Costamare Q4 2023 Earnings Call Transcript

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February 7, 2024

There are 5 speakers on the call.

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the Costamare Inc. Conference Call on the 4th Quarter 2023 Financial Results. We have with us 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. Costamare. I must advise you that this conference is being recorded today, Wednesday, February 7, 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.

Operator

And I will now pass the floor to your speaker, Mr. Zikos. Please go ahead, sir.

Speaker 1

Thank you and good morning ladies and gentlemen. 2023 has been a growth year for Costamare. The company had revenues of $1,500,000,000 and generated net income of about 350,000,000 Liquidity stood at around $1,000,000,000 as of year end. Following our strategic decision in 2021 to enter into the drybulk sector at an opportune time in the cycle. We have grown during 2023 our newly established trading platform to an operator managing a fleet of 51 drybulk vessels.

Speaker 1

Having invested $200,000,000 the new venture, we have a long term commitment to the sector whose fundamentals will view positively. Regarding Neptune Maritime Glazing, The platform has been steadily growing on a prudent basis throughout 2023, having now concluded leasing transactions for 23 ships with a total of about $250,000,000 We are committed to further growing the leasing business on the back of a healthy pipeline extending over the coming quarters. On the owned drybulk fleet side, we are executing our strategy to renew the drybulk fleet and increase its average size. During the year, we took the decision to dispose of 12 smaller sized vessels and have agreed to acquire 3 Capesize and 2 Ang Ultramax vessel. Subject to market conditions, our goal is to continue our expansion in the dry market.

Speaker 1

In the containership market, recent events have been contributing positively to the supply and demand dynamics pushing up box and charter rates. Those recent developments are mediating the effects of oversupply in the contingency market, Astronauts is expected to remain tight at least until the Chinese New Year. We have, however, proactively secured employment for 95% and 78% of our open days for 2024 and 2025 respectively, Putting our contracted revenues for the containership purchase at $2,500,000,000 with the remaining time charter duration of about 3.6 years. Moving now to the slide presentation. On slide 3, you can see our annual results.

Speaker 1

Net income was about $350,000,000 or $2.95 per share. Adjusted net income was around $250,000,000 or $2.07 per share. Our year end liquidity stands at roughly 1,000,000,000 Slide 4. Regarding CBA, we have chartered in period 51 vessels with the majority of the fleet being on index linked agreements. On our leasing platform, we have already invested around $120,000,000 Since inception, NML has financed 23 assets through sale and leaseback transactions and has a very healthy pipeline going forward.

Speaker 1

Slide 5. We have now acquired Bjorg's equity interest on a Frida container ships and have now agreed to acquire 1 Capesize Trival vessel. In parallel, we have concluded the sale of 2 Supramax and 3 Handysize ships, while we have agreed to sell 3 more Handysize and 1 Supramax drybulk ship. Slide 6. During the Q4, we have financed the acquisition of 1 dry bulk pressure through a new planting license facility, where we have roughly available $132,000,000 for financing of further vessel acquisitions.

Speaker 1

We do continue to charter all our drybulk vessels in the spot market, having entered into more than 40 chartering agreements since our last earnings release. On the containership side, as already mentioned, our revenue days are fixed 95 percent for 'twenty four percent and 'seventy eight percent for 'twenty five percent, while our contracted revenues are $2,500,000,000 with a TEU weighted average remaining duration of 3.6 years. Moving to Slide 7, during 2023, we have purchased approximately $6,300,000 of common shares for a total consideration of $60,000,000 In addition, we continue to have a long uninterrupted dividend track record boosted by strong sponsor support. Slide 8. As mentioned already, our liquidity stands at roughly $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 9. Charter rates in the containership market have Rising daily across all segments, having benefited from the regi crisis. The idle capacity remains at low levels at 0.8%. And moving to the last slide. On Slide 10, you can see the recent drybulk market trends in the spot and forward market.

Speaker 1

Charter rates remain volatile, have been corrected from the highs of Q4 2023. Today's order book is at 8.5 of the total fleet. With that, we can conclude our presentation and we can now take questions. Thank you. Operator, we can take questions now.

Speaker 2

Thank Hey, good morning. This is Matt on for Chris. Thanks for taking the question.

Speaker 3

Hi, good morning.

Speaker 2

Good morning. Yes, just wanted to touch a little bit more on CBI. Last quarter, you mentioned having a fixed fleet of 59 drybulk vessels on period charters, but this quarter 51. So we're just wondering if you could provide a little bit more detail on sort of what drives that variability on the platform from quarter to quarter and how that can affect profitability levels well as the magnitude of potential shift in that profit. I think that would be great to start.

Speaker 1

Yes. Thanks for the question. First of all, you're right, it was close to 59 ships chartered in the previous quarter. We mentioned 51 now. It has nothing to do with our intention to grow the company further.

