range of 20.20 10% will be there. And also, the other part is that our ships, By about 50% Chinese and the Chinese is not paid. So I think that the company is very comfortably be able to We compete on the basis of short performance, having about half of the fleet new to Phase 3 in April

Speaker 3

Okay. That's a very good overview. Appreciate that. I think earlier in the I think it was In response to Chris' question about new buildings and you highlighted the you'd have to go out to 26 or 27 to take delivery. And again, there's uncertainty on propulsion.

Speaker 3

Earlier this year, you had added to your CancerMAX, I believe, tally With the 'twenty five delivery, if I remember

Operator

it was first half of

Speaker 3

'twenty five. If you guys were to Place an order, is that achievable again to be able to get something in the first half of twenty twenty five? Or is it basically now the window has passed and we're looking at 2026, 2027?

Speaker 1

Look, in Japan, it's very hard to find new dates in 2025. It's 26 100. If you go also to see the RMA dual fuel possibilities, at the moment, you have to go till late 20 6, early 20 7. And even there, we don't know if the designs are viable and if the designs, the shipyards are evenly wrapped Well, by the yards and they are at the very primary stage. Regarding ship owners in general are very skeptical which parts to tell them.

Speaker 1

For

Operator

us, we

Speaker 1

are pleased that we have it on the program of 9 ships And some delays, if you could tell me that we know our fleet with the additional partnerships trading the fleet, During the start of the COVID. So from our point of view, we cannot afford to wait another 6 to 12 months before we may As we did a rate of 10% of 5%, largely the margin of the banks another 2%, 7% I don't see actual conditions for 20.7. It's too far away, but the target is too much. So we prefer Wait for later on. Now we will be selectively Despite the trade market, I think, underperforming the 1st 4 months of or 5 months of this year, So either the market has to go up and all ownership pricing will have to come down.

Speaker 1

So there will be plenty of opportunity to gain one way or another. So we don't need to make more Our prices in the market doesn't turn up in the second half of this year. Maybe pricing will correct. 2nd half pricing will correct. So we'll be in the investment opportunity.

Speaker 1

We will come to invest on existing mobile ships under the under $7,000,000 range.

Speaker 3

Thank you. Yes, actually, that was just going to be a I was going to have a follow-up on that.

Speaker 1

At the same time, if I may add, at the same time, We have seen that our NAV is trading at 50% of the value of the fleet. If prices continue to go up and now our NAV is static, it's much healthier to invest shareholders' money In buyback of old stock, which lately we have as you have said, we have stepped up a bit on that front. So this program may continue. We'll see how things develop. We don't see appreciation of our share price.

Speaker 1

We will continue.

Speaker 3

That sounds good, and it's very clear. I'll that's it for me. Thank you.

Operator

Thank you. Thank you. At this time, there are no additional questions. I'll turn the floor back to management for closing remarks.

Speaker 1

Okay. Thank you very much for attending this conference call All the Q1 financial results, and we are looking forward to discuss again with you in the next quarter. Thank you to all.

Operator

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Powered by Quartr
Earnings Conference Call
Safe Bulkers Q1 2023
00:00 / 00:00