Costamare Q2 2024 Earnings Call Transcript

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July 31, 2024

Key Takeaways

  • Strong Q2 earnings: Costa Mare reported net income of $91 million and ended the quarter with liquidity of $1.1 billion, underscoring a solid financial position.
  • Container ship charters: The company secured seven forward charters generating over $220 million in incremental revenues, with 100% fixed revenue days for 2024 and $2.4 billion of contracted revenues at a 3.5-year average tenor.
  • Drybulk fleet renewal: Management sold older Handysize and Supramax vessels and acquired two Capesize ships, while CBI now commercially manages 54 vessels mainly on index-linked charters to reinforce its long-term commitment.
  • Leasing platform growth: Nexmo Maritime Leasing has funded 25 shipping assets totaling approximately €285 million and continues to build a healthy pipeline of sale-and-leaseback transactions.
  • Financial optimization: The full redemption of Series C preferred stock will save about $10.1 million annually, and refinancing of three drybulk vessels improved funding costs, extended maturities, and left $116 million available for acquisitions.
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Earnings Conference Call
Costamare Q2 2024
00:00 / 00:00

There are 4 speakers on the call.

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the Costa Mare Inc. Conference Call on the Q2 2024 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. Session. I must advise you that this conference is being recorded today, Wednesday, July 31, 2024. We'd 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 over to your speaker today, Mr. Zikos. Please go ahead, sir.

Speaker 1

Thank you, and good morning, ladies and gentlemen. During the Q2 of the year, the company generated net income of about 91,000,000 dollars As of quarter end, liquidity was about $1,100,000,000 In the egotanaship sector, continued vessel diversions around Africa in an early peak season with higher than expected cargo demand have resulted in charter rates remaining on an upward trajectory against the backdrop of short supply of truck tonnage. During the quarter, we started on a forward basis having for tenancy for a minimum period of between 2 to 3 years. The new charter agreements are expected to generate incremental contracted revenues of above 220,000,000 dollars Our fleet employment starts at 100% and 8% for 2024 and 2025 respectively and total contracted revenues amount to 2,400,000,000 with the remaining time charter duration of 3.5 years. On the drybulk side, we are now progressing with our strategy to renew the owned fleet and increase its average size, have concluded the sale of 1 2011 built Handysize and that did the sale of 1 2019 built Supramax vessel while simultaneously acquiring 2 2012 built Capesize ships.

Speaker 1

CBI, our drybulk trading platform is commercially managing a fleet of 54 ships, the majority of which are on index linked chartering agreements. As mentioned in the past, we have a long term commitment to the sector, which has been a strategic decision for us. Finally, regarding Nexmo Maritime Leasing, the platform has been steadily growing, having currently funded 25 shipping assets for a total amount of approximately €285,000,000 on the back of a healthy pipeline. Moving now to the slide presentation. On Slide 3, you can see our 2nd quarter results.

Speaker 1

Net income for the quarter was about $91,000,000 or $0.77 per share. Our liquidity was above 1,100,000,000 dollars Slide 4. We have proceeded with a full redemption of our Series C preferred stock, resulting to annual cash flow savings of approximately $10,100,000 Slide 5. On the container ship side, we have chartered 7 containerships with incremental contracted revenues of above $220,000,000 Our revenue days are fixed 100% for this year and 88% for 2025, percent, while our contracted revenues are €2,400,000,000 with a TEU weighted remaining time charter duration of 3.5 years. In parallel, we continue to charter all our dry bulk prices in the spot market having entered into more than 25 chartering agreements since our last earnings release.

Speaker 1

Slide 6. We have concluded the acquisition of 2 Capesize drybulk vessels as well as the sale of 1 handysize drybulk ship. In addition, we have agreed to dispose of 1 more Supramax vessel. Slide 7. Regarding CBI, we have chartered in 54 period vessels where the majority of the fleet is being chartered on indexing agreements.

Speaker 1

Our leasing platform has already an investment of about $123,000,000 from our side. As of the date of this presentation, NML is financing 25 ships through sale and leaseback transactions and has a very healthy pipeline. Slide 8, we have refinanced the existing indebtedness of 3 dry bulk vessels without any increase in leverage. This deal was coupled with improvement of funding costs and extension of maturities. In addition, we have roughly available $116,000,000 for financing of vessel acquisitions.

Speaker 1

Finally, we do continue to have a long uninterrupted dividend track record. Slide 9. Liquidity is above €1,100,000,000 This liquidity gives us the ability to look for opportunities to grow the company on a healthy basis. Moving to Slide 10. Charter rates in the contingency markets have increased across all segments since the beginning of the year, remaining stable the last couple of weeks.