Speaker 1

It is just that during That quarter specifically, there were some redelivers which coincided altogether. And we are like we are now in the process of chartering in additional vessels. Now at the same time, I need to remind you that we also employ FFA. So I mean instead of chartering in a vessel at some point, if you cannot find a suitable asset in the market, you can buy, for instance, FFA days for Panamaxes. So the smaller amount of ships chartered in Has absolutely no effect, and this should have been misconstrued as our willingness to swing the business, Quite the opposite.

Speaker 1

This is a long term strategic decision, and we are committed to the drybulk sector, both through CBI and also through our owned drybulk ships. So it is a matter of deliveries that have Where the market is, we may be buying FFAs instead of chartering in ships. And in this business, we need to be opportunistic. More ships will be chartered in when we find the right asset also at the right price.

Speaker 2

Okay, interesting. Okay, thank you for the further granularity. And just as a follow-up, And just given the current plan that you guys have outstanding in terms of $30,000,000 for common shares and $150,000,000 for preferred, What was your plan moving forward with that? And sort of how do you think about how share count can moving forward.

Speaker 1

Yes. First of all, the share repurchases like the common or like the common stock dividends. This is a Board decision, and these are subjects that are part of the discussion every quarter. But leaving that aside for the time being, We are the majority shareholders, the founding family at above 60%. So both dividend and sharing processes that help the stock price, we are all like the stock price go higher.

Speaker 1

We We are 100% aligned. At the same time, regarding the optimal capital allocation, we need to be We'll do that by new opportunities when like there are. So we bought common stock worth of $60,000,000 during the years or sort of during last year. And we also did some part of this in the past some years ago. I'm not saying that we sort of excluded this is a Board decision and those But I'm not ready to tell you that we're going to be buying back more stock like next quarter or in 2 quarters' time.

Speaker 1

This is all subject market condition, and this is subject to the view we take regarding the optimal capital allocation of the company. So I'm afraid I cannot be more specific on that simply because this is an ongoing discussion. And for the time being, We feel that this is something that could happen the next quarter or the quarter after or like during 'twenty four, but I'm not in a position to give you And exact timing, depends on market conditions.

Speaker 2

Got it, got it. Understood. So it would be fair to assume that for the foreseeable future at elevated stock prices. It's unlikely that repurchases are going to be executed on, correct?

Speaker 1

No, I didn't say that because I believe that the stock is undervalued. And if you look at some NAV calculations. You will see that the stock's value, also considering the value of the containerships and also of the dry bulk vessels and the contracted revenues from the containerships and the net debt. I think on a like NAV basis, The stock is worth much more than the $10 or like $11 So the fact that we are not buying back shares, It's not because we don't believe that the stock is undervalued. We definitely believe that the stock is undervalued.

Speaker 1

However, We still may find it the optimal to use that cash in order to buy ships Or in order to push the CPI or National Maritime Leasing, but it doesn't mean that because we don't buy back shares, we don't feel that the stock is undervalued, Quite the opposite. The stock has been undervalued for quite some time now. As is in most of the cases, this is what's happening with shipping stock. So we're definitely trading at below NAV.

Speaker 2

Understood. Thank you very much Costa

Speaker 1

Mare. The

Operator

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

Speaker 3

Good morning, Greg. I had a couple, but I wanted to start with the asset sales that you guys did. I know that you In the release, you posted the net after debt repayment, but could you give the gross proceeds from the asset sales. I can tell you

Speaker 1

that for the ships we sold, after debt repayment, The net cash in total for the 'twenty three is close to $80,000,000 more or less, dollars 79,000,000 I guess my question is how much is that debt that we

Speaker 3

should expect to be repaid?

Speaker 1

Yes, sorry. This debt for those ships has been repaid. So I mean, we sold the ships, we paid back the debt and the net equity proceeds We're like $80,000,000 for all the ships. Now the new ships we bought in total bought or also have agreed to buy, It's like 4 Capes, and you can assume that those are going to be funded with a leverage of close to 60% On the asset value. I think these are our expectations.

Speaker 1

Okay.

Speaker 3

All right.

Speaker 2

My next question had to

Speaker 3

do with the Neptune leasing program. I guess, still a little bit more to go under your original commitment. But Obviously, it's growing. How do you think about that longer term? Is this something where once you reach sort of your commitment level that that amount would grow or do you think in time your relative position shrinks because there's capital coming in from Other sources that mean that your effective position is a little bit diluted or I don't know how are you thinking about that business?

Speaker 1

Look, up to now, this business has grown. I mean, when we started We started consolidating that business, and we bought the shareholding interest in March of 'twenty three. So we talk about 3 quarters of operation. And over those three quarters, the business has from funding 1 to 2 vessels. We are like 23 today funded and with a very strong pipeline going forward.

