Yahoo Finance Safe Bulkers, Inc. (NYSE:SB) Q1 2024 Earnings Call Transcript
Safe Bulkers, Inc. (NYSE:SB) Q1 2024 Earnings Call Transcript April 30, 2024
Safe Bulkers, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers Conference Call on the First Quarter 2024 Financial Results. We have with us Mr. Polys Hajioannou, Chairman and Chief Executive Officer; Dr. Loukas Barmparis, President; and Mr. Konstantinos Adamopoulos, 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 Instructions] Following this conference call, if you need any further information on the conference call or on the presentation, please contact Capital Link at 212-661-7566. I must advise you that this conference is being recorded today, April 30, 2024. The archived webcast of this conference call will soon be made available on the Safe Bulkers website at www.safebulkers.com.
Many of the remarks today contain forward-looking statements based on current expectations. Actual results may differ materially from the results projected from those forward-looking statements. Additional information concerning factors that can cause the actual results to differ materially from those in the forward-looking statements is contained in the first quarter 2024 earnings release, which is also available on the Safe Bulkers website, again www.safebulkers.com. I would now like to turn the conference call to one of your speakers today, the President of the company, Dr. Loukas Barmparis. Please go ahead, sir.
Loukas Barmparis: Good morning to all. I'm Loukas Barmparis, President of Safe Bulkers. In the first quarter of 2024, we operated within a more robust market in comparison with the previous year. In alignment with our environmental, social, and governance strategy, we ordered one additional Phase 3 newbuild. Concurrently, we continued to process of modernizing our fleet by divesting three older vessels. Moreover, we executed the repurchase of 4.9 million shares of our common stock while declaring a dividend of $0.05 per share of common stock. Our strategic focus persists on fostering enduring value for our shareholders and upholding a resilient capital structure. This commitment is further evidenced by our efforts towards a young and energy-efficient fleet, thereby securing operational excellence in anticipation of forthcoming stringent environmental regulations.
We ensure that our capital expenditure is adequately covered by our contracted future revenues, fortifying our balance sheet towards the trajectory of sustainable growth. Subsequent to a comprehensive review of our forward-looking statements language presented in Slide 2, our attention -- the transition to the market update in Slide 4. Noteworthy is the volatility experienced in the cape market segment. It is pertinent to highlight that all eight of our capes are present in period charter boosting on average remaining chartered duration of exceeding two years with an average daily rate of approximately $24,400. This provide us with an appreciable degree of cash flow visibility notwithstanding the prevailing daily market rate today of around $19,500.
On the Panamax front, the charter market is at about $17,200. Progressing to Slide 5, we present an overview of CRB commodity index's fluctuation in basic commodities future prices. The geopolitical landscape with tensions in regions such as Middle East, the Red Sea, and Ukraine underscores the heightened level of global uncertainty. The global economic recovery is slow but steady. The drybulk market is expected to remain strong in 2024 with a tightening supply and demand balance attributed to increased cargo volumes, particularly in the Capesize segment driven by higher iron ore shipments from Brazil to China -- and China. Rerouting away from the Red Sea and Panama Canal has also bolstered in demand in smaller segments. There is the expectation of gradual control of inflation.
Despite the delay in interest rate cuts, the expectation for global economy -- for global economic resilience remains strong. The IMF April forecast of 3.2% expansion in global GDP for both 2024 and 2025 is accompanied by control over inflationary pressures. According to BIMCO, the forecasted global drybulk demand growth stand at 3%, increased for 2024. In China, the IMF April projection of GDP growth for 2024 stood at 4.6%. China faces challenges, of course, in growth dynamic driven by internal factors, while the resilience of India's robust domestic demand and sustained infrastructure investments emerges as a stabilizing force amidst the prevailing economic uncertainty. Let us now proceed to examine the supply side dynamics in Slide 6. The drybulk order book remains at single-digit percentages.
Our outlook remains optimistic regarding the near- to medium-term trajectory of the freight market underscored by the low order book. Approximately 25% of the medium-sized fleet surpasses the 15-year mark, increasing the anticipated impact of fleet aging and stringent environmental regulations. Vessels constructed in Japan have superior design efficiencies. 85% of our company's fleet comprised of Japanese build vessels, surpassing the global average of 40%. The strategic advantage positions of fleet are favorable to compete within the environmental-based charter market. As one of the few drybulk companies with a substantial Phase 3 order book, strategically positioned below prevailing market valuations, underscore our commitment to compete on the basis of operational environmental excellence.
