Diana Shipping Q1 2023 Earnings Call Transcript

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May 26, 2023

There are 5 speakers on the call.

Operator

Hello, and welcome to the Diana Shipping Inc. 1st Quarter 2023 Conference Call and Webcast. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Ed Nebb, Investor Relations. Please go ahead, Ed.

Speaker 1

Thank you, Kevin, and thanks to everyone who is joining us could join us today for the Diana Shipping Inc. 2023 First Quarter Conference Call. With us today to lead the call from management is

Speaker 2

Thank you, Ed. Good morning, ladies and gentlemen, and welcome to Diana Shipping, Inc. Thank you, Ms. Palliou, the CEO of the company, And it is a great pleasure to have the opportunity to present to you today. As mentioned by Ed earlier, I'm joined by our esteemed team, Mr.

Speaker 2

Stacy Margaronis, President of Diana Shipping Mr. Ioannis Zafirakis, CFO and Chief Strategy Mr. Lefteris Papatrifon, Director of Diana Shipping Inc Ms. Maria Zede, the company's Before we begin, I would like to remind everyone to review the forward looking statements applicable Despite less robust conditions prevailing in the market, our disciplined chartering strategy once again provided during the company's end of year earnings call, we are pleased to declare the distribution of a dividend for this quarter amounting to could $0.15 per share. We aim to continue rewarding our shareholders when the conditions allow us to do so.

Speaker 2

Could Turning to Slide 5, I will provide an overview of the company's snapshot as of today. We currently own and operate an extended Our fleet utilization has remained consistently high, reaching 99.4% for the Q1 of 2023. Additionally, we employed 1013 people at sea and the shore by the end of the Q1. Moving on to Slide 6 And 7, let's review the highlights of the Q1 and recent developments. In January, We concluded the unblocked deal signed in August 2022 to purchase 9 Ultramax vessels with the delivery of the motor vessel DSI Aquarius.

Speaker 2

Also in January, we agreed to sell the motor vessel, Aliki, for a price of US15.08 million dollars She was delivered to her in February 2023. In February, we agreed to sell the motor Furthermore, within the same month, we purchased the motor vessel Nord Potamak, later named the motor vessel DSI Drammen, $0.15 per common share for the Q4 of 2022, amounting to approximately $16,000,000 Additionally, we announced the special stock distribution of all Series D Convertible Preferred Shares of Ocean Pal Inc. Held at the In March, we filed the 2022 annual report on Form 20 F, We signed a US100 $1,000,000 term loan facility with Danish Ship Finance SAS, which has been drawn down to refinance existing loan facilities. Last week, we entered into 2 separate term sheets with 2 major European banks for 2 senior secured term loan facilities of up to US100 $1,000,000 and US22.5 million Lastly, today, we announced a quarterly dividend of $0.15 per common share, We have secured revenue of 79% for the remaining ownership days of 2023, amounting to approximately $8,300,000 of contracted revenues. Additionally, we have secured approximately $66,400,000 of contracted revenues for 2024, representing 26% of the available ownership days for the entire year.

Speaker 2

Janik will provide a more detailed analysis of our cash flow generation potential based on the current market environment. Turning to the financial highlights of the Q1 of 2023 on Slide 8. As of March 1, 2023, we held a cash and cash equivalent position of US115,700,000 including restricted cash and time deposits compared to US143.9 million dollars as of December 30 US130.8 million dollars at the end of the Q1 of 2023 compared to could $663,400,000 at the end of December 31, 2022. Time charter revenues for the Q1 of 2023 amounted to 72 point For the Q1 of 2023 came in at $0.22 compared to $0.31 per share for the same period in 2022. Could Yanis will provide a more detailed analysis of these numbers later in the presentation.

