United Maritime Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2024

There are 4 speakers on the call.

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the United Maritime Corporation Conference Call on the 2nd Quarter 6 Months Ended the 30th June, 2024 Financial Results. We have with us Mr. Stamatis Santanis, Chairman and CEO and Mr. Stavros Giftakis, Chief Financial Officer of United Maritime Corporation. At this time, all participants are in listen only mode.

Operator

Please be advised that this conference call is being recorded today, Tuesday, 6th August, 2024. The archived webcast of the conference call will be soon made available on the United Maritime website, www.unitedmaritime. Gr, under the Investors section. Many of the remarks today contain forward looking statements based on the current expectations. Actual results may differ materially from the results projected from those forward looking statements.

Operator

Additional information concerning factors that can cause the actual results to differ materially from those in forward looking statements is contained in the Q2 6 months ended 30th June, 2024 earnings release, which is available on the United Maritime website, again, www.unitedmaritime. Gr. I would now like to turn the conference over to one of your speakers today, the Chairman and CEO of the company, Mr. Stamatis Santanes. Please go ahead, sir.

Speaker 1

Good afternoon. Welcome to United Maritime's conference call to discuss our Q2 and first half 2024 financial results and recent corporate developments. United Maritime returned to profitability in Q2 with a net income of $700,000 and net revenues of $12,400,000 The fleet's average time charter equivalent rate was $17,143 thanks to a strong Capesize market. For the 1st 6 months, net revenues were $23,000,000 but we had a net loss of $800,000 due to Q1 hedging activities. Stavros will provide more details on this.

Speaker 1

The strong drybulk market since Q4 2023 validates our sector investment and we are optimistic about higher returns. We are declaring a dividend of $0.075 per share cash dividend for Q2 yielding about 13% and have paid over $1.50 in dividends, cash dividends since January 2023. Fleet updates. We delivered the Oasi, a 2010 Kamsarmax to its new owners with profits recognized in Q3. It will be replaced by the NISI, a 2016 Kamsarmax arriving in October.

Speaker 1

We continue to seek acquisitions in the drybulk sector meeting our commercial and capital return criteria. The appreciating market value of our bulkers position us well to reward our shareholders further. New investments, offshore sector. We acquired a minority stake in a company designing an energy construction vessel for $8,500,000 completing by 2027. This vessel is designed to operate across all major subsegments against the growing demand backdrop will serve renewables and oil and gas sectors benefiting from increased offshore demand.

Speaker 1

Aframax time charter. We joined a time charter on an Aframax crude tanker committing about $300,000 in working capital for up to 9 months. This has been made in partnership with a very prominent Aframax pool operator. Commercial developments, Panamax vessels. The Xelix Sea extended its charter from August 15 for about 11 months to 14 months.

Speaker 1

The Synthesy extended its charter from October forward for about 11 months to 14 months, the same charters. Capesize vessels. The goodship charter extends from July until July 2024 until late 2025. And the Glory Ship starts a new 70 to 80 day charter in August in continuation with existing one at $22,500 a day. For Q3 2024, we estimate a daily time charter equivalent of approximately 18,000 for the blended fleet with 65% of the days all already fixed.

Speaker 1

Industry overview. The drybulk market is strong driven by Capesize demand and increased grain and coal demand as well. China's iron ore imports rose 6% with Brazilian exports also up by 6%. Stable Chinese steel market driven by manufacturing and infrastructure is expected to prevail globally in the next years. Global steel production is expected to remain stable in 2024 2025.

Speaker 1

West African bauxite exports up 14% in the first half with further increases expected in the future. Canada's iron ore exports rise 15% expected in the second half of the year. Long term trends in aluminum and steel consumption are sustainable, driven by energy transition and infrastructure demands. Several mining expansion projects are expected to ensure steady Capesize demand. Coal and grain cargo growth provides stability for smaller vessels with increased inefficiencies, reducing effective vessel supply.

Speaker 1

The drybulk order book is at historically low levels with net fleet growth expected to be below 2% annually for the next 2 years favoring a positive market balance. This concludes my initial summary. I will now hand over the call to Stavros for

Speaker 2

a detailed financial update. Stavros, please go ahead. Thank you, Samadhi. Welcome everyone to our earnings call. Let us start by reviewing the main highlights of financial statements for the Q2 and the 6 month period that ended on June 30, 2024.

