C3is Inc (CISS) 2024 Q3 法說會逐字稿

Good morning, everyone, and welcome to our C3is third-quarter endings conference call and webcast. This is Dr Diamantis Andriotis, I'm the CEO of the company. Joining me on the call today is our CFO, Nina Pyndiah.

Before we commence our presentation, I would like to remind you that we will be discussing forward-looking statements which reflect current views with respect to future events and financial performance and are based on current expectations and assumptions which by nature are inherently uncertain and outside of the company's control.

At this stage it could all take a moment to read our disclaimer on slide 2 of this presentation. I would also like to point out that all amounts quoted unless otherwise clarified, are implicitly stated in US dollars. Today we released our annual results for the third-quarter of 2024. So let's proceed to discuss these results and update you on the company strategy and the market in general.

Please turn to slide 3 where we summarize and highlight the company's performances, starting with our financial highlights. For the first nine months of 2024, we reported revenues of $32.9 million, which is an increase of 120% compared to the same period of 2023.

Aframax tanker, the Afrapearl II contributed around 77% to the total revenues. Our adjusted EBITDA was $13.5 million and 92% increase from the first nine months of 2023. Our adjusted net income came in at $7.7 million, an increase of 106% from 2023.

Our vessel's net book value increased by 14% since year end 2023, due to the addition of the Eco Spitfire handysize dry bulk carrier that joined our fleet in April 2024. Our cash balance was $8 million by the end of third-quarter 2024 after paying $39.5 million for the remaining 90% purchase price of our Aframax tanker in third quarter 2024 and $1.62 million, which was 10% of the purchase price of the handysize dry bulk carrier Eco Spitfire in second quarter 2024. Our short-term bank deposits yielded $800,000 for the first nine months of 2024.

Our TCE for the nine months, 2024 was $23,000 per day, 24% higher than the rate of for nine months 2023 when it was $18,800 per day.

The balance due on our CapEx is $14.57 million in April 2025, which represents 90% of the purchase price of the handysize dry bulk carrier Eco Spitfire. Slide 4 shows the dry bulk trade by the end of the third quarter of 2024. Iron ore and coal trade continue to have the lion's share in the dry bulk trade.

Iron ore is the number one dry bulk traded commodity. Trade is restricted on very few routes such as Brazil, China, and Australia, China, with the Pacific basin being predominant. Major importers are China, Japan, South Korea, Western Europe, and the Middle East. Major exporters are Australia, Brazil, Canada, and South Africa.

Favorably, weather conditions have supported record Brazilian iron ore shipment so far, while bauxite exports are expected to rise as the rainy season comes to an end. Iron ore prices have fallen to the lowest levels since 2022, leading to the high imports in 2024. Coal is the second most traded dry bulk commodity. Global coal trade continues to grow with higher imports from China, India, and the [New Zealand].

Compensating for the declining demand from Europe and Japan. Exports are mainly from Australia, Russia, and US-Canada. In January, September 2024, global exports of soybeans reached 114.1 million tons, according to AXS marine vessel tracking data. 17% of exports were shipped from Brazil, 14% from USA, 4% from Argentina, 2% from Uruguay.

In slide 5, we see that the dry bulk market is enjoying healthy earnings due to major support from Red Sea diversions, uncertainty in the Russia-Ukraine war, the Middle East, a potential escalation in the US-China trade war, and OPEC's oil market gas.

Geopolitical conflicts and restrictions on the Panama Canal transits have been impacting shipping demand since 2023, leading to longer voyages through the Cape of Good Hope and aiding shipping demand. Handysized demand remains healthy, but it heavily depends on steel related exports, making it vulnerable to a potential slowdown in China's steel sector.

The robust demand from the shipbuilding, automotive manufacturing and renewable sectors will drive the global growth. The current pace of exports is sustainable, but in the long run, external demand and the threat of tariffs will determine China's ability to continue flooding the seaborne market with excess steel.

So far, the market has been overwhelmingly positive and industrial metals, not just iron ore, are on a synchronized rise. Slide 6 shows that crude oil is the single most seaborne traded bulk commodity in the world, 2 billion meters per year

Traded volumes have not increased significantly over the last decade. Trade patterns, however, have changed dramatically. The USA is emerging as a significant exporter of crude, while China remains the top source of demand growth. In January, September 2024, global imports of crude oil reached 1,659.2 million tons, excluding cabotage, according to Refinitiv vessel tracking.

This was a 1.3% increase year-on-year. 23% of imports were shipped to China, 22% to EU, 12% to the ASEAN, 11% to India. Despite the ongoing crude oil production cuts enforced by OPEC members, industry participants believe that the tanker market environment will remain healthy through 2025.

