C3is Inc (CISS) 2025 Q1 法說會逐字稿

Good morning, everyone, and welcome to our C3is first-quarter of 2025 earnings conference call and webcast. This is Dr. Diamantis Andriotis, 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, if you 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 earnings results for the first quarter of 2025. So let's proceed to discuss these results and update you on the company's 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 quarter of 2025, we achieved a net income of $8 million, which is an increase of 109% from Q1 2024. We reported net revenues of $5.8 million, which is a decrease of 41% compared to the first quarter of 2024.

This was exclusively due to the decrease in charters rates. Our Aframax tanker, the Afrapearl 2, which contributed around 72% of the total revenues, had TCE rates 55% lower than the rate of Q1 2024. The TCE rates for the whole fleet was 56% lower than the rate for the first quarter of 2024. Our cash balance was $15.7 million, an increase of 25% from the year-end 2024. In Q2 2025, we paid off the remaining 90% balance that was due on the Eco Spitfire.

So we have met all our CapEx requirements, which totaled $59.2 million without resorting to any bank financings. None of our vessels are from Chinese shipyards, so we are not affected by the implementation of the new tariffs by the Trump administration.

Slide 4 shows the dry bulk trade by the end of the first quarter of 2025. The steel industry and iron ore market are navigating transitional phase with shifting dynamics influenced by economic trends, structural changes and environmental pressures. Over the long term, the iron ore market is forecasted to enter a multiyear downturn with price expected to decline. This outlook reflects a structural shift in China's economy away from steel-intensive sectors and an increased focus on sustainability globally.

A global push for decarbonization is reshaping the steel industry and shifting towards green steel. Initiatives like the EU Carbon Border Adjustment Mechanism and voluntary corporate commitments are accelerating this shift. Over time, this structural transition could lead to a peak in iron ore demand earlier than anticipated, presenting downside risk to long-term projections.

As green steel production gains traction and global iron ore outputs rises, the market will likely experience a looser supply-demand balance. The global grain trade in 2025 is expected to exhibit steady but uneven growth, driven by a mix of regional demand patterns, geopolitical factors and weather-related challenges.

China, traditionally a significant player in the global grain market, is expected to show slower growth in grain imports. High inventories and domestic agricultural policy adjustments could reduce its reliance on international markets.

Slide 5 shows the dry bulk opportunities ahead and the Handysize trade performance. The dry bulk shipping sector is expected to face slower demand growth in the coming year, driven by a variety of uncertainties. Handysize demand remains reasonably healthy, but it heavily depends on steel-related exports, making it vulnerable to a potential slowdown in China's steel sector.

Global dry bulk trading ton-miles is forecast to grow by 1.5% in 2025, slightly lagging fleet growth of 3.1%. Chinese bulk demand continues to be a critical variable characterized by mixed signals, record high imports, elevated inventories and challenges in the steel sector.

While recent economic stimulus measures may provide support, significant downside risks persist. Environmental regulations are set to play a more influential role in market dynamics. Initiatives such as slower vessels operating speed, retrofitting for energy-saving technologies, increased vessel demolitions and growing emphasis on sustainability will likely affect supply side conditions.

Additionally, the global push for greener shipping practices is expected to influence demand for certain cargoes, while amplifying inefficiencies and competition across the sector. Despite these challenges, the dry bulk market in 2025 is expected to benefit from a relatively balanced supply-demand dynamic.

Evolving environmental policies and industry adaptations are likely to moderate potential downturns, positioning the sector for gradual but necessary transformation. China's monetary policy shift and India's growth trajectory are expected to offer areas of opportunity, particularly in commodities-type infrastructure and industrial activity.

Slide 6 shows the Aframax tanker market fundamentals. The global economic environment is poised for a year of mixed signals in 2025, presenting both risks and opportunities for the oil tanker sector. Economic shocks, financial market responses and evolving policy measures are expected to shape the outlook, contributing to a cautious yet dynamic landscape.

Global growth and inflation challenges are likely to be characterized by slower global economic growth and persistent inflation pressures. Key factors include ongoing vulnerabilities in global supply chains, geopolitical uncertainties, tightening financial conditions across major economies as well as the ongoing environmental regulation regarding EU ETS, CII and EEXI. These headwinds are expected to influence global energy demand, with ripple effects on oil trade flows and tanker utilization.

