Costamare Q3 2024 Earnings Report

Costamare EPS Results

• Actual EPS: $0.68
• Consensus EPS: $0.64
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: $0.46

Costamare Revenue Results

• Actual Revenue: $544.64 million
• Expected Revenue: $434.13 million
• Beat/Miss: Beat by +$110.51 million
• YoY Revenue Growth: N/A

Costamare Announcement Details

• Quarter: Q3 2024
• Date: 11/1/2024
• Time: Before Market Opens
• Conference Call Date: Friday, November 1, 2024
• Conference Call Time: 8:30AM ET

Costamare (NYSE:CMRE) is a leading owner and manager of containerships, specializing in the acquisition, chartering and operation of modern container vessels. The company secures employment for its fleet under a mix of long‐term and short‐term agreements, providing vital capacity to major shipping lines and leveraging fixed-rate charters to support cash flow stability.

Founded in 1974 and headquartered in Athens, Greece, Costamare has cultivated a disciplined approach to fleet renewal, often overseeing newbuild supervision and shipyard coordination to ensure vessels meet performance and environmental standards. The company also engages in sale‐and‐purchase transactions, optimizing its portfolio in line with market conditions and strategic objectives.

Costamare’s fleet encompasses a range of vessel sizes—from standard feeders to Panamax and post-Panamax ships—allowing it to serve diverse trade routes and cargo requirements. In addition to vessel ownership, the company maintains comprehensive technical management and crew services through affiliated management firms, ensuring high levels of operational efficiency and safety.

With an international presence spanning Asia, Europe and the Americas, Costamare operates offices in key maritime centres including Athens, Monaco and New York. The company’s seasoned management team brings decades of industry expertise, guiding chartering strategies and fleet development to meet the evolving demands of global trade.

Costamare Q3 2024 Earnings Call Transcript

Key Takeaways

• Q3 results: Net income of $75.5 million ($0.62/share) and adjusted net income of $81 million ($0.68/share), with liquidity above $1 billion at quarter end.
• Containership employment: Fleet is 100% chartered in 2024 and 94% in 2025 after securing seven new charters that will add over $165 million in contracted revenues, boosting total contracted revenue to $2.3 billion over an average 3.3-year remaining duration.
• Dry bulk fleet renewal: Strategy to modernize by acquiring two Ultramax and one Capesize vessels while selling older smaller ships, expanding TBI’s chartering platform to manage nearly 100 vessels and supporting Nexum Maritime Leasing’s $410 million funding for 32 shipping assets.
• Strengthened financing: Early redemption of a €100 million bond for tax reasons, refinancing the dry bulk fleet at stable leverage with improved covenants and maturity extensions, and maintaining €94 million available for vessel acquisitions.
• Market dynamics: Larger containership segments maintain firm charter rates with an idle fleet at 0.8%, though looming newbuilding capacity is a principal threat, and the dry bulk order book represents 10.3% of the total fleet.

Presentation

[Operator]

Thank you for standing by, ladies and gentlemen, and welcome to the Costamare Inc. conference call on the third quarter 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. There will be a presentation followed by a question-and-answer session, at which time, if you wish to ask a question, please press star then one on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today, Friday, November 1st, 2024. We would like to remind you that this conference call contains forward-looking statements. Please take a moment to read slide number two of the presentation, which contains the forward-looking statements. I will now pass the floor to your speaker today, Mr. Zikos. Please go ahead, sir.

[Gregory Zikos, CFO at Costamare Inc.]

Thank you, and good morning, ladies and gentlemen. During the third quarter of the year, the company generated net income of about $80 million. As of quarter end, liquidity was above $1 billion. In the container ship sector, with idle 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 chartered seven container ships at healthy levels. The new charter agreements are expected to generate incremental contracted revenues of above $165 million. The container ship fleet employment stands at 100% and 94% for 2024 and 2025, respectively.

[Gregory Zikos, CFO at Costamare Inc.]

