Costamare Q1 2024 Earnings Call Transcript

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May 10, 2024

There are 4 speakers on the call.

Operator

and welcome to the Costamare Inc. Conference Call on the First Quarter We have with us Mr. Gregory Zikos, Chief Financial Officer of the company. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session.

Operator

I must advise you that this conference is being recorded today, Friday, May 10, 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

Speaker 1

statements.

Operator

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

Speaker 1

Thank you, and good morning, ladies and gentlemen. During the Q1 of the year, the company generated net income of about $94,000,000 As of quarter end, liquidity was close to 1,100,000,000 dollars In the containership sector, charter rates have seen significant improvement from the end of last year. Demolition has fallen to levels below what was experienced during the Q1 of 2023. Although cargo volumes have generally improved, the disruption in Red Sea is the main reason for the improved charter market. We have proactively secured deployment for 97% 80% of our Cotanassi fleet for 2024 and 20.25 respectively generating contracted revenues of $2,300,000,000 with the remaining time charter duration of 3.4 years.

Speaker 1

For the drybulk side, as part of our strategy to renew the fleet and increase its average size, we have agreed to acquire 2 more Capesize vessels and accelerate delivery of 1 similar size ship. In total, we have acquired 5 Capesize vessels with an average age of about 12.5 years and disposed of a total of 10 smaller sized ships with an average age of 14 years. Our own drybulk vessels continue to trade on a spot basis while the trading platform is commercially managing a fleet of 54 ships. As mentioned in the past, we have a long term commitment to the drybulk sector, which has been a strategic decision for us. Regarding Neptune Maritime Leasing, the platform has been steadily growing having concluded leasing transactions for 24 ships in total on the back of a healthy pipeline extending over the coming quarters.

Speaker 1

Moving now to the Slide presentation. On Slide 3, you can see our Q1 results. Net income for the quarter was roughly $94,000,000 or $0.79 per share. Adjusted net income was about $75,000,000 or $0.63 per share. Our liquidity stands at about $1,100,000,000 Slide 4, on the containership side our revenue days are fixed 97% for 20 24% 80% for 2025%, while our contracted revenues are $2,300,000,000 with a TEU weighted remaining duration of 3.4 years.

Speaker 1

In parallel, we continue to charter all our dry powder vessels in the spot market having entered into more than 30 charging agreements since our last earnings release. Slide 5, we do execute on our strategy to renew our fleet and increase its size. During the last quarters, we have acquired 5 Capesize and 1 Ultramax ship with an average age of 12 years. And we also have disposed of 10 smaller vessels with an average age of 14 years. Slide 6 shows in more detail the S and P activities since our last earnings release.

Speaker 1

Slide 5 regarding CBI, we have chartered in 54 period 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 24 assets through sale and leaseback transactions and has a very healthy pipeline going forward. Moving to Slide 8, we do have roughly available $116,000,000 for financing of asset acquisitions through hunting licenses. In addition, we continue to have a long uninterrupted EBITDA track record boosted by strong sponsor support. Moving to slide 9, our liquidity stands at about $1,100,000,000 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 contingency market have been rising lately across all segments having benefited from the Red Sea disruption. The idle capacity remains at low levels at 0.6%. Moving to Slide 11, the final slide, you can see the recent drybulk market trends in the spot and forward market. Charter rates remain volatile, however, turning higher than the Q1 of last year. The order book is at about 9% of the total fleet.

Speaker 1

With that, we conclude our presentation and we can now take questions. Thank you. Operator, we can take questions now.

Operator

Thank Your first question comes from the line of Ben Nolan with Stifel. Please go ahead.

Speaker 2

Hi, guys. It's actually Pranella on for Ben, but thanks for taking my question. I wanted to ask what the expectation is going forward for putting additional capital into Neptune Leasing?