China offers a modestly optimistic outlook despite its long-term trend of slowing growth. For the first time since 2010, China is expected to adopt a more appropriately loose monetary policy stance, signaling significant efforts to rejuvenate economic activity. Policymakers are focused on extraordinary countercyclical measures to stimulate consumption, enhance investment efficiency and expand domestic demand.

These initiatives are expected to support crude oil and refined product imports, particularly for use in industrial and infrastructure sectors. Such developments could provide a stabilizing influence of global oil trade, benefiting the tanker market. Adding to this outlook, the recent depreciation of the yuan driven by the China's easing monetary policy and increased fiscal spending could have significant implications for the oil tanker sector.

A weaker yuan raises the cost of oil imports, which are predominantly priced in US dollars, potentially tempering China's crude imports volume in the near term. However, these cost pressures are likely to be offset by China's strategic focus on energy security and continued investment in domestic infrastructure. Furthermore, the depreciation may bolster exports to refined products, supporting outbound tanker demand.

As part of the sanctions imposed on the Russian Federation as a result of the Russian-Ukrainian war on September 2, 2022, finance ministers of the G7 group of nations agreed to cap the price of Russian oil and petroleum products in an effort intended to reduce Russia's ability to finance its war in Ukraine, while at the same time, hoping to curb further increases to the 2021, 2022 inflation surge.

The G7 is currently considering collectively tightening an oil price cap on Russian petroleum in an effort to cut Moscow's oil revenues as the war in Ukraine rages on. Trump's tariff wars have prompted a slump in oil prices and has made the current price cap pointless. The Russia-Ukraine conflict is expected to continue being a factor through March of 2025. This means Russia will likely have to continue dodging stricter sanctions and potentially struggle to sell its oil during 2025. Its production and refining capacity could also remain targets for Ukrainian drone attacks.

Slide 7 shows the Handysize fleet age and growth. The global Handysize fleet now stands at 3,151 vessels. Of these, 583 vessels are over 20 years of age, accounting for 31% of the total number of vessels. With a starting tally of 3,113 vessels, the current fleet represents a change of 1.2% in vessels numbers over the year so far. Over the first quarter of 2025, the fleet had increased by 38 vessels, while around 1.65 million deadweight was added to the fleet's total carrying capacity.

The global Handysize order book now stands at 231 vessels. Of these, 96 vessels are still scheduled for delivery within 2025, which is equivalent to 31.6% of the total number of vessels currently on order. Currently, the order book to fleet ratio stands at 7.3%. Following the conclusion of the first quarter, deliveries are holding at levels above the total number of removals from the fleet, creating a net gain in the fleet equivalent to 1.2%. This increase is on par with the change noted in the quarter prior, while compared to last year, there was a decrease in the trend noted.

Slide 8 shows the Aframax tankers fleet age growth and order book. The global Aframax LR2 fleet currently stands at 1,174 vessels with an average age of 13.3 years. Of this, 195 vessels are over 20 years of age, accounting for 16.6% of the total number of vessels. The order book now stands at 215 vessels with 41 vessels scheduled for delivery in 2025, which is equivalent to 90% of the total number of vessels on order.

Currently, the order book to fleet ratio stands at 18%, while in comparison, 3% of the fleet is over 25 years of age and another 14% is between 20 and 24 years of age. This translates to a ratio of order book to vessels over 20 years of 110%.

Slide 9 shows the current fleet of C3is. C3is owns and operates a fleet of three Handysize dry bulk carriers and one Aframax oil tanker. In May 2024, the company took delivery of the 33,000 deadweight dry bulk carrier, the Eco Spitfire, bringing the total fleet capacity to 213,000 deadweight with an average age of 14.3 years. All vessels have had their ballast water systems sold and installed.

One capital commitment during 2025 is the special survey of the tanker Afrapearl 2 scheduled in Q3 2025. All the vessels are unencumbered and currently employed on short- to medium-term period charters and spot voyages. None of the vessels were built in Chinese shipyards, hence, not affected by the newly imposed tariffs.

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 maintain 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 first quarter of 2025. We reported total revenues of $8.7 million for the first quarter of '25 compared to $12.8 million for the first quarter of '24, a reduction of 32%.