Tanker demand outlook remains robust, supported by growth in crude oil trade volumes as well as by trade pattern shifts arising from Red Sea diversions, benefiting long-haul routes, thus boosting ton-mile demand.

Seaborne crude oil trade has been supported by increasing demand from China and rising exports from suppliers in the Americas. Slide 7 shows the handysize fleet age and growth. The handysize bulk fleet includes many old vessels with plenty of demolition potential. New environmental regulations likely to accelerate demolition.

17% of the trading fleet is over 20 years, 13% is 15 to 19 years, 39% is 10 to 14 years, 17% is five to nine years, while 14% has less than five years. The order book to trading ratio is 10.4% in deadweight terms. In 2023, net fleet growth for handysize bulkers was 3.5% year-on-year.

Net fleet growth is expected to continue at around 4.8% in 2024 and then at around 4.4% in 2025. Fleet growth forecast for 2024 to 2026 is based on the current order book after assuming slippage and expected demolition. Compliance with new environmental regulations like EEXI, CII coupled with an overage fleet might induce scrapping, thus reducing available fleet supply.

Slow streaming and retrofit time as part of complying with new environmental regulations are also factors that are expected to reduce available fleet supply in the years to come. Slide 8 shows the Aframax tankers fleet age, growth and order book.

The global Aframax LR2 fleet now stands at 1,150 vessels. Of these 201 vessels are over 20 years of age, accounting for 17.48% of the total number of vessels. With a starting tally of 1,134 vessels, the current fleet represents a change of 1.41% in vessel numbers over the year so far. Deliveries are holding at levels above the total number of removals from the fleet, creating a net gain in the fleet equivalent to 1.41%.

This increase is higher than the change noted in the prior month, while compared to last year, there was a decrease in the trend noted. The order book now stands at 198 vessels and represents 17% of the current fleet. Demolition activity is expected to remain strong going forward.

Significantly more vessels were built in the early [1000s] compared to the '90s. Slide 9 shows the current fleet of C3is. By the end of third quarter 2024, C3is owned and operated the fleet of 3 handysize dry bulk carriers and one Aframax oil tanker.

In May 2024, the company took delivery of 33,000 deadweight dry bulk carrier, the Eco Spitfire, bringing the total fleet capacity to 213,000 deadweight with an average age of 13.77 years. All vessels have had the ballast water management systems already installed.

And furthermore, there are no immediate capital commitments for special surveys as the next one due is in third quarter 2025. All vessels are unencumbered and currently employed on short to medium term period charters and spot voyages. Slide 10 shows a sample of the international charters with whom the management company has developed strategic relationships and has experienced repeat business.

Repeat business highlights the confidence our customers have for our operations and the satisfaction of the services we provide. The key to maintaining our relationships with these companies are high standards of safety and reliability of service.

I will now turn over the call to Nina Pyndiah for our financial performance.

Thank you, Diamantis, and good morning to everyone. Please turn to slide 11, and I will go through our financial performance for the third quarter and first nine months of 2024. Voyage revenues for the nine months ending September 30, 2024 amounted to $32.9 million, an increase of 120% compared to the first nine months of 2023.

77% of our total revenues were contributed by our Aframax tanker, the Afrapearl II. Our net revenues for the period January to September '24 were $22.5 million, an increase of 92% compared to the same period of last year. Our daily TCE was up 24% from Q3 '23. Our fleet operational utilization was 90.6% for the nine months ending September 30, '24 compared to 93.6% for the same period of 2023.

Voyage expenses and vessels operating expenses for the nine months of 2024 were $10.4 million and $6 million. The increases in both voyage expenses and vessels operating expenses were attributed to the increase in the average number of vessels. Voyage expenses for the nine months of 2024 mainly included banker cost of $4.9 million and port expenses of $3.4 million corresponding to 85% of total voyage expenses.

Operating expenses for the nine months ending September 30, '24 mainly included correct expenses of $3.2 million corresponding to 53% of total operating expenses, spares and consumable cost of $1.3 million, corresponding to 22% and maintenance expenses of $600,000 representing works and repairs on board the vessels corresponding to 10% of total vessel operating expenses.

Management fees increased by 55% from Q3 '23 due to the increase in the average number of vessels. General and administrative costs were $2.5 million and mainly related to the expenses incurred from the two public offerings and the reverse stock split.

Depreciation recorded for the nine months -- for the first nine months of '24 was $4.6 million, a 67% increase from Q3 of last year due to the increase in the average number of vessels. Related party interest and finance costs for the period was $2.1 million and related to the accrued interest expenses as of September 30, 2024 in connection with $53.3 million payable, which was the 90% balance payable on the acquisition prices of our Aframax tanker Afrapearl II and our bulk carrier, the Eco Spitfire.