Speaker 2

Our overall performance saw significant improvement compared to 2023, which I must remind you was a transitory year for United. In the Q2, our net revenues reached $12,400,000 marking a 24% increase from the same period last year. This growth was driven by expanded fleet, improved freight rates and our operating leverage. Our adjusted EBITDA for the 2nd quarter was $6,300,000 and we recorded a net income of $700,000 In comparison, these figures for 2023 were $2,000,000 and a net loss of $3,000,000 respectively. For the 6 month period, net revenue totaled $23,000,000 while adjusted EBITDA rose to $10,000,000 compared to $12,800,000 $600,000 respectively last year.

Speaker 2

Despite the improved profitability in the 2nd quarter, we recorded a net loss of $800,000 for the 6 month period ended June 30, 2024. Moving on to our balance sheet, our cash position at the end of June 2024 was $7,700,000 reflecting the significant CapEx program undertaken during the 1st 6 months for the dry docking of 4 of our vessels and the advance payment for our new Kamsarmax vessel, Nishi, which is expected to be delivered within the year. All our vessels have returned to service since the beginning of the second half. CapEx is now behind us, while we have also delivered the Oasi to share buyers and therefore our liquidity position has improved significantly as of today. Outstanding debt, which includes liabilities from our bareboat in transaction stood at 91,700,000 of approximately 50%, including the bareboat in liabilities.

Speaker 2

Regarding our debt, we recently concluded a new $18,000,000 sale and leaseback agreement to fund the $17,100,000 purchase option of the Synthasy. The financing bears an interest rate of 2.7 percent over 3 month term SOFR and amortizes over a 7 year term through monthly installments of approximately $100,000 We have continuous options to repurchase the vessel at preterm prices following the 2nd anniversary of the bareboat charter and a final purchase option of $6,500,000 at the end of the bareboat period, which we expect to exercise. Additionally, we recently entered into a 16,500,000 loan facility with a prominent lender in Taiwan to finance the exercise of the $12,400,000 purchase option for the 3C. The principal will amortize over a 5 year term through quarterly installments of $400,000 and the final balloon payment of $8,500,000 The facility is priced at 2.6 percent over 3 months term SOFR. Our financing terms keep improving and we expect this to reflect positively in our future profitability.

Speaker 2

Regarding our investments and divestment activities that Samat has mentioned previously, we expect to record an accounting profit of approximately $1,500,000 in the Q3 from the sale of the Oasi. Concerning our investment in the offshore sector, we have committed to participate with an amount of up to $8,500,000 which will be called based on certain milestones and conditions in 5 separate installments over a period of 33 months. This schedule aligns with the construction of the ECV unit allowing for minimum impact on our liquidity. Lastly, concerning our participation in the P and L of the Aframax time charter, we have committed a $250,000 for the vessel's working capital. Finally, I would like to express our optimism about future growth and the implementation of diversified strategy.

Speaker 2

We anticipate further improvements in our profitability and are committed to rewarding our investors with dividends and share buybacks as appropriate. I would now turn the call back to Samati for his concluding remarks. Samati?

Speaker 1

Thanks, Avro. Following our successful tanker investment cycle in Q3 2023, we've delivered strong returns for our shareholders. We've expanded our fleet to 8 drybulk vessels without diluted capital raisings. Since November 2022, we have declared total cash dividends of over $1.50 per share, cash dividends of course, a significant portion of our current share price. Additionally, we aggressively returned capital with $6,700,000 in common share buybacks at an average price of $1.87 per share.

Speaker 1

United Maritime is well positioned to benefit from positive drybulk market trends due to index linked time charters that provide direct exposure to Capesize and Panamax market fluctuations, a strong balance sheet that allows for leveraged exposure to the sector and the potential for higher returns on capital a proven commitment to rewarding shareholders through substantial capital returns resulting in high dividend yield. Lastly, I'm confident in our recent offshore sector investment, which I believe will also generate higher returns for our company. That completes our call and I would like to turn the call over to the operator for any questions you may have. Operator, please take over. Thank you.

Operator

Thank you. And now we're going to take our first question. And it comes from the line of Tate Sullivan from Maxim Group. Your line is open. Please ask your question.