Fleets comprising of efficient Japanese vessels and vessels delivered post 2014 will be able to remain relevant and compete within the regulatory frameworks and greenhouse gas targets. A number of our recent developments is presented in Slide 8. This includes the declaration of 5% -- $0.05 dividend per common share, divestment of three older vessels, the delivery of two Phase 3 newbuilds alongside the initiation of orders for two additional Phase 3 vessels. In Slide 9, we present Safe Bulkers' key attributes such as our robust management, ownership alignment, comparable leverage, ample liquidity, contracted revenues, a selling track record, and the quality and competitiveness of our fleet, strategically positioned to leverage the regulatory landscape remaining true in our commitment to expand by building a resilient company and reward our shareholders.
Moving to Slide 10, we present an insight into the advantage of our green fleet. The breakdown presented in the top right graph underscores the environmental credentials of our fleet comprising today of 46 vessels with 20 vessels having undergone environmental upgrades, nine being Phase 3 and 11 being echo, and the remaining six scheduled to be upgraded within this year. The bottom graph represents our fleet renewal strategy with a divestment of 12 older vessels, acquisition of seven second-hand vessels, a steadfast ordering comprising of seven plus one Phase 3 newbuilds resulting to a stable 10-year average fleet aids over the past four years, as confirmed by Slide 11. This trajectory of fleet expansion serves as a testament to our commitment towards sustainability.
I now pass the floor to our CFO, Konstantinos Adamopoulos, for our quarterly financial overview.
Konstantinos Adamopoulos: Thank you, Loukas, and good morning to everyone. As a general note, during the first quarter of 2024, we operated in a stronger charter market environment compared to the same period in 2023 with increased revenues due to higher charter hires. These earnings from scrubber-fitted vessels increased operating expenses and higher interest expenses due to increased interest rates. Let us focus now on our liquidity, our cash flows, and our capital structure, as presented in Slide 13. We are maintaining a comfortable leverage of 34%. Our debt of $534 million remains comparable to our fleet's scrap value of $338 million although our fleet is about 10 years old. Our weighted average interest rate stood at 6.51% for our consolidated debt, with a portion of €100 million being fixed at 2.95% coupon in an unsecured five-year bond.
We have paid $79 million of our capital expenditure requirements in relation to our existing order book, with remaining capital expenditure at $201 million. Our liquidity and capital resources stand strong at approximately $216 million, which together with a contracted revenue of about $276 million, provides flexibility to our management in capital allocation. Furthermore, we have additional borrowing capacity in relation to seven existing unencumbered vessels and eight newbuilds upon their delivery. Moving on to Slide 14 with our quarterly financial highlights for the first quarter of 2024 compared to the same period of 2023. Our adjusted EBITDA for the first quarter of this year stood at $46.8 million compared to $33.1 million for the same period in 2023.
Our adjusted earnings per share for the first quarter of 2024 was $0.20, calculated on a weighted average number of 100.4 million shares, compared to $0.10 during the same period in 2023, calculated on a weighted average number of 118.4 million shares. Slide 15 will present quarterly operational highlights for the first quarter of 2024 in comparison to the same period of 2023. During the first quarter of this year, we operated 47.08 vessels on average, earning a TCE of -- on average of $18,158 compared to 43.3 vessels with earning on average TCE of $3,760 during the same period in 2023. The company's net income for the first quarter of 2024 was $25.3 million, compared to net income of $19.3 million during the same period in 2023. Concluding in Slide 16, we present a list of our Phase 3 vessels already in our fleet.
The global economy is experiencing multiple challenges. Persistent inflation, tight financial conditions, Russia's invasion in Ukraine, Middle East crisis, all weigh on the market output. Based on financial performance, the company's Board of Directors declared a $0.05 dividend per common share. We'd like to emphasize that the company is maintaining a healthy cash position of about $82 million as of April 19, 2024, another $164 million available in revolving credit facilities. Overall, a combined liquidity and capital resources of $246 million. Furthermore, we have contracted net of [commissions] (ph), from our non-cancellable spot and period time charter contracts of $274 million net of commissions and before scrubber revenue, as well as additional borrowing capacity in relation to seven unencumbered existing ships and eight newbuilds upon their delivery.
We believe our strong liquidity and our comfortable leverage will enable us to expand further our fleet while still rewarding our shareholders. This concludes our presentation. We are now ready for the Q&A session.
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