Speaker 2

Moving on to Slide 9, let's could review a summary of our recent chartering activity. We have continued to implement our disciplined chartering strategy by To provide some detail, we have chartered 1 Ultramax vessel at a daily rate of US18,250 dollars for a remaining average period Furthermore, we have chartered 2 Capesize vessels With an average daily rate of 19,360 and the remaining average period of 4 66 days per vessel. We intend to continue chartering our vessels in a staggered manner, focusing on locking in cash flows and positioning ourselves in a balanced way to I will now pass on the floor to Yannis to provide a more detailed analysis of our financials.

Speaker 3

Thank you, Sameer Amish. All in all, I think this has been a good quarter. As we have already said, our time charter revenues for the quarters stood at $72,600,000 Compared to 65.9 in the same quarter in 2022, of course, you understand that this is mainly because of the increased number of Operating days, I. E. Number of vessels.

Speaker 3

The time charter rate was at 18,500 dollars compared to $22,000 This is showing the market the current or the previous quarter's market conditions. An important point to pinpoint someone for this slide is the daily operating expenses where we are at Similar levels like a year ago or even a little bit lower. Moving to Slide 11, The important point on this slide is the Earnings per common shares diluted as we have already said, we managed to have 0.22 Dollars per share compared to $0.31 for the previous Again, we have kept our balance sheet at a very healthy condition. You can see the cash and cash equivalents and time deposits to be at the level of $115,700,000 And the total debt only at 6.30 plus something million. If you do the math, this leaves the company with a net debt position of only 523 point As we have mentioned many times, managing our amortization profile is very important.

Speaker 3

Taking into account the 2 last The loan agreement, the last 2 loan agreements we did, the one for $100,000,000 and another one for 22,000,000 We have successfully managed not to have maturities for the remaining of 2023 And the entire 2024 and 2025, the entire 2025. Of course, This should not be news for you since you know that from the beginning we have In addition to the previous slide, looking at the total debt and its composition, It can clearly been demonstrated how reasonable is the debt amount for the years to come And also each composition of various financial instruments, some with fixed interest could raise others with variable and key that gives a good hedge position in this Our breakeven cost also has been kept at very low levels. We are talking here approximately 14,000 point could $600 Looking at the average time charter rate Our fixed revenues for the remaining of 2023, 2023, it is at 17,170.

Speaker 4

And for

Speaker 3

2024, of course, only 26% of the days, but still we're talking about $17,000.248 per day. Slide number 16, I'm pretty much certain that you are bored looking at this slide, but This is the usual graph that depicts the essence of our chartering strategy, which is exactly the same since 2,005, Strategy that is proven that provides the best risk reward ratio for our revenues. The specific numbers we have already mentioned on previous slides. Slide number 17. Using the May 15 FFAs, Of course, I'm not on the high side.

Speaker 3

It looks as if we can have a cash flow surplus of 16 point Something $1,000,000 for 2023 $1,600,000 for 2024. And now I will pass the call to Stacy Margaronis for the drybulk market outage.

Speaker 4

Thank you, Yani, and welcome from me as well to the participants of this conference call on Diana's could Q1 financial performance and a look at the industry outlook. I'd like to start by looking at recent bulk carrier earnings developments. The bulk carrier sector has experienced the softer earnings recently across all size ranges. Average bulk carrier earnings are down to around $12,000 per day amid limited inquiry in key cargo loading regions and weaker sentiment. Looking at the indices, we observed the following trends which help us put into perspective the present state of the market.

Speaker 4

The Bortic dry index started the year at $12.50 and closed yesterday at $12.15 The 2022 high was 3,369. The Baltic Cape Index moved from 1635 on January 3 of this year to 1758 yesterday. The 2022 high was 4,602 And the 5TC route earnings peaked at $38,169 per day. The Baltic Panamax Index started the year at 1438 and closed yesterday at 11.41. It reached a high of $300,416 in 2022 with the 5 TC average earnings peaking at That's $30,746 a day.

Speaker 4

The Baltic Supramax Index stood at 968 on January 1 and closed yesterday at 980. The 2022 high was 3,033 and the 10 time charter average Earnings peaked last year at $33,366 per day. The 12 month time charter rate for Cape stands at around $15,000 per day. For Panamax, the rate is 12,500 per day, while for full tram access it stands at around 11,500 per day. Now let's try to explain the reasons behind these rather wild movements in earnings and indices.