Speaker 1

The continued injection of newbuilding capacity remains, however, the principal threat of the market. Highly fleet remains at low levels of 0.6%. And last slide on Slide 11, you can see the recent drybulk market trends in the spot and forward market. The order book is at 9.4% of the total fleet. With that, we can conclude our presentation and we can now take questions.

Speaker 1

Thank you. Operator, we can take questions now. Hello. Operator, can you hear us? Yes.

Operator

Thank you. We will now begin the question and answer session. Our first question comes from Ben Nolan from Stifel. Please go ahead.

Speaker 2

Hi. This is Dylan O'Malley on for Ben Nolan. Thanks for taking our question. We were hoping you could add a little rough context on the rate levels for the 7 new container ships or the 7 new container ship charters you mentioned earlier in your press release? Yes.

Speaker 1

These are ships I mean, we don't announce specifically the charter rates, but these are ships which were chartered on a forward basis. One of them is like 2,000 build vessel. So it is like 24 years old. And those have been chartered at a very healthy rate amount in the mid-30s.

Speaker 2

Yes, thanks for that. We're also hoping you can add a little bit of color on your perspective on why dry bulk purchase activity has slowed and your outlook for the rest of the year?

Speaker 1

Yes. In total, I mean, you have seen that we have been buying bigger vessels like Capesizes. And in total, we have acquired 6 of those, I mean, 5 Capes and 1 2013 1,000,000 Ultramax. Now we are quite price sensitive. So depending on market condition, our strategy is to dispose of smaller handysized vessels and move towards the larger sizes.

Speaker 1

But it's all a matter of pricing and where asset levels are. So we take our time. I think that the ships we bought up to now, those 6 ships, they have been bought at quite attractive prices. But at the same time, we don't have to rush. We will sit and wait.

Speaker 1

And when we feel that the price makes sense, then we have the ability to execute fast based on our cash balances and also access to commercial bank debt.

Operator

Our next question comes from Clement Mullens of Value Investors Edge. Please go ahead.

Speaker 3

Good afternoon. Thank you for taking my questions. I wanted to start by asking about the strategy on the CBI segment. It seems the proportion of vessels time charted in on fixed contracts has increased slightly quarter over quarter. Could you provide some insight on the reasoning behind this?

Speaker 3

And is it a directional bet on the market? Or are you hedging the positions with FFOs or physical volumes?

Speaker 1

Yes. A couple of things. Yes, you are right. It's slightly there's a slight increase in the fixed rate charter in vessels. But this is just because of the specific deals that were available in the market.

Speaker 1

It's not that we have taken a directional approach that going forward, we need to have more ships charter in on a fixed rate rather than on index. It's just that it happens that those deals with the specific vessels, based on the specific charter hires, we found them to be attractive, but there is no more than that. We are quite flexible. And depending on market conditions, we may opt to have more vessels on index linked period or fixed rate to the contrary. So there's nothing specific there.

Speaker 1

And what was the second part of your question?

Speaker 3

Yes. Whether this was like it was HPS or physical volumes?

Speaker 1

We buy a lot of FFAs. And yes, we definitely use them as a hedging tool. We have quite a book for the games and also for the Panamaxes. FFS can be used as a changing instrument or if someone has a positive view on the market and they cannot secure assets in the water, can also buy long FFA days. But regarding hedging, yes, this is a hedging tool that we been utilizing quite a lot.

Speaker 3

That's helpful. Thank you. And pro form a for the redemption of the Series E preferred, you continue to see it on a very large cash position. Is there any appetite to redeem additional preferred service or to prepay debt? Or are you comfortable keeping cash balances at current levels?

Speaker 1

Yes. We'll see. Look, the Series E preferred stock, we redeemed it. It was the most expensive we had. It was 8.875.

Speaker 1

So it was quite expensive. We redeemed this having savings of slightly above £10,000,000 per year. Now whether we're going to go ahead and also redeem Series D, for example, or not, which has been the 2nd most expensive series outstanding. This is a more generic question of capital allocation, whether we feel that we can utilize our equity in order to buy ships or sort of repay debt or like redeem the preferred. But I mean, compared to the cost of debt, I think the preferred is a bit it's more flexible, but it is more expensive.

Speaker 1

We'll see. But this is a decision taken at the board level considering all the circumstances and like and whether we feel that there is room for new transactions where equity will where our equity will be used. So I'm afraid I'm not ready to tell you now whether and like when we're going to be redeeming Series C, for example, or Series D. It remains to be seen. But now but regarding the last one, considering our cash balances, I think it was quite obvious that at some point that a series of preferred stock will be repaid.

Speaker 3

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

Operator

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

Speaker 1

Thank you for being with us today and for dialing in the Costa Maris Q2 2024 results. We are looking forward to speaking with you again during our Q3 results call. Thank you.

Operator

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

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