Costamare Q3 2024 Earnings Call Transcript

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November 1, 2024

There are 4 speakers on the call.

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the Costa Mare Inc. Conference Call on the Q3 2024 Financial Results. We have with us today Mr. Gregory Zikos, Chief Financial Officer of the company. At this time, all participants are in a listen only mode.

Operator

There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today, Friday, November 1, 2024. 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 Q3 of the year, the company generated net income of about $80,000,000 As of quarter end, liquidity was above $1,000,000,000 In the containership sector, with add new vessels of less than 1%, the fleet can still be considered as fully employed. The market is split between the larger sizes, which do remain in limited supply and smaller vessels where the availability of tonnage is greater. As the pool of bigger tonnage is unable to meet demand, charter rates continue to evolve at firm levels. During the quarter, we started 7 containerships at healthy levels.

Speaker 1

The new charter agreements are expected to generate incremental contracted revenues of above $165,000,000 The containership fleet employment stands at 100% and 94% for 2024 and 2025 respectively. Total contracted revenues amount to $2,300,000,000 with the remaining time charter duration of 3.3 years. On the diabolic side, we are now progressing with our strategy to renew the owned fleet and decrease its average size. During the quarter, we agreed to acquire 2 2014 and 2015 built Ultramax vessels and 20 11 built Capesize ship, while at the same time progressing with the disposal of smaller tonnage. TBI manages a fleet of 56 ships, the majority of which are on index linked chartering agreements.

Speaker 1

We have a long term commitment to the sector and we view the business as the vessel owning and the trading platform as highly complementary activities. Finally, with regards to Nexium Maritime Leasing, the platform continues to grow with committed funding for 32 shipping assets, reflecting total funding commitments of about $410,000,000 on the back of a healthy pipeline. Moving now to the slide presentation. On slide 3, you can see our 3rd quarter results. Net income for the quarter was $75,500,000 or $0.62 per share.

Speaker 1

Adjusted net income was $81,000,000 or $0.68 per share. Our liquidity stands at over $1,000,000,000 Turning into slide 4, regarding our S and P activity, we have agreed to acquire 1 Capesize and 2 Ultramax dry bulk ships. In parallel, we have concluded the sale of 2 Supramax vessels and agreed to sell 1 Pantisize ship. Slide 5, On the chartering side, we have chartered 7 containers with incremental contracted revenues of above €165,000,000 Our revenue base are 600% for 24% and 94% for 2025, while our contracted revenues are €2,300,000,000 with a TEU weighted remaining duration of 3.3 years. In parallel, we continue to target all our drybulk vessels in the spot market having entered into more than 30 charter agreements since our last earnings release.

Speaker 1

Slide 6, regarding our financing arrangements, we will fully prepare with cash on hand the €100,000,000 unsecured bond issued by customer participation. In addition, we have agreed to refinance our drybulk fleet without an increase in leverage. This deal is coupled with improvement of anti cost and the extension of maturities. Finally, we have roughly available €94,000,000 for financing of vessel acquisitions. Slide 7, regarding CPI, we have chartered 56 period pesos with the majority of the fleet being on index linked agreements.

Speaker 1

On our leasing platform, we have already invested around $100,000,000 to $23,000,000 NML continues to grow with funding for 32 ships and has a very healthy pipeline. On slide 8, on this slide, you can see our liquidity exceeding $1,000,000,000 This gives us the ability to look for opportunities to grow the company on a healthy basis. Slide 9, Charter rates in the contingency market continue to evolve at very firm levels, especially in the latter segments despite there is a decrease in box rates. The continued injection of new printing capacity though remains the principal threat of the market. The idle fleet remains at low levels of 0.8%.

Speaker 1

Moving to the final slide 10, you can see the recent drybulk market trends in the spot and forward markets. The drybulk order book stands at 10.3% of the total fleet. With that, we can conclude our presentation and we can now take questions. Thank you. Megan, we can take questions now.

Operator

Thank you. And your first question comes from the line of Omar Khanna with Jefferies. Please go ahead.

Speaker 2

Thank you. Hi, Greg. Thanks for the update. Just a couple of questions from my side. Just first on the Greek bond.

Speaker 2

I think it's a Greek bond, the €100,000,000 that you redeemed early. Just wondering, I know those were relatively much lower interest cost. And so I just want to get a sense of what drove the early redemption of those bonds?

Speaker 1

Yes, yes. You're right. Yes. This is a bond which was originally maturing next year. And we are like a prepaying a year earlier.

Speaker 1

This was on an asset book basis relatively competitive terms at like 2.7% cost. The reason being that there are some tax implications, which have to do with Pillar 2. And for that reason, because this board was issued by Costa Maria Participation, a Cypriot, meaning European Union subsidiary of ours. For tax reasons and for some legal implications, we had to redeem it earlier. However, we did use those funds for close to 4 years.

Speaker 1

And as you rightly said, it was in terms of pricing, I think it was competitively priced.