Speaker 1

Yes. I mean for Neptune Leasing, we have announced that we're going to be investing up to $200,000,000 of equity. The figure we have in our press release of around $120,000,000 of equity already invested excludes back leverage, which like we're going to be receiving over the next month. So the net amount actually invested after the back leverage is going to be committed, it's actually lower. So from an equity perspective, I can say that we could definitely invest $150,000,000 more of equity.

Speaker 1

And subject to our back leverage strategy and commitment, this amount could even go higher. Now in case there are deals that we feel that makes sense from a risk and returns perspective, also considering our liquidity, we wouldn't have a problem rebuilding this figure in case we would like to go north of that. However, this is a bit premature now. As of today, I think we have more than enough capacity to grow further this platform, which provide returns that make sense also considering the risk involved.

Operator

The next question is from Clement Mullins with Value Investor's Edge. Please go ahead.

Speaker 3

Good afternoon. Thank you for taking my questions. I wanted to start by asking about the drybulk fleet. Over the past year, you focused on expanding your Capesize exposure while divesting some smaller vessels. Asset values have increased

Speaker 1

size vessels at 1 ultra much we have bought up to now 5 game size vessels and 1 Ultramax. We haven't bought more vessels vessels exactly for the reason you rightly mentioned that asset values have been going up, and the same applies for new buildings. So we are very sensitive regarding the acquisition price. If there is a correction in the market, most probably you're going to see us entering into more SAP transactions. Otherwise, we will sit and wait.

Speaker 1

We don't have to carry. And there is no reason for us to grow based on deals that cannot be justified on the numbers. So it depends on market conditions, but there is no predetermined growth rate that we need to meet, quite the opposite. Our goal is to enter new transactions that do make sense and that they do cover our downside, of course, leaving some upside for our shareholders as well.

Speaker 3

Thanks for the color. And is it fair to assume that most of the dry vessels are currently operated in the spot market?

Speaker 1

For the time being, yes. You talk about our old dry bulk ships. I mean, after now we have been operating in the spot market. However, again, it is subject to market conditions. If we take the view for like a period, it would make sense to lock some of them in like fixed rates, then this is something we could consider.

Speaker 1

There is no pre determined rule. We are flexible. And this is subject to market circumstances. Also, those vessels were bought, most of them or the majority of the dry bulk oil fleet was bought in the summer of 2021 where prices were much lower. So by default, those ships, they have low leverage and their breakeven levels are quite low.

Speaker 1

So there are no restrictions and there are no requirements from our lenders or like from a cash breakeven perspective to charter the ships at a minimum rate. We have the flexibility. As you've seen we also have the liquidity. So there we're going to be opportunistic. If it makes sense, yes, some of the ships in the future might be chartered out for a period.

Speaker 1

It remains to be seen. But I'm afraid that at this point, I cannot forecast how the market is going to go and what our decision is going to be.

Speaker 3

Thanks for the color. And final question from me. On the container ship side, are you currently seeing any opportunities? Or do you believe asset value still remains somewhat elevated relative to underlying fundamentals?

Speaker 1

I think that for the containerships, if you look at the new cooking prices, I think they are still at high levels, looking at it historically. Also comparing those prices to the prices we had ordering new buildings some years ago. Also for 2nd half ships, yes, we don't see a lot of opportunities, considering where asset values are. I think it may take some time until after rates end values which are correlated see some correction. So we don't see something that does make sense right now for us considering our risk reward approach.

Speaker 1

So there we sit and wait. What we have been doing, as already mentioned, we have relatively targeted on a forward basis most of our fleet with a very solid charter coverage for like 24, where literally all our fleet is chartered close to 97%, which is actually close to 100%. And at 80% for next year, which provides us with a great visibility going forward.

Speaker 3

Makes sense. That's all for me. Thank you for taking my questions.

Operator

Thank you. Seeing no further questions at this time, I would like to pass the call back over to Mr. Zikos for his closing remarks.

Speaker 1

Thank you very much for your interest in Costamare and for dialing in today. I hope we're going to speak again soon during our next conference results call. Thank you very much.

Operator

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

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Earnings Conference Call
Costamare Q1 2024
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