Speaker 4

On Slide 19, We can have a look at macroeconomic development. According to the latest forecast published by the IMF, World GDP is expected to grow by 2.8% this year and 3% in 2024. Uncertainties which may create headwinds for the bulk carrier market include the U. S. Banking system stability or Monetary policy trajectory, energy prices, inflation, the Chinese economy And the continuing Russia Ukraine conflict.

Speaker 4

According to Clarkson, the Chinese GDP grew by 4.5% during the Q1 of this year, Which was up from 2.9% in the last quarter of last year. Manufacturing and infrastructure spending were supportive, while domestic Consumption in the property sector have not performed as well. New construction spending was down 19% during the first 3 months of this year. For 2023, China's GDP is anticipated to grow by 5.2% And by 4.5% next year. The United States is expected to grow by 1.6 this year and only 1.1% in 2024, while the Eurozone area is expected to grow by 0.8% this year And by 1.4% in 2024.

Speaker 4

A quick look at the grain trade now. The global seaborne grain trade is projected to grow by 3% this gray season from a reduction of 3% in 2022. Last year, several factors including the Russia Ukraine conflict put pressure on seaborne volumes. This year, the Black Sea Grain Initiative came up for renewal on 18th May, it appears that the fresh agreement is now in place and Ukraine and exports will not be disrupted further For 2024, world seaborne grain trade is expected to increase by a further 4%. As regards coking coal, Global seaborne coking coal trade is currently projected to grow by 2.9% this year compared to 2022, which will follow a drop of about 0.5 last year.

Speaker 4

China is expected to import less coking coal than last year, while India will probably increase imports by 9% to 78,000,000 tonnes. In 2024, seaborne transportation of coking coal is projected by Clarksons to grow by 2.8% this year and reach 991,000,000 tonnes. India's Imports are once again projected to grow by around 10% this year, while Chinese imports are also expected to increase by In 2024, thermal coal exports as a whole are expected to grow by a further 1%. On the all important iron ore trade, the global seaborne iron ore trade is projected by Clarksons to grow by around 2% this year At 1,500,000,000 tonne, Chinese imports are expected to grow by 1.6% and come to 1.127 could 1,000,000,000 tons on the back of improving sentiment in the steel sector. The main concern here is the Chinese government's decision to place a cap on steel production at 2022 levels.

Speaker 4

If implemented, this could reduce iron ore imports over the rest of the year. According to Kamado Research, Chinese iron ore stockpiles are at their lowest level since last July. Strong steel production in China has helped this destocking. Turning to the minor bulk trade, The global seaborne miner bulk trade is currently projected to increase marginally this year by 1% after contracting by 4% in 2022. Agribulks, fertilizers, metals and minerals are all affected one way or another by sanctions against Russia And trade restrictions between the warring parties in the Ukraine.

Speaker 4

Furthermore, macroeconomic pressures and other headwinds have been responsible for weakness in demand for minor bulk commodities. One bright spot has been the bauxite trade. According to Clarksons, China's imports of bauxite, mainly from Australia and Guinea, Last year was such that without them, ton mile demand for bulkers would have been 0.6% lower than it actually was. This is something Clarksons expect will continue this year as well. Turning to slide 20 now and looking at the new building order book and the supply side.

