Diana Shipping Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 31, 2024

There are 5 speakers on the call.

Operator

Welcome to the Diana Shipping 20 24 Second Quarter Conference Call and Webcast. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to Edward Nepp, Investor Relations Advisor.

Operator

Thank you. You may begin.

Speaker 1

Thank you, Daryl, and thanks to everyone who is joining us today for the Diana Shipping Inc. 2024 Second Quarter Conference Call. With us today from management is Sameer Amis Paliou, Chief Executive Officer, who will introduce the other members of the management team. And so without further ado, I will turn the call over to Ms. Palieu.

Speaker 2

Thank you, Ed. Good morning, ladies and gentlemen, and welcome to Diana Shipping Inc. Q2 2024 Financial Results Conference Call. I'm, as Ed said, Semiramis Palieu, the CEO of Diana Shipping. And it's my pleasure to present alongside our esteemed team, Mr.

Speaker 2

Stacy Margaroni, Director and President Mr. Ioannis Zappirakis, Director, CFO and Chief Strategy Officer Mr. Laceris Papatri, former Director and Ms. Maria Dede, Chief Accounting Officer. Before we begin, please review the forward looking statements on page 4 of the accompanying investor presentation.

Speaker 2

After a strong Q1, the 2nd quarter has remained resilient. The average Baltic time charter rates for Capesize vessels fell around 7%, while Panamax rates increased by 6% and Supramax rates rose by 16%. Compared to recent years, the end of the second quarter and the start of the third quarter are somewhat muted, but sentiment remains strong as shown by the time charter rates in our most recent period fixtures. Turning to slide 5, Let's review our company snapshot. Founded in 1972 and listed on the New York Stock Exchange since 2,005, Diana Shipping Inc.

Speaker 2

Operates a fleet of 39 dry bulk vessels, 5 of which are mortgage free, with an average age of 11 years and a total deadweight of approximately 4,400,000 tonnes. We are expecting the delivery of 2 methanol dual fuel newbuilding Campermax drybulk vessels in around 20 2720 28. Our fleet utilization reached 99.5% in the Q2 of 2024, reflecting our efficient vessel management. As of the end of June, we employed 1,000 people at sea and the shore. Financially, our net debt stands at 38% of market value with $140,000,000 in cash reserves and total secured revenues of approximately USD 145,000,000 On Slide 6, we highlight key developments from the Q2.

Speaker 2

We rechartered 8 vessels year to date with an average charter rate increase of 11% with high quality counterparts. On June 18, 2024, we announced pricing of $150,000,000 placement in the Norwegian market of senior unsecured bonds maturing in July 2029 with an 8.75 percent fixed rate coupon. The net proceeds from the bonds were used to refinance all of the company's USD 125,000,000 senior unsecured bond due in 2026. As of July 24, 2024, we raised $25,300,000 from the exercise of warrants under our ongoing warrant program, with a further $65,000,000 possible. On July 25, 2024, we signed a USD 167,300,000 6 year secured term loan facility with Nordea Bank, secured by 10 vessels.

Speaker 2

This refinancing released 2 previously mortgaged vessels. We have secured revenue for 74% of the remaining ownership days of 2024, amounting to approximately $76,800,000 and approximately $68,900,000 dollars for 2025, covering 26 percent of the available ownership date. Ioannis will provide a more detailed analysis of our cash flow generation potential later on. Finally, we are pleased to declare a quarterly cash dividend for the quarter ending June 30 of $0.075 per common share, totaling approximately $9,400,000 Slide 7 summarizes our recent chartering activity. Since our last earnings presentation, we have secured profitable time charters for 8 vessels.

Speaker 2

Specifically, we chartered 1 Ultramax vessel at a daily rate of US15400 dollars for 316 days. We charted 6 Panamax and Post Panamax vessels at a weighted average daily rate of 15,455 dollars for 2.59 days and 1 Newcastle MAX vessel at 28 $700 for 4.38 days. Slide 8 illustrates our strategy of staggered charters that we believe will result in positive free cash flows and efficient market participation. Now I'll pass the floor to Ioannis for a detailed financial analysis. Ioannis?

Speaker 3

Thank you. Thank you, Javier. Here we are again for our conference call for the results and we are going to be talking about the Q2 of 2024 financials. I think this highlights the most important point for someone to notice is the net loss of $2,800,000 However, this is mainly this has been influenced from some non cash items like the pricing of the warrants and also our shareholding in Ocean Pal calculation accounting wise. Otherwise, we would have been on the positive side of other as regards to net income.

Speaker 3

Our cash and cash equivalent stands at $140,000,000 and our long term debt and finance liabilities net of deferred financing costs has been decreased has decreased on the entities at $613,500,000 Moving to the next slide, our ownership days have decreased compared to the ownership days for the same quarter in 2023, but we have kept utilization very high. And of course, the time charter equivalent rate has decreased to US15,806 dollars compared to US17,311 dollars in the same quarter of the year. Now in the 6 month period, again, you can see the ownership days that have increased and also the decrease, sorry, I beg your pardon, and also the time charter equivalent that has decreased to 15,000 approximately from 17,900 in the previous 6 months. The daily operating expenses we have kept at very similar levels. Moving to our debt profile.