The Afrapearl II was completely paid off in July '24, and the balance due on Eco Spitfire is payable in April '25. Interest income of $800,000 for the first nine months of '24 were recorded and relate to the interest received on our bank deposits.

As a result of the above, for the nine months ended September 30, '24, the company reported an adjusted net income of $7.7 million compared to an adjusted net income of $3.7 million for the same period of last year, an increase of 106%.

Adjusted EBITDA for the nine months ended September '24 amounted to $13.5 million compared to an adjusted EBITDA of $7 million for the same period of last year, an increase of 92%. A non-cash item of $15.18 million loss was recorded in Q2 '24 and $4.8 million gain in Q3 '24, resulting in a net loss of $10.35 million for the nine months of '24. These represent the unrealized gain or loss on the fair value of non-exercised warrants.

Turning to slide 12 for the balance sheet, our cash balance was $8 million by the end of Q3 '24 after paying $39.5 million (sic - see slide 12, "$38.7 million") for the remaining 90% purchase price of our Aframax tanker Afrapearl II in Q3 '24, and $1.62 million, which was 10% of the purchase price of the handysize dry bulk carrier Eco Spitfire in Q2 '24.

The fleet book value, as at the end of September '24, was $85.8 million, an increase of 16% (sic - see slide 12, "14%") from year end '23 due to the addition of the bulk carrier the Eco Spitfire. The company has no outstanding bank debt.

The financial liability of $11.9 million relates to the following: 90% of the purchase price of vehicle Spitfire, which was $14.7 million (sic - see slide 12, "$14.57 million") less receivable of $2.7 million freight income from the management company which was collected in Q4 '24.

The warrant liability of $9.7 million relates partly to the next fair value losses on non-exercised warrants at half one '24. $690,000 from the total fair value losses has been recorded to equity.

Concluding the presentation on slide 13, we outlined the key variables that will assist us progress with our company's growth. Owning a high quality fleet, reduces operating costs, improves safety, and provides a competitive advantage in securing favorable charters. We maintain the quality of the vessels by carrying out regular inspections, both while in port and at sea, and adopting a comprehensive maintenance program for each vessel.

The company's strategy is to follow a discipline growth with in-depth technical and condition assessment review. Management is continuously seeking a timely and selective acquisitions of quality vessels with current focus on short to medium term charters and spot voyages. We always charter to high-quality charterers such as commodity traders, industrial companies and oil producers and refineries.

The company maintains an adequate level of cash flow and liquidity that will enable us to act instantly as the windows of growth and opportunities open. Despite being in operation for just over a year and having increased our fleet by 234% since inception, the company has no bank debts. No interest were charged by the affiliated sellers for the subsequent 90% payments due on the Afrapearl II and the Eco Spitfire.

At this stage, our CEO, Dr. Diamantis Andriotis, will summarize the concluding remarks for the period examined.

Following the completion of the first nine months of operations of 2024, C3is has reported voyage revenues of $32.9 million, an increase of 120% from 2023, an adjusted net income of $7.7 million, 106% higher than 2023 and an adjusted EBITDA of $13.5 million, 92% higher than 2023.

We have taken delivery of our fourth vessel this year, bringing our total fleet capacity to 213,000 deadweight, an increase of 234% from the company's inception over a year ago.

In April 2024, we paid off $1.62 million, representing the 10% balance due on the Eco Spitfire. And in July 2024, we paid off the remaining balance of $13.5 million (sic - see slide 3, "$39.5 million") due on our Aframax tanker. We have more than trebled our fleet capacity without incurring any bank debt.

Our strategy of expansion has continuously been bearing fruits as proven by the results of every single quarter since the company's inception. We will continue to aim at achieving sustainable growth despite the current challenges of macro and micro conditions. The results of the US elections will have significant implications on the global shipping industry. The proposed policies of 10% tariff on all US imports and 60% tariff on Chinese products are poised to reshape trade dynamics, thus affecting shipping.

The industry also faces added uncertainties around the current geopolitical situation with the two major conflicts having a significant impact on shipping markets, combined with the outcome of environmental regulations.

We will closely monitor these evolving situations and maintain an agile and effective control of our business, focusing on maximizing our results. We will continue to address industry challenges and will maintain our strategy to provide safe global transportation services in parallel with producing excellent financial performance, attractive returns and growth prospects for our shareholders. We would like to thank you for joining us today, and look forward to having you with us again at our next call for fourth quarter of 2024 results.