Safe Bulkers Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 20, 2025

There are 6 speakers on the call.

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers Conference Call on the First Quarter twenty twenty five Financial Results. We have with us Mr. Paulis Hagianu, Chairman and Chief Executive Officer Doctor. Lucas Barampas, President and Mr. Konstantinos Adamopoulos, Chief Financial Officer of the company.

Operator

At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. 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. The archived webcast of the conference call will soon be made available on the SafeBulkers website, www.safebulkers.com.

Operator

Many of the remarks today contain forward looking statements based on current expectations. Actual results may differ materially from results projected from these 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 twenty twenty five earnings release, which is available on the Safe Bulkers website, again, ww.safebulkers.com. I would now like to turn the conference call to one of your speakers today, the Chairman and CEO of the company, Mr. Parmus Hagianu.

Operator

Please go ahead, sir.

Speaker 1

Hello. I will do the presentation. So good morning to all. I'm Lucas Barbaris, President of Safe Bulkers, and I'm welcoming you to our quarterly results. During the first quarter of twenty twenty five, we faced a softer charter markets due to seasonality, geopolitical uncertainties and concerns related to tariffs, which could affect global trade and growth.

Speaker 1

We maintain our strong balance sheet and took delivery of our 12 newbuild. In this volatile environment, we continued to renew our fleet focusing on operational excellence, environmental performance in relation to IMO regulations and the creation of long term value for our shareholders, maintaining a strong capital structure, ample liquidity and a leverage of about 7%. Further to our repurchase program of roughly 3% of the company's common stock, which we fully completed, we've declared a $05 per share dividend, rewarding our common shareholders. We remain focused on capital allocation towards our newbuilds program on improving our operational efficiency and environmental footprint as all our actions are targeting to increase the wealth of our shareholders. Following a comprehensive review of the forward looking statements, language which is presented in Slide two, let's proceed to examine the supply side dynamics in Slide four.

Speaker 1

The drybulk fleet is projected to grow by about 2.8% on average in 2025 and in 2026 due to stable new deliveries and increased recycling with Panamax vessels comprising the largest share. The order book now stands at about 11% of the current fleet and newbuilding orders have slowed. Asset prices are projected to weaken further in the second secondhand ships price may fall in line with freight market. Recycling volumes are anticipated to rise through as market continues prompt the retirement of older vessels. 30% of ship capacity in the order book will be capable of using alternative fuels upon delivery and out of those ships 40% can use LNG, 37% methanol and 23% ammonia.

Speaker 1

However, the dual fuel order book in the drybulk sector is minimal. We do have two dual fuel newbuilds on order with delivery by Q1 twenty twenty seven. And currently, about 25% of the existing global fleet is older than fifteen years. Seabed Bulk of Fleet now accounts 12 Phase III vessels on the water, all delivered after 2022. In addition, 24 vessels have been environmentally upgraded and delivered at Eco vessels having superior design efficiencies.

Speaker 1

80% of our fleet comprised of Japanese built vessels, surpassing the global average of 40%, while our off average fleet age is about ten years old. We believe that our energy efficient designs will have an advantage in the coming years. We will become even more commercially competitive as we have on our order book six more Phase III vessels, which were placed at prices well below the prevailing market to be delivered to us by the first quarter of twenty twenty seven, positioning us favorably to compete within the stringent greenhouse gas targets. It is worth noting that MEPC83 has adopted the new environmental regulation in relation to global fuel standard, which conceptually is similar to fuel EU regulation. The global implementation of a fuel standard that penalizes the excess of fuel calorie intensity compared to specific predetermined reducing limits broadens the scope of the regional fuel issue and will substantially affect the vessel tradability 2028 onwards, promoting the use of alternative fuels and the energy efficient Phase III vessels.