Speaker 1

So our goal is to further grow the business. And in order to boost Our returns, as you can imagine, we are also focusing on backleveraging our equity. So boosting our returns and at the same time being able to participate in more transactions with our Equity Share Holding. Now when we reach the 250, where with back leverage the 250, it could be total deals of Depending on the asset and on the leverage between $800,000,000 $900,000,000 $1,000,000,000 whatever the bad leverage will be, I think it's going to be a meaningful size. At this point in time, we're going to see how the I mean, how like whether we want to grow the business further, whether we want to have Other people joining, what are the alternatives and listing, a lot of things.

Speaker 1

I'm not ready to talk about this yet. I mean, the fact that we have It's a good thing. The fact that it is growing, it's good as well. And I have to stress that it's not growing for the sake of growth. It's growing based on deals that we feel from a credit perspective and also from a returns perspective, including the back leverage makes sense.

Speaker 1

So this is sort of a growing business, which completes the rest of our assets. You don't expect to have the volatility of the returns you have in the dry bulk vessels also in CBI. But it is, let's say, a steady return, which does make sense. And there are a lot of options At the moment, we're likely going to be reaching the $1,000,000,000 of deals or $800,000,000 whatever that is depending on the back level. So we are quite positive on the light of business.

Speaker 1

Okay.

Speaker 2

And then I guess my

Speaker 3

last question relates to container business. Obviously, your existing book is well covered, etcetera. Asset values have fallen Turning from the peak. Getting to a place where Maybe deals and returns in the container market are getting close to something that you'd look to maybe come back to and invest in that space again? Or in your view, is

Speaker 1

there still some room to go? I think There is still some room to go, although you can never predict the market, but you would take it 1 by 1. If you look at new buildings, new building prices for containers, if They still remain at very high levels. So I mean, this is the first thing. Then the second thing, also secondhand prices, still they are at levels which have come off, They may come off even more, but where they are today, buying at levels that would make sense if you have to have First of all, if you want to have a good understanding of your sort of residual value is with some potential upside, I think that we still have some way to go.

Speaker 1

Of course, I'd like the new buildings will continue kicking in. Whether the asset prices and new deals may make sense in a year's time or like in 6 months or like in 2 years, I cannot tell, but for the time being, I think we need to be patient there. If we want to have a well structured transactions with like manageable downside and also with some residual upside. Right. Okay.

Speaker 3

I appreciate. Thank you, Greg.

Speaker 1

Sure. Thank you. Thank you, Ben.

Operator

The next question comes from Clement Mullins with Value Investors Edge. Please go ahead.

Speaker 1

Hello?

Operator

Clement, your line is now live.

Speaker 4

Sorry about that. Good morning. Thank you for taking my questions. I wanted to follow-up on the question on CBI. Could you provide some commentary on how the segment fared during the quarter?

Speaker 4

And secondly, has recent turmoil in the Red Sea had an effect on the trades you're engaged on, specifically on CBI?

Speaker 1

Okay. Regarding CPI, we don't provide in our press release detailed segmental information, Neither for CBI nor like for the dry bulk owned vessels or like for the containers or for Neptune Maritime Leasing. There will be some information in our 6 ks filings. But for the time being, I'm afraid this is not part of our press release presentation. So we provided the full picture.

Speaker 1

And for every business, we provided the number of assets that CBI that chartered sort of investors, for example, with a generic description about the transactions there, like, for example, that most of the ships are chartered in at index linked charter rates. So I'm afraid this is for CBI now. Regarding the Reti, events in the CBI business, I cannot say that we had a huge effect on our voyage charters or like the profitability. For the Capes, for instance, the C3 or C5 may not be affected by that area. So I cannot say that we saw something which made the market much more volatile.

Speaker 1

For the Capes, for instance, for Q4, we saw increased volatility because of adverse weather conditions in But this was not linked to the sort of Brexit disruptions. So concluding, I cannot say that we saw any major effect in the CBI business.

Speaker 4

Makes sense. Thank you. I also want to follow-up on Ben's question on Neptune leasing. As I understand it, it's fully consolidated in your financial statements. You mentioned potentially adding leverage to free up capital, but I was wondering, Was there any debt outstanding on Neptun as of year end?

Speaker 1

There is. There is because Neptun, It is capitalized by our equity. And in the transaction, we conclude as Neptune. Neptune gets a back leverage, so it gets debt from 3rd party providers. For every transaction it is entering into.

Speaker 1

So there is also leverage at the Neptune level. Now generally, the leverage of Neptune is at low levels in the region of, I don't know, between 35% to 45% Depending on the transactions, but yes, but in order to have solid returns on our equity investments in Neptune. We need to have some back levers there as well, however, at lower levels.

Speaker 4

Makes sense. Thanks for the color. That's all for me.

Speaker 1

Thank you

Speaker 4

for taking my questions.

Operator

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

Speaker 1

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

Operator

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Earnings Conference Call
Costamare Q4 2023
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