Costamare Q2 2023 Earnings Call Transcript

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July 28, 2023

There are 4 speakers on the call.

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the Costa Marie Inc. Conference Call on the Second Quarter 2023 Financial Results. We have with us Mr. Gregory Zikos, Chief Financial Officer of the company. There will be a presentation followed by a question and answer session.

Operator

On your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today, Friday, July 28, 2023. We would like to remind you that this conference call contains forward looking statements. Please take a moment to read Slide number 2 of the presentation, which contains the forward looking statements. And I will now pass the floor to your speaker today, Mr.

Operator

Zikos. Please go ahead, sir.

Speaker 1

Thank you, and good morning, ladies and gentlemen. During the Q2 of the year, the company generated net income of about $69,000,000 As of quarter end, liquidity was $1,000,000,000 In the containership sector, the charter market has been softening, although rates still remain at healthy levels. The order book, however, Remains a principal threat to the market. For the drybulk side, our own drybulk vessels continue to trade on a spot basis, While the trading platform has grown to a fleet of 56 ships, having invested $200,000,000 in the drybulk Operating platform, we have a long term commitment to the sector whose fundamentals we view positively. Regarding Neptune Maritime Leasing, the platform has been steadily growing on a prudent basis, having concluded in total leasing transactions worth of 120,000,000 Which are complemented by a healthy pipeline extending over in the coming quarters.

Speaker 1

Finally, during the quarter, we proceeded with our And we have bought $50,000,000 worth of common shares, highlighting our strong belief that the share price is heavily undervalued, Considering both the company's performance and prospects. Moving now to the slide presentation. On Slide 3, you can see our 2nd quarter results. Net income for the quarter was roughly $63,000,000 or $0.52 per share. Adjusted net income was around $69,000,000 or $0.56 per share.

Speaker 1

Our liquidity stands at over $1,000,000,000 On Slide 4, you can see an update on our share repurchase program. Since the beginning of Q2, we 5,400,000 common shares for $50,000,000 worth. Slide 5. As far as CBI is concerned, we have chartered in 56 period vessels with the majority of the fleet being on index linked chartering agreements. 53 of those vessels have been already delivered and are running.

Speaker 1

Regarding our leasing platform, we have already invested around $50,000,000 Since inception, NML has financed 12 ships through sale and leaseback transactions. Slide 6. Our financing arrangements amounted roughly to $175,000,000 without an increase in leverage. Those deals were coupled with extension of maturities and improvement on fighting cost. We continue to charter on our drybulk basis in the spot market, Having entered into more than 50 charter agreements since our last earnings release.

Speaker 1

On the containership side, our revenue days are essentially 100% For 20 23 87 percent fixed for 2024, while our contracted revenues are €2,900,000,000 with a TEU weighted remaining time charter duration of About 3.9 years. Slide 7. We have sold 1 drybulk vessels and We have agreed to acquire 2 Capesize Drybulk ships. Both vessels will be purchased with cash on hand. In addition, we have concluded concurrent SAP transactions with Your capital for 2 containership vessels while we have agreed to sell another containership where we own a 49% equity interest.

Speaker 1

Moving to slide 8. The containership charter market has been softening although rates remain at healthy levels. Drybulk market remains volatile, while for the remainder of 2023, the FFA market indicates signs of recovery in Q3 And further strengthening in Q4. Finally, we continue to have a long uninterrupted dividend track record boosted by strong sponsor support. On slide 9, our liquidity has increased significantly over the year, starting at above $1,000,000,000 This liquidity gives us the ability to look for opportunities to grow the company on a healthy basis.

Speaker 1

Moving to slide 10. Charter rates in the containership market have softer remaining capacity remains at historically low levels of about 1%. And finally on slide 11, you can see the recent drybulk market trends in the spotter forward market. Order book is at 7.4% of the total fleet. With that, we can conclude our presentation and we can now take questions.

Speaker 1

Thank you. Operator, we can take questions now.

Operator

Thank you. The first question comes from the line of Mr. Omar Nochta from Jefferies. Please go ahead.

Speaker 2

Thank you. Hi, Greg. Good afternoon.

Speaker 1

Yes. Hi, Omar. Good morning.

Speaker 2

Thank you. Good morning Good afternoon. Sorry. Just wanted to check on how things are going operationally. Clearly, customary has shifted more so into drybulk over the past couple of years With investments in the mid sized segments previously, you've now got the Capes that are coming on and you've also have CBI.

Speaker 2

The sector Obviously kind of soft here over the past few quarters and just wanted to see kind of in terms of profitability in that business, It looks like it's eating somewhat into the container profits. In the release, you show the container business earning $127,000,000 in the quarter. Dry bulk The dry book fleet lost just $3,000,000 but the trading business $24,000,000 And just wanted to ask about that $24,000,000 Would you say that is just simple? Is that Commercial performance or is it more of just start up costs and building up CBI?