Speaker 1

The recent decisions of the MEPC83 dictate a faster pace towards decarbonization. Moving on to Slide five, we present an overview of the demand and basic commodities trade. The combination of trade war as expressed through tariffs and the Chinese property crisis elevate policy uncertainty and pose a considerable downside risk for global growth and against this inflation. For all segments, we anticipate a softer freight rate market and supply grows faster than demand and we expect an increasing focus on the existing fleet decarbonization and on energy efficient new buildings. The global GDP growth expectations for 2025 and 2026 as reflected in the IMF's April forecast, cause for a growth around 2.8 in the coming years, combined by a gradual control of inventory measures.

Speaker 1

According to BIMCO, the forecast that global drybulk demand will be from minus 1% to 0% in 2025, followed by a growth of from 1.5% to 2.5 in 2026, with grains and minor bulks being the best performing sectors. China's slower growth may hinder demand for drybulk commodities like iron ore and coal. Iron ore shipments are estimated to slightly grow as a result of weak Chinese demand and increased recycled steel usage. Coal trade will be affected by the rising renewable energy use in Asia and the increased coal production in China and India. Gain in minor bulk shipments are predicted to rise and expected to be a key growth driver.

Speaker 1

The IMF IMF projects China GDP growth to be 4% in 2025 and in 2026, signaling a slowdown in consumption amid delayed stabilization in the property market and persistently low consumer confidence and trade uncertainty. India on the other hand continues to perform and is projected to experience the fastest growth among major economies with a forecasted 6.2% GDP increase in 2025 and 2026. Increased renewable energy and industrial growth will be key drivers for India's economic momentum. Each expanding domestic market and manufacturing sector may continue to contribute positively to the drybulk demand with infrastructure investments playing a vital role. Summing up, the supply demand equilibrium on Slide six, the supply growth is expected to continue to outpace demand, accepting pressure on freight rates.

Speaker 1

The clip market segment has been weaker through the year. On the other hand, all eight of our clips are presently period chartered with an average remaining chartered duration of two years at an average day charter rate of $23,000 That is about $16,000 on the spot market, providing us visibility of cash flows, topping $137,000,000 in contract revenue backlog from Capes alone, excluding the scrubber benefit. On the Panamax front, the charter market stands short at about 11,500. Moving to Slide eight, we present an overview of our quarterly highlights. We have declared our fourteenth consecutive quarterly dividend for $05 representing a 5.5% dividend yield, while at the same time, our free cash flow financed our newbuilding program.

Speaker 1

Furthermore, we completed the repurchase program of 3,000,000 common shares. We maintained ample liquidity, profitability and capital resources of $276,000,000 at a comfortable leverage of 37%. While we achieved zero vessels for 2024 in the D and E Carbon Intensity, CII rating of IMO. Lastly, recently we took delivery of our 12 Phase three blueprint serving as a testament to our commitment towards sustainability. In Slide nine, we present our return to shareholders of $73,600,000 paid in common dividends and $69,000,000 paid in common shares.

Speaker 1

Repurchases since 2022. We have been consistent in generating sustainable returns across market fluctuation as a result of our track record, hedge on management and our overall business model. Concluding the company's update in Slide 10, we present our strong fundamentals. Safe Bulkers is a drybulk company with $390,000,000 market cap, forty seven days from the water, having $317,000,000 scrap value. We maintained significant firepower with $128,000,000 cash, dollars 149,000,000 in undrawn RCFs and $176,000,000 borrowing capacity against our significant order book of six newbuilds, mainly in Japanese shipyards.

Speaker 1

We consistently focus on our majority Japanese build fleet, which has abundance on energy efficiency and lower CO2 taxation. We've selected now CII rating of zero vessels at the bottom ratings of D and E for 2024. We maintain a young technologically advanced fleet, strong balance sheet, comfortable leverage and a low net debt per vessel of $8,500,000 for a ten years old fleet. We have built a resilient business model with cash flow visibility of $2.00 $3,000,000 in revenue backlog, healthy expansion for sizable fleet that achieves scale and 11.5% annualized dividend yield strategically positioned to leverage on the environmentally regulatory landscape. I now pass the floor to our CFO, Kusadopoulos, for our quarterly financial overview.