This was exclusively due to the decrease in charter rates. Our Aframax tanker, the Afrapearl 2, which contributed 72% to the total revenues had TCE rates that were 55% lower than the rates for Q1 '24. The TCE rates for the whole fleet were 56% lower than the rate for Q1 '24. Voyage costs for Q1 '25 were $2.8 million, the same as for Q1 '24. Vessels operating expenses of $2.1 million were recorded for Q1 '25 compared to $1.8 million for Q1 '24.

This is the impact of the Eco Spitfire that was included in the numbers for Q1 '25 and not in Q1 '24. G&A expenses were $653,000 in Q1 '25 and related mainly to the stock-based compensation costs. In Q1 '24, the balance was $1.5 million, sorry, and included the costs related to the two share offers that took place at the beginning of '24.

Depreciation increased from $1.4 million in Q1 '24 to $1.6 million in Q1 '25 due to the increase in the average number of vessels. A noncash item of $6.9 million gain was recorded for Q1 '25 as compared to a loss of $630,000 for Q1 '24. This item represents the unrealized gain loss on the fair value of nonexercised warrants. This noncash item arose due to the change in the fair value of warrants, that is the issuance date versus March 31, 2025.

As a result of the above, we reported a net income of $8 million and an adjusted net income of $1.2 million for Q1 '25, an increase of 109% on the net income and a decrease of 74% on the adjusted net income compared to Q1 '24.

Turning to slide 12 for the balance sheet. We had a cash balance of $15.7 million compared to $12.6 million at the end of '24, an increase of 25%. In Q2 '25, we paid off the remaining 90% payment balance due on the Handysize carrier Eco Spitfire plus the bunkers remaining on board, a total of $15.1 million.

Other current assets mainly include charters receivable of $3 million for Q1 '25 compared to $2.8 million at December '24, an increase of 10% as well as inventories of $1.6 million compared to $0.9 million at December '24.

The vessels net value of $82.5 million are for the four vessels less depreciation. Trade accounts payable of $1.8 million are balances due to suppliers and brokers. Payable to a related party of $17.6 million represent the 90% balance due on the Eco Spitfire of $14.6 million and $3 million due to the management company, Braves Maritime. Both of these items were fully paid for in April '25.

A warrant liability of $3.6 million was recorded, a drop of 66% from the balance at year-end '24 where it was $10.4 million. In Q1 '25, the warrant adjustment was a gain of $6.8 million. The balance at year-end '24 was $10.4 million, hence, resulting in a net value of $3.6 million.

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.

None of our vessels were built from Chinese shipyards. Hence, the proposed US tariffs of all Chinese-built ships would be a significant positive shift for our fleet. The company's strategy is to follow a disciplined growth with in-depth technical and condition assessment review. Equity issuances will continue.

Management is continuously seeking a timely and selective acquisition of quality non-Chinese built 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 less than two years and having increased our fleet by 234% since inception, the company has no bank debt. No interest were charged by the affiliated sellers on the purchase prices of the Afrapearl 2 and the Eco Spitfire. From July 2023 to date, we have repaid all our CapEx obligations totaling $59.2 million without resorting to bank loans.

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

For the first quarter of 2025, we reported a net income of $7.9 million, an increase of 109% from the Q1 2024, but our revenues decreased by 32% due to the drop in TCE rates. By Q2 2025, we have met all our CapEx obligations without resorting to bank loans. We have, therefore, more than tripled our non-Chinese built fleet capacity without incurring any bank debt.

The global economic environment is poised for a year of mixed signals in 2025 with risks and opportunities influencing the shipping sector. Economic shocks, financial market responses and evolving policy measures are expected to shape the outlook, contributing to a cautious yet dynamic landscape. While global growth may be moderate and inflationary pressures persist, these challenges also create room for market adjustments and new trade patterns.

C3is will adapt to these evolving dynamics by focusing on diversification and aligning with the growing emphasis on sustainable practices, which are poised to reshape trade in the coming years. With careful navigation and adaptability, the company is well positioned to leverage regional growth drivers and evolving economic dynamics to maintain resilience in the years ahead.

We would like to thank you for joining us today and look forward to having you with us again at our next call for the results of the second quarter of 2025.