Total contracted revenues amount to $2.3 billion, with the remaining time charter duration of 3.3 years. On the dry bulk side, we are now progressing with our strategy to renew the owned fleet and decrease its average age. During the quarter, we agreed to acquire two 2014- and 2015-built Ultramax vessels and one 2011-built Capesize ship, while at the same time progressing with the disposal of smaller tonnage. CBI manages a fleet of 56 ships, the majority of which are on index-linked chartering agreements. We have a long-term commitment to the sector, and we view the vessel owning at the trading platform as highly complementary activities. Finally, with regards to Neptune Maritime Leasing, the platform continues to grow with committed funding for 32 shipping assets, reflecting total funding commitments of above $410 million on the back of a healthy pipeline. Moving now to the slide presentation.

[Gregory Zikos, CFO at Costamare Inc.]

On slide three, you can see our third quarter results. Net income for the quarter was $75.5 million, or $0.63 per share. Adjusted net income was $81 million, or $0.68 per share. Our liquidity stands at over $1 billion. Turning to slide four, regarding our CBI activity, we have agreed to acquire one Capesize and two Ultramax dry bulk ships. In parallel, we have concluded the sale of two Supramax vessels and agreed to sell one Handysize ship. Slide five. On the chartering side, we have chartered seven container ships with incremental contracted revenues of above $165 million. Our revenue days are fixed 100% for 2024 and 94% for 2025, while our contracted revenues are $2.3 billion, with a TEU-weighted remaining duration of 3.3 years.

[Gregory Zikos, CFO at Costamare Inc.]

In parallel, we continue to charter all our dry bulk vessels in the spot market, having entered into more than 30 chartering agreements since our last earnings release. Slide six. Regarding our financing arrangements, we will fully repay with cash our €100 million unsecured bond issued by Costamare Participations. In addition, we have agreed to refinance our dry bulk fleet without any increase in leverage. This deal is coupled with improvement of funding costs and extension of maturities. Finally, we have roughly available $94 million for financing of vessel acquisitions. Slide seven. Regarding CBI, we have chartered 56 period vessels, with the majority of the fleet being on index-linked agreements. On our leasing platform, we have already invested around $123 million. NML continues to grow with committed funding for 32 ships and has a very healthy pipeline.

[Gregory Zikos, CFO at Costamare Inc.]

On slide eight, on this slide, you can see our liquidity exceeding $1 billion. This gives us the ability to look for opportunities to grow the company on a healthy basis. Slide nine. Charter rates in the container ship market continue to evolve at very firm levels, especially in the larger segments, despite there is a decrease in box rates. The continued injection of newbuilding capacity, though, remains the principal threat of the market. The idle fleet remains at low levels of 0.8%. Moving to the final slide 10, you can see the recent dry bulk market trends in the spot and forward markets. The dry bulk 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. As a reminder, if you would like to ask a question, please press star then one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star then two. That's star then one to ask a question. And your first question comes from the line of Omar Nokta with Jefferies. Please go ahead.

[Omar Mostafa Nokta, Managing Director at Jefferies LLC]

Thank you. Hi, Greg. Thanks for the update. Just a couple of questions from.

[Gregory Zikos, CFO at Costamare Inc.]

Hi, Omar Nokta.

[Omar Mostafa Nokta, Managing Director at Jefferies LLC]

Hi. Yeah, just a couple of questions from my side. Just first on the Greek bond. I think it's the Greek bonds, the EUR 100 million that you redeemed early. Just wondering, I know those were a relatively much lower interest cost, and so just want to get a sense of what drove the early redemption of those bonds.

[Gregory Zikos, CFO at Costamare Inc.]

Yes, yes. You're right. Yes. This is a bond which was originally maturing next year, and we are preparing a year earlier. This was on an unsecured basis, relatively competitive terms at like 2.7% cost. The reason being that there are some tax implications which have to do with Pillar Two. And for that reason, because this bond was issued by Costamare Participations, 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 four years. And as you rightly said, it was in terms of pricing, I think it was competitively priced.