Speaker 1

Konstantinos, the floor is yours.

Speaker 2

Thank you, Lucas, and good morning to all. During the first quarter of twenty twenty five, we operated in a weaker charter market environment compared to the same period in 2024 with decreased revenues, decreased earnings from scrubber fitted vessels and increased operating expenses. Moving now on Slide two with our quarterly financial highlights for the first quarter of twenty twenty five compared to the same period of last year. Our adjusted EBITDA for the first quarter of twenty twenty five stood at 29,400,000 compared to $64,300,000 for the same period in 2024. Our adjusted earnings per share for the first quarter of twenty twenty five was $05 calculated in a weighted average number 105,100,000.0 shares compared to $0.20 during the same period in 2024 calculated in a weighted average number of 110,400,000.0 shares.

Speaker 2

On the graph on the top, during the first quarter of twenty twenty five, we operated 46 vessels on average, adding an average daily time charter equivalent of $14,655 compared to 47.08 vessels on average, ending a time charter equivalent of $18,158 during the same period in 2024. Our daily vessel operating expenses increased by 6% to $5,765 for the first quarter of twenty twenty five compared to $5,442 for the same period in 2024. Daily vessel earning expenses excluding dry docking and pre delivery expenses increased by 10% to $5,546 for the first quarter of twenty twenty five compared to $5,038 for the same period in 2024. Concluding our presentation on slide 13, we present a quick overview of our quarterly operational highlights for the first quarter of twenty twenty five. We would like to highlight that based on our financial performance, the company's Board of Directors declared a $05 dividend per common share.

Speaker 2

We would like to emphasize that the company is maintaining a healthy cash position of around $122,000,000 as of 05/09/2025, another $128,000,000 available in committed revolving credit facilities. So we have a combined liquidity and capital resources of $250,000,000 Furthermore, we have contracted revenue from our non cancel of the spot and period time charter contracts of $179,000,000 federal commissions this before any additional scrubber revenue. We also have additional volume capacity in relation to six newbuilds upon their delivery and one existing newbuild which is debt free. We believe our strong liquidity and our comfortable leverage provide flexibility to our management in capital allocation and this would enable us to expand the fleet further, build a resilient company, create a long term prosperity for our shareholders. Thank you and we are now ready to take your questions.

Operator

Thank you. We'll now be conducting a question and answer session. Our first question comes from the line of Omar Nokta with Jefferies. Please proceed with your questions.

Speaker 3

Clearly, you've been buying back shares at a fairly decent rate, I'd say, clearly, over the past few years. You launched a 5,000,000 share buyback three months ago. You finished it up fairly quickly. How are you thinking about buybacks from here? Obviously, there's still a lot of uncertainty just given macro.

Speaker 3

But the outlook maybe seems to have gotten slightly better perhaps just based off of the way the financial markets have acted here post this China U. S. Agreement. And maybe that brings about a more positive attitude. Just wanted to get a sense from you, how does that sort of this backdrop affect your view on further share repurchases from here?

Speaker 1

Yes. As you're aware, we always react on a very consistent basis and according to certain principles. So the things that we are considering in order to initiate a buyback program is, first of all, what is the condition of the market. So in profitable markets, we tend to buy more shares. The second is the price of our stock.

Speaker 1

So either stock price if we feel that the stock price is depressed, we may initiate buyback programs. Generally, as already said several times, we believe that our stock is undervalued. Quite often, it's worth investing for everybody, not only for us, it's worth investing in our scope instead of buying a new ship.

Speaker 3

Yes, makes sense. And then I guess maybe just as you kind of think about the idea of buying the your stock, the obviously, NAV, it seems across different metrics or different whomever is calculating it, it's definitely materially above the kind of stock price. What would you how could you could you maybe just give perhaps how you're seeing the sale and purchase market as it is now? We understand that values have been rather elevated given where freight rates are and some of the uncertainty in the market. But can

Operator

you just give a flavor

Speaker 3

of what you're seeing in ship values and how things are looking directionally?