Speaker 1

Yes. It's 2 things. First of all, regarding our participation in the and our Investment in the drybulk sector, we are there for the long term. So this is a long term commitment of the company, as I think I have also stated in my commentary. Now, more specifically regarding CPI, The company started operations within the last 6 months and has grown quite substantially Starting from 0 ships are chartered into 56 ships are chartered in and 53 of those have been delivered.

Speaker 1

So I think we 2 things. First, we need to allow the company Some time in order to amortize the setup costs. At the same time, we had a lot of deliveries, which You know from day 1, eating gas without the ships having operated for a full period. So I would say that it's mainly Set up cost and the rollover of a new business. We have invested $200,000,000 And we are very happy with the way the company has grown over the last 6 months.

Speaker 1

At the same time, we are patient. So I think it's mainly set up cost and we are Now at the initiation phase, we need to allow more time in In order to see the results that this entity will be yielding, also, you know that the drybulk is a quite volatile Environment, especially right now. But I think we have the right setup and the right people and the experience. In order to capitalize on the market upside whenever that comes.

Speaker 2

Okay. Thanks, Rob. That's helpful. And then just in terms of you mentioned giving it some time. Do you think you've got 53 of the 56 ships in house now?

Speaker 2

So maybe the medias part of the startup costs have taken place. Is that the case? Or do you Potentially look to maybe does that 56 ship fleet, is that going to be are you aiming to get that to 75 or 100 or is 56 sort of the going number Or within that range here in the near term?

Speaker 1

It depends on market conditions. Our goal is to grow the company And to have a meaningful size within that sector as an operator. Now whether We're going to go to a bigger number of ships sooner or later. There's also a lot of commercial considerations regarding equity. We have the capacity to grow, but we also need to look at market conditions.

Speaker 1

So Most probably, I would say that it's a question of like when rather than of whether we're going to be growing Or not, but I think the growth needs to be on a healthy basis and step by step. So, let's see. I cannot predict the growth rate Simply because I cannot predict the market.

Speaker 2

No, that's fair. That was a tough question, I guess. And then maybe just one final one. Clearly, you announced the buyback. You were very aggressive putting $50,000,000 to work.

Speaker 2

And you paid roughly about $9 a share, a little above that. The stock is up a little bit from there. Do you still see the price today as attractive? And can we expect that remaining $40,000,000 to be put to work quickly?

Speaker 1

Look, regarding the first part of the question, I do consider that the stock is undervalued Whether someone looks in terms of NAV, in terms of profitability, in terms of prospects, in terms of track record, however you look at it, It's undervalued. This is the reason we bought those common stock shares $50,000,000 worth over the last quarter. Now, I cannot predict and also for legal reasons. I cannot tell you now what's our plan for the remaining EUR 40,000,000 of the program or like whether this program is going to be extended and add more capacity I cannot predict this now, but I can tell you that we generally believe that the stock is undervalued and we feel that buying But the common stock at those levels, it definitely made sense.

Speaker 2

Okay. That's clear. Thanks, Greg. I'll turn it over. Thank you.

Operator

The next question comes from Mr. Ben Nolan with Stifel. Please go ahead.

Speaker 3

Hey, good Good afternoon. It's actually Pranella on for Bim, but thank you for taking our question.

Speaker 1

Sure.

Speaker 3

I wanted to ask about, at the moment, both container and dry bulk asset prices have Come down, although in each case, both are still historically elevated. But at the moment, do you see Costa Amari as a better

Speaker 1

I think, yes, you're right. I mean, asset values Have come down, but not to a level where they reflect today's charter rates and especially for the containers, Not at a level where they reflect consensus about how the charter rates are going to be developing over the next quarters. So Regarding the containerships for the time being, we are not biased. And as you know, we haven't bought Any contingency over the last couple of years. And also we didn't put any new billing orders because we felt that asset prices Both for second hand and for new briefings were elevated.

Speaker 1

So there we wait and see. But I agree with you that although asset advisers have come down still, they are So that levels that they are so attractive the way We like normally buying vessels. Now regarding the drybulk market, again, As you saw, we bought 2 capesize of middle age. We felt the price made sense. But for the time being, we haven't seen a substantial correction in asset prices At levels close to levels we bought our drybulk fleet a couple of years ago.

Speaker 1

It was actually 2 years ago. So there we do wait and see. So we have the equity. We have cash together with available liquidity of slightly above €1,000,000,000 We have access to Commercial back debt. So when we feel that the asset prices do make sense, also judging from a We have the ability to buy and execute quite fast.

Speaker 1

For the time being, we are sitting and waiting and Opportunistically, we could be buying some assets here and there, if on a case by case, we feel it makes sense.

Speaker 3

Awesome. Thank you so much. It's helpful.

Speaker 1

Sure. Thanks.

Operator

Question and answer session. I will now pass the floor back to Mr. Zikos for his closing remarks.

Speaker 1

Thank you for dialing in and thank you for your interest in Costa Maria. We look forward to speaking with you again during our next quarterly results call. Thank you.

Operator

Thank you. That does conclude our conference. Thank you all for participating. You may now disconnect.

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Costamare Q2 2023
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