[Omar Mostafa Nokta, Managing Director at Jefferies LLC]

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 CBI, there's been reports and shipping circles of changes happening there at the personnel level. Just in general, wanted to ask, how are you thinking about that platform? Clearly, you've been investing in the actual dry bulk ownership platform with the Capesize acquisitions. 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?

[Gregory Zikos, CFO at Costamare Inc.]

No, no, no. First of all, thank you for the question because you're right. There were important volatilities and TradeWinds, 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. As I mentioned in my commentary, we consider the dry bulk owning side 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 dry bulk business, including the trading platform. So today, CBI commercially manages close to 56 vessels, plus 37 ships owned by the dry bulk business. So we're going to be getting close to 100 ships.

[Gregory Zikos, CFO at Costamare Inc.]

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

[Omar Mostafa Nokta, Managing Director at Jefferies LLC]

Okay. All right. Thank you, Greg. That's it for me. I'll turn it over.

[Gregory Zikos, CFO at Costamare Inc.]

Okay. Thank you. Thanks.

[Operator]

The next question comes from the line of Ben Nolan with Stifel. Please go ahead.

[Pernille Buhl, Analyst at Stifel]

Hi. This is Pernille 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 $0.115 per quarter?

[Gregory Zikos, CFO at Costamare Inc.]

Okay. Now, the dividend is like, yes, as you rightly said, $0.115 and $0.46 per year. A 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. Of course, I cannot exclude the possibility of 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. But definitely, in the past, we have done one-off dividend payments. We have sort of increased the dividend, and we have also done share buybacks and also preferred stock buybacks.

[Gregory Zikos, CFO at Costamare Inc.]

Probably it's not the case now for the preferred stock, but this is something for the board to decide.

[Pernille Buhl, Analyst at Stifel]

All right. Appreciate it. Thank you.

[Gregory Zikos, CFO at Costamare Inc.]

Thank you.

[Operator]

The next question comes from the line of Climent Molins with Value Investor's Edge. Please go ahead.

[Climent Molins, Head of Shipping Research at Value Investor's Edge]

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 view on current asset pricing on the dry side? And secondly, going forward, do you have a preference to continue building your Cape exposure, or are you comfortable as is?

[Gregory Zikos, CFO at Costamare Inc.]

Yeah. Well, I mean, what we have been traditionally doing over the last year or a year and a half, we have been buying Capes opportunistically and disposing of smaller tonnage. Now, we have been quite careful on how much we buy and on how much we sell. And where asset prices are today for Capes, for example, let's take the newbuildings. I think they are at levels which we would consider high in order to put a newbuilding order for a Cape. Also, I'm not sure today whether asset values for the Capes represent today's chartering capacity of those vessels and the FFA curve going forward. So they 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 wait.

[Gregory Zikos, CFO at Costamare Inc.]

Our fleet is big enough, so there is no need to grow it further, so where asset prices are today, we are more opportunistic rather than buying en bloc 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.

[Climent Molins, Head of Shipping Research at Value Investor's Edge]

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?

[Gregory Zikos, CFO at Costamare Inc.]

Look, we don't have any newbuildings, any newbuilding commitments today, because had we any newbuildings delivered today or next year, then asset prices for the containers and newbuildings have been extremely high from a historical perspective. So either newbuildings or like three, five-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 we haven't done it. Now, of course, there may be opportunities. We look at the market, but we are extremely cautious.

[Climent Molins, Head of Shipping Research at Value Investor's Edge]

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

[Gregory Zikos, CFO at Costamare Inc.]

Okay. Thank you.

[Operator]

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

[Gregory Zikos, CFO at Costamare Inc.]

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.

Participants

Executives

• Gregory Zikos, CFO

Analysts

• Climent Molins, Head of Shipping Research at Value Investor's Edge
• Pernille Buhl, Analyst at Stifel
• Omar Mostafa Nokta, Managing Director at Jefferies LLC