Speaker 4

Yes. Hello from me. The S and P values, I would say that have dropped in the last six months around 25% in older ships and around 10% or 15% on the very modern ships. So it's not really attractive prices to start buying ships right now considering where the freight market is. So at this point of time, we're not doing much.

Speaker 4

We have our newbuildings, take delivery off. And we're doing the buyback from time to time. But of course, also the buyback, we don't want to it too fast or too much in a hurry because the company still has to take delivery of six ships. And we plan to do a very fast buyback until market improves, freight market improves. So we are there and we are waiting for the opportune time to buy stock once it remains depressed in a situation that we have better signs of some improvement in the freight market.

Speaker 4

If the freight market stays at current levels, we are not going to rush and buying more stock at such a trade market because we have to keep all companies' options open.

Speaker 3

Yes. That makes sense. The

Operator

next question is from the line of Clement Mullens with Value Investor's Edge.

Speaker 5

Hi, good afternoon and thank you for taking my questions. I wanted to start by following up on Omar's questions on buybacks. Could you confirm whether the 3,000,000 share program was exhausted during the first quarter? And if not, how much was spent post quarter end?

Speaker 4

Yes. This I think we have reported and has been exhausted, yes. So 3,000,000 have been purchased. So the program has been completed.

Speaker 5

Yes. I was asking if you could clarify whether any repurchases were done after quarter end for modeling purposes mostly?

Speaker 1

After? After quarter end. No. In the first quarter, I mean, whole repurchase program was completed within the first quarter.

Speaker 5

That's very helpful. Thank you. And I also wanted to ask about your Capesizes, which are all now employed on medium term contracts. You have a couple of those coming open later this year. Is there any appetite to trade them on spot?

Speaker 5

Or would you prefer to fix them on time charters?

Speaker 4

Yes, the one has come open is coming open this month. At the moment, the charter rates the period charter rates are not at the levels we would hold for a long period. We will opt for round voice in the spot market at the current levels and try then after a month or so to refix it maybe on period if there's a better environment. The other one will come open. There's another one that is most likely will come open around August.

Speaker 4

Again, we will judge at the time we will go if she's delivered in August, that's certainly a part of the window. If she's delivered at that point, we will now see at the time what is the best thing to do. Generally, we are trading the spot market unless we see employment period employment of a couple of years above 20,000, then we consider the period of time.

Speaker 5

Makes sense. Thank you. That's everything from me. Thank you for taking my questions and congratulations for the quarter. Thank you.

Operator

Thank you. At this time, I'll turn the floor back to management for closing remarks.

Speaker 1

Thank you very much for attending this our results, this webcast, and we're looking forward to discuss again with you in the next quarter. Have a nice day. Thank you.

Operator

This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.

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Key Takeaways

  • During Q1 2025, spot market TCE fell to $14,655 from $18,158 YoY amid softer charter markets, driving adjusted EBITDA down to $29.4 M versus $64.3 M last year.
  • Safe Bulkers fully completed a 3 M share repurchase program and declared a $0.05 quarterly dividend—its 14th consecutive payout—to reward shareholders.
  • The company sustains a robust balance sheet with roughly $250 M liquidity (cash plus RCFs), comfortable 37% leverage, and a $179 M contracted revenue backlog from Capesize charters.
  • Fleet renewal remains a priority: 12 Phase III eco-vessels delivered, six more under construction at Japanese yards, and 24 vessels upgraded to superior Eco-design ahead of stricter IMO fuel standards.
  • Looking ahead, global drybulk supply is forecast to grow ~2.8% in 2025–26 versus flat to negative demand, intensifying freight rate pressure and underscoring the need for operational efficiency and decarbonization.
A.I. generated. May contain errors.
Earnings Conference Call
Safe Bulkers Q1 2025
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