Speaker 3

Great. Hi. Hi. Thank you for having the call on Yousie and we can talk to you again. On the energy construction vessel, Stamat, can you talk about what how you started looking at that market?

Speaker 3

Has this been a long term evaluation of that market? And have you done business with a Norwegian partner before?

Speaker 1

Good morning, Kate, and nice to hear from you again. Yes, I believe it's a great diversification opportunity and it's nothing super substantial. I think it's a good entry point. But Stavros sitting next to me is going to give you more color on how we have decided to proceed with that. So Stavros, if you want to.

Speaker 2

Thank you, Samati. Yes, Tate, we have been we have started to look at the sector since early this year. Things have changed, I wouldn't say dramatically, but gradually there in terms of the demand. Demand has been increasing. There is very limited supply and most of the ships have been built more than a decade ago.

Speaker 2

So there is actually demand for good performance in terms of energy. These type of ships, they can serve both the oil and gas industry and their renewables projects. So we think that the demand will be very robust for the ships going forward. The supply is very limited. Half of the fleet is older than 15 years and there are actually only a couple of ships that are being actually built right now.

Speaker 2

So we identified this specific niche as a good entry point for United for the offshore. And as you know, I mean, we have decent connections in the market also in Norway. So this project was presented to us. We showed it to our board and we all decided consensually that this would be a good opportunity for United to enter the sector.

Speaker 3

Okay, great. Thank you for that. And then $8,500,000 is your share, not the total cost of the vessel, correct?

Speaker 2

No, no, no. The total cost of the vessel is around $100,000,000 around $96,000,000 Around 60 $1,000,000 will be financed by debt. So our participation results in a share of around 22% to 23% of the vessel.

Speaker 3

Okay, great. Okay, thank you. And then the comments about the dry docking of the 4 vessels in the first half of the year, will that have what portion of those dry dockings was in the 2Q versus well, they're all complete now. There's no cost that will be extended into 3Q, I guess, is my takeaway?

Speaker 1

Yes. We have almost nothing for the 3rd and the 4th quarter. So we will have very good operating fleet for the second half of the year, which I believe is going to improve our cash flow quite significantly. So we do not anticipate all the ships that we went that underwent dry docks went also in upgrading processes. So the ships are actually running much better than before.

Speaker 1

So I believe that we're going to have all of our fleet running very smoothly and very efficiently in the second half of the year with very limited downtime.

Speaker 3

Okay. And the Taiwanese, was that the first time

Speaker 1

Sorry, Ted, can you please repeat the question because you're breaking up?

Speaker 3

I apologize. Was that the first time you have had a lender based in Taiwan?

Speaker 2

Hi, Tate. We had a similar we had experience with this lender in synergy, the related the previous parent of United. So basically, as you know, I mean, there are synergies on the management side between the two companies and we have worked quite well with this lender. So he expressed interest to finance also United now that the company is maturing is in a more mature state. So yes, we proceeded with this financing with a known party to us.

Speaker 3

Thank you both.

Speaker 1

Thank you, Ted. Have a great day.

Operator

Thank you. There are speakers, no further questions for today. This concludes today's conference call. Thank you for participating. You may now all disconnect.

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Key Takeaways

  • United Maritime returned to profitability in Q2 with net income of $700,000 on revenues of $12.4 million, though it reported a six-month net loss of $800,000 due to Q1 hedging activities.
  • The company declared a Q2 cash dividend of $0.075 per share (≈13% yield) and has paid over $1.50 per share in dividends since January 2023, alongside $6.7 million in share buybacks.
  • Fleet updates include delivery of the 2010 Kamsarmax “Oasi” (profits recognized in Q3) to be replaced by the 2016-built “Nisi” in October, a Q3 blended TCE rate forecast of ~$18,000 (65% days fixed), and completion of major drydock capex.
  • United Maritime acquired a 22–23% stake for $8.5 million in a $96 million energy construction vessel geared to serve both renewables and oil & gas markets, with delivery expected by 2027.
  • The firm highlights robust drybulk fundamentals—strong Capesize and Panamax demand, low orderbook, stable steel production and rising grain/coal exports—and continues to seek accretive acquisitions.
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Earnings Conference Call
United Maritime Q2 2024
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