Speaker 3

We are very happy, as we have said in the past the way we have managed our credit facilities together with the share and leaseback facilities and also the senior secured bond. Basically, the way now the debt profile is that we don't have basically we have no maturities except a small one in 2028 and we start having 29. Also, if you notice at the bottom of the graph, the projected senior and secured on balance together with the sale and leaseback and amortized balance and the loan balances supposed to be decreasing steadily and slowly till 20 29 almost. In the next slide here, again, we show that based on our fixed days and our unfixed days, if we were to project using the FFA rates as of July 26, 2024, there is some room to have a profit in 2024 and also cash flow wise and also in 2025. And as regards our dividend policy, we are very happy also that we've managed accumulate since 2021, the Q3 of 2021, dollars 2.634 per common share.

Speaker 3

And this is you can see that and also our CEO also mentioned that we just announced another $0.075 per share. I think Stacy Malharone is going to follow now with the dry bulk market overview.

Speaker 4

[SPEAKER JOSE RAFAEL FERNANDEZ:] Thank you, Yani. As mentioned in our last call, geopolitical developments have continued to have a drybulk carrier market during the Q2 of this year as well. The 12 months time charter rate for Capes started the year at $19,500 per day and the latest fixtures were around $22,100 per day. Dollars per day. For Camshamaxes, the figures were $14,500 per day $15,600 respectively.

Speaker 4

And for Supramaxes, rates started the year at 13,000 a day and recent fixtures were around 14,000 per day. The highest levels for Capes and Camcher Maxes were reached in March this year at 27,000 a day and 17,000 a day, respectively. Rates reached their highest level early this month for Supramaxes at around $16,000 a day. As reported by Clarksons, during the 1st 5 months of this year, average sector earnings were US15 $750 per day, up 40% on a year on year basis. The main reasons for this firmness were firm bulk demand in the Atlantic created by firstly Brazilian iron ore exports secondly Guinea bauxite exports thirdly Brazilian grain exports 4th, U.

Speaker 4

S. East Coast coal and grain exports and finally, manganese ore shipments from West Africa, mainly Ghana and Gabon. According to Braemar, due to its use in steelmaking, China remains the dominant driver for manganese imports, while shipments to India might be rising soon as well. Growth in this group of commodity shipments mentioned above is expected to add 500,000,000,000 ton miles to dry bulk demand this year alone, which would represent about 45% of dry bulk demand growth in ton miles. Added to the above have been the positive impact from the Red Sea and Panama Canal disruptions, which according to Clarksons have increased bulkier demand by about 1.2% over the last 12 months.

Speaker 4

As regards the Panama Canal, bulk of transits until recently have been 1 third their normal number. These might start increasing during the second half of the year, which will somewhat reduce ton mile demand going forward. Average bulk of earnings in 2021 were $26,095 per day and in 2022, $20,478. So the market has plenty of catching up to do before reaching those levels. Turning to macroeconomic units.

Speaker 4

The expected GDP growth figures as published by the IMF are shown in this slide. World GDP growth, which has been adjusted slightly upward to 3.2% this year and 3.3% in 2025 is supportive for demand for bulk carriers, particularly through its effect on minor bulk trade. Overall, Clarksons predicts that drybulk ton mile trade growth this year will be 3.9%, outpacing fleet growth of 3.1%. Slower bulk carrier operating speeds, down about 1% so far this year and the gradual rise in port congestion from last year's lows, particularly in Brazil, are also likely to support earnings. Turning to the demand side.

Speaker 4

Major bulk commodities such as iron ore, coal and grains are all expected to grow this year around 2% to 3%. As for 2025, iron ore shipments are expected by Clarksons to drop by 1% to 1,576,000,000 tons as well as thermal coal growth, which might come in negative by 1% and reach 1.033000000000 tonnes. The rest of the major commodities should show some growth going into 2025. Chinese seaborne iron ore imports were up 7% year on year between January May this year, reaching 505,000,000 tonnes. These were supported by softer iron ore prices despite concerns about stocks in Chinese ports.

Speaker 4

The seaborne miner bulk trade is also expected to grow by about 3% in 2024 and by the same percentage next year and reach 2,269,000,000 tons. This trade is more directly related to world growth and macroeconomic headwinds are expected to ease somewhat for the rest of this year and into 2025, thus lending support to shipments of such commodities as agribulks, fertilizers, sugar, minerals and related products. Demand from China is expected to remain strong through the end of this year and into 2025. However, the potential concept of a strong La Nina event later this year could bring weather disruption in the operation of key exporters such as Australia, Brazil and Indonesia. On Slide 17, we turn to supply.