Speaker 4

According to Clarkson's high new building prices, limited berth availability at shipyard, uncertainty about fueling Technology options and economic uncertainties have had a negative impact on owner's willingness to place new building orders. The overall bulk order book stood at 7% of the entire fleet at the end of March. For Capes, this percentage was just 5%, For Panamax, it's 8.9% and for Handymax Ultramax, it's 7.7%. Ordering this year has been down by an average of 60 could 5% across the size spectrum of bulk carriers. New buildings orders this year will not be delivered before late 2025

Speaker 3

could Checking out with

Speaker 4

fleet development, according to Clarksons, the Capesize fleet is expected to grow by 2.2% this year and only 0.3% In 2024, the Panamax Capgemax fleet is anticipated to grow by 3.3% this year With the Clarksons index having dropped to about 33% of Cape and Panamax capacity globally in early April, down from about 36 spent a year ago and closer to the 20 sixteen-twenty 19 average of about 30%. A quick look at fueling transition. According to statistics published by Clarksons and the American Bureau of Shipping, 93 Alternative fuel capable ships of all types were ordered during the Q1 of this year, which is 49% of the total tonnage order. While LNG remained the most popular option in Q1, there was some interest in methanol with 32 ships ordered, primarily container Some owners are ordering ships with full fuel optionality by ordering vessels with LNG, Methanol or ammonia ready notations. The extent of readiness is directly proportional to the premium payable for these very few ships orders.

Speaker 4

At the beginning of this year, at least 38% of the order book in gross ton terms will be fitted with at least one energy saving technology. This is the result of the IMO short term measures on EEXI, the Energy Efficiency Existing Ship Index And CII, the Carbon Intensity Index. It is estimated by Granular Capital that by the end of 2023, around 30 Percent of the word fleet, all types of ships will be modern eco tonnage, 6% will be alternative fuel and 25% will be could with some sort of energy saving technology such as bow enhancements, hull fin, propeller ducts or other bulk among others. A quick look at demolition. The forecast published by Clarkson's for dry bulk demolition this year It's for 13,500,000 deadweight tonne.

Speaker 4

While for next year, the forecast is for 30,900,000 deadweight mainly due to the aging fleet and the environmental regulations coming into force. The benchmark price for bulk carrier scrapping candidates stands at around $5.50 to $5.75 per lightweight tonne displacement. Finally, the outlook for our industry. We agree with Clarksons on supply backdrop of our industry. The order book stands near the 30 year 3 with supply demand fundamental appearing marginally positive for this year with ton mile demand expected to grow by 2.5% could reduce bulkier supply by an estimated 2% to 2.5% per annum during 2023, 2024 through lower speeds and retrofit In 2024, Clarksons forecast some further improvements in the bulk of market based on more positive supply demand fundamentals.

Speaker 4

Ton mile demand is initially projected to grow by about 2.5%, while total fleet capacity growth could be slightly less than 1%, Given slowing deliveries and potentially increased demolition. If these forecasts come And considering the fact that for the last few quarters, the bulk carrier market has been evenly balanced with no significant shortage or surplus could comment, earnings should indeed improve. However, Clarkson highlights uncertainty over the scale This uncertainty makes us more cautious about the prospects of our industry as adverse developments could easily influence future demand growth And ruin the benign supply demand forecast for 2024 and beyond. We continue therefore Adopting the agnostic view in the chartering and commercial management of our fleet and at the same time strengthening our balance sheet With among other things actions mentioned by our CFO, Ioannis Zafirakis earlier on in this conference call. I will now pass the call back to our CEO, Semira Mispalu, for an overview of our corporate strategy and goals going forward.

Speaker 4

Thank you.

Speaker 2

Thank you, Stacy. Before we open up the call to questions and answer sessions, I would like to summarize the key points Firstly, we continue putting emphasis on generating and securing positive Since November 2021, we have consistently distributed substantial cash and in kind dividends. Additionally, we have provided clear guidance of our intention to declare a quarterly dividend of $0.15 per share Allowing us to pursue creative growth opportunities and fleet renewal initiatives. 3rd, We remain committed to our strategy of providing stability in a cyclical business, while maximizing Thank you all for joining us today, and we look forward to addressing your questions during the Q and A session. Thank you all for joining us today.

Speaker 2

We look forward to talking to you on our next earnings call. Thank you very much.

Operator

Thank you. That does conclude today's teleconference and webcast. You may

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Diana Shipping Q1 2023
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