Speaker 2

Okay, got it. Thank you for that. And then just we've talked about this in the past, but just on the dry bulk business with the CBI, and there's been reports in shipping circles of changes happening there at the personnel level. Just in general, I wanted to ask how you're thinking about that platform? Clearly, you've been investing in the actual dry bulk ownership platform with the cave acquisitions.

Speaker 2

But just in general, about the trading business, how are you thinking about that going forward? Is it still a main piece of the pie? Or are you looking to scale that back?

Speaker 1

No, no, no. First of all, thank you for that question because you're right, there were like a reports in noise, this and trade wins and rightfully so a lot of people ask the same question you are asking. A couple of points. We do support CBI. This is a long term business for us.

Speaker 1

As I mentioned in my commentary, we consider the TriPAL owning site together with the trading platform of CBI as highly complementary activities. And there is absolutely no thought to scale it back, quite the opposite. The personnel changes, they were affected for various reasons, but they have absolutely nothing to do with our intention to continue investing in the drybulk business, including the trading platform. So today CBI commercially manages close to 56 vessels, plus 37 ships owned by the drybulk business. So we're going to be getting close to 100 ships.

Speaker 1

And this is quite a substantial business of operation, which I think we should consider this internally as one business, as one entity. So going forward, our goal is to stay there and to continue investing.

Operator

The next question comes from the line of Ben Nolan with Stifel. Please go ahead. Hi. This is Permella on for Ben, but thanks for taking my question. I wanted to ask with the announced time charters giving some better cash flow visibility and the strengthening balance sheet, any thoughts on moving the dividend higher from the $0.11005 per quarter?

Speaker 1

Okay. Now the dividend is like yes, as we rightly said, dollars 11.5.46 like per year. Couple of points. First of all, this is a Board decision, and I'm not authorized now to sort of speak on behalf of the Board. We have a dividend policy, which is flexible and can be revised.

Speaker 1

Of course, I cannot exclude the possibility of like one off dividend payments or of increasing the dividend steadily per quarter. In the past, we have done both. And also in the past, we used share buybacks. But I'm afraid that at this moment, I cannot give any color on that. This is something which is not for me to say right now.

Speaker 1

But definitely, in the past, we have done one off dividend payments. We have sort of increased the dividend and we have also done buybacks and also preferred stock buybacks. Probably this is not the case now for the preferred stock, but this is something for the Board to decide.

Operator

The next question comes from the line of Clement Mullens with Value Investors Edge. Please go ahead.

Speaker 3

Good morning. Thank you for taking my questions. Most has already been covered, but I wanted to touch upon your sale and purchase activity. Over the past year, you've acquired some Capes while also shedding some older tonnage. And I was wondering, what's your B1 current asset pricing on the dry side?

Speaker 3

And secondly, going forward, do you have a preference to continue building your Cape exposure or are you comfortable as is?

Speaker 1

Yes. I mean, what we have been traditionally doing or like over the last year or a year and a half, We have been buying Capes opportunistically and disposing of smaller donuts. Now we have been quite careful on how much we buy and how much we sell. And where like asset prices are today for Capes, for example, let's take the new buildings. I think they are at levels which we would consider high in order to put a new building order for a cave.

Speaker 1

Also, I'm not sure today whether asset values for the caves represent today's chartering capacity of those vessels and the FFA curve going forward. So there may be a bit overpriced. So I mean, we don't have a reason to buy if something we feel it is expensive. We can see the weight. Our fleet is big enough, so there is no need to grow it further.

Speaker 1

So asset prices are today, we are more opportunistic rather than buying and block vessels where especially considering Q4 for the Capes, it hasn't been a great market as of now. So I mean, we're going to be more careful and take it as we go.

Speaker 3

That's very helpful. Thank you. And on the container ship side, you've taken a fairly conservative approach to fleet renewal, basically focusing on generating cash flow from existing assets. Is there maybe any appetite to going forward acquire some modern tonnage Or is asset pricing still too high?

Speaker 1

Look, we haven't we don't have any new buildings any new building commitments today because had we any new buildings delivered today or like next year, I think asset prices for the containers of new buildings have been extremely high from a historical perspective. So either new buildings or like 3, 5 year old tonnage in containers today, I think the prices are high irrespective of the chartering market. So I think we would be assuming excessive residual value risk, and this is the reason that we haven't done it. Now of course, there may be opportunities. We look at the market, but we are extremely cautious.

Speaker 3

Makes sense. Thanks for the color and congratulations for the quarter.

Speaker 1

Okay. Thank you.

Operator

This concludes our question and answer session. I would like to turn the call to turn the conference back over to Mr. Zikos for any closing remarks.

Speaker 1

Yes. Thank you very much for your interest in Costamare and for dialing in today. We are looking forward to speaking with you again during the next quarterly results call. Thank you.

Operator

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

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Costamare Q3 2024
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