Speaker 4

According to Clarksons, bulk carrier contracting has so far been slower in 2024 compared to 2023, with 148 vessels contracted between January May this year, down 40% year on year. Deliveries are currently projected to reach 35,000,000 deadweight this year before easing back in 2025 to around 33,000,000 tonnes still. The Capesize fleet is expected to increase by 1.8 percent this year and by a near 1.3% in 2025. For the Panamax Camshamaxes, the expected increases are 3.5% and 3%, respectively. The Handymax fleet is expected to increase by 4.1% this year and about the same in 2025.

Speaker 4

Looking at the order book, according to figures provided by Clarksons, as of 1 July this year, there were 26,200,000 deadweight worth of Capes on order, representing just 6.6% of the trading fleet. The $32,700,000 deadweight worth of Panamaxes on order represents 13% of the existing fleet. On the Handymax side, there were $26,800,000 deadweight on order, which were 11.1% for the trading fleet. According to Braemar, congestion is apparently on the rise again. Leading this trend are ports in Brazil, where according to the International Grain Council's Annual Conference report in June, many of the factors that caused the surge in congestion in 2023 are reappearing today as well.

Speaker 4

Some of these are sugar exports putting pressure on sugar terminals and soybean exports likely to carry over into the Q3 corn export season. Turning to asset prices now. According to Clarksons, the overall change in bulk carrier asset values in July over the past 12 months was an increase of 22%. Camsharmaxes and particularly Capes lead this overall increase. According to Clarksons, 5 year old Capes are worth about $64,000,000 today and the resale newbuilding price stands at around 77,000,000 dollars 5 year old Camchermaxes are selling at around $38,500,000 while new building resale would bring about $43,500,000 today.

Speaker 4

All these are for ships with conventional engines. On the demolition side, according to Simpson, Spence and Young, during the first half of 2024, around 190 Bulkers were committed to be scrapped, amounting to 3,730,000 deadweight. Statistics provided by Clarkson show that 5,400,000 deadweight worth of bulk carriers were sold for scrap in 2023 and 2,300,000 deadweight tons have been scrapped so far this year. Prices have remained relatively steady at between $5.10 $5.25 per lightweight. Scrapping in 2025 will very much depend on the state of the freight market at the time as well as sentiment for the medium term prospects of the industry.

Speaker 4

It is worth noting that most of the huge numbers of bulkers that were delivered between 2,009 2011 will soon have to pass their 3rd special survey and will be required to comply with the latest environmental restrictions on emission. Depending on their overall condition and state of the market, several of these ships will be sold for scrap. So on Slide 18, we have the outlook of our industry, and we list several items as bullet points, which are positive and negative for our industry. Brammer and Clarksons believe that the Capesize market is expected to continue benefiting through the second half of this year from firm Atlantic iron ore, bauxite and manganese exports. The latter have recently started being shipped not only in geared Ultramaxes, but larger vessels as well.

Speaker 4

Looking ahead into 2025, Clarksons predict that there could be a small easing in markets as drybulk trade is projected to grow by 1% in ton mile, slightly below the fleet growth of about 2.5%. This assumes that the Red Sea disruption will gradually ease as the year progresses. Impact from environmental policies will influence earnings going forward that 25% of the bulk carrier fleet capacity is estimated to have been rated DOE for CII last year. This fact, together with even slower operating speed, ESP retrofitting and the demolition of all the units will also influence the supply demand balance over the next few quarters. Therefore, there is no firm direction that the market is expected to go from the rest of this year and into 2025.

Speaker 4

However, as we have mentioned on numerous past conference calls, then a strategy is to avoid predicting future trends in fleet earnings and charter vessels in a staggered way as has been the case in 2,005. This strategy helps avoid the cluster of vessels opening at the same time and smoothens out the company's cash flow over the medium and long term. I'll now pass the call to our CEO, Semiram Spaggio, to provide some important takeaway points from our quarterly earnings call. Thank you.

Speaker 2

Thank you, Stacy. Before summarizing today's presentation, I'd like to highlight our ESG initiatives. We are committed to promoting eco friendly technologies, modernizing our fleet and transparently sharing emission data. We build on partnerships and collaborations to further our goals. We have developed an equity, diversity and inclusion program, and we continuously invest in our people.

Speaker 2

For the past 4 years, we have published our ESG report and remain committed to embracing and improving our standards. So moving on to Slide 20. In summary, Vayana Shipping Inc, with over 50 years of experience and nearly 20 years on the NICE, has an experienced management team ready to tackle industry challenges. We maintain strong stakeholder relationships and a disciplined strategy, focusing on a solid balance sheet, a countercyclical approach, fleet modernization, rewarding our shareholders whenever possible and the robust ESG strategy. Thank you for joining us today.

Speaker 2

We now look forward to addressing your questions during the Q and A session.

Operator

Thank you. At this time, we'll be conducting a question and answer Thank you. I'm not showing any questions at this time. I'd like to turn the floor back over to management for closing remarks.

Speaker 2

Thank you. So once again, thank you all for joining us today. Thank you.

Operator

This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Powered by Quartr
Earnings Conference Call
Diana Shipping Q2 2024
00:00 / 00:00