Diana Shipping Inc (DSX) 2006 Q4 法說會逐字稿

Good morning, ladies and gentlemen. My name is Stacey and I will be your conference operator today. At this time I would like to welcome everyone to the Diana Shipping Inc. fourth-quarter 2006 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (OPERATOR INSTRUCTIONS).

It is now my pleasure to turn the floor over to your host, Mr. Edward Nebb of Diana Shipping Investor Relations. Sir, you may begin your conference.

Thank you very much. Hello. This and Ed Nebb and I want to welcome all of you to the Diana Shipping 2006 fourth-quarter and year-end conference call. The members of the Diana Shipping management team who are with us today are Mr. Simeon Palios, Chairman and Chief Executive Officer; Mr. Anastassis Margaronis, President; Mr. Andreas Michalopoulos, Chief Financial Officer; Mr. Ioannis Zafirakis, Vice President and Secretary; and Ms. Maria Dede, (technical difficulty)

Before management begins their remarks, let me briefly summarize the Safe Harbor notice which you can see in its entirety in the news release we issued last night. Certain statements made during this conference call which are not statements of historical fact are forward-looking statements and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on assumptions, expectations, projections, intentions and beliefs as to future events that may not prove to be accurate.

For a description of the risks, uncertainties, and other factors that may cause future results to differ materially from what is expressed or forecast in the forward-looking statements, please refer to the Company's filing with the Securities and Exchange Commission.

With that, let me turn the over to Mr. Simeon Palios, Chairman and CEO of Diana Shipping.

Good morning and thank you for joining us today. It is my pleasure to report to you on the financial and operating results of Diana Shipping for the fourth quarter and full year 2006. Our excellent performance is a reflection to our corporate strategies, which have been designed to produce strong earnings in the near-term while positioning the Company for continued profitable growth in the future.

In a few moments, members of our senior management team will summarize our market outlook and provide you with a financial review. First I would like to highlight some of the Company's key accomplishments during the past year.

Net income for the full year 2006 was $61.1 million, compared with $65 million in 2005. Net income available to common stockholders at the end of 2006 was $40.8 million after the deduction of non-recurring items. For the fourth quarter of 2006, net income was $19.4 million, up from $13.9 million in the same quarter of 2005.

During 2006, we continued expanding the size of our fleet and building strong relationships with high-quality charters. At the same time, we maintained a flexible chartering policy which allowed our company to benefit from the strong trends in the dry bulk freight markets especially during the second half of the year.

We have also maintained our commitment to provide shareholders with an attractive dividend. Based on our results from operations, we declared a cash dividend of $0.46 per share for the fourth quarter. Including this dividend, we will have paid out a total of about $141.4 million to our shareholders since March 2005, when Diana Shipping became a public company.

We are especially proud to our successful efforts to expand the Diana Shipping fleet and therefore to enhance our revenue generating potential. Today our fleet is larger, younger, and more efficient than at any time in our history. Specifically in the fourth quarter we took delivery of the Sideris GS, a new Capesize vessel. The Sideris was chartered to BHP Billiton for four years with a possible extension for an additional year.

Recently we announced an agreement to acquire another Capesize vessel to be named Semirio which we expect to be delivered in June 2007. The Semirio was also being chartered to BHP Billiton for a four-year period with a possible one-year extension.

We also agreed to share our other Capesize carrier, the Pantelis SP at a very attractive price and expect to deliver the ship to the new owners in July 2007. This will allow our Company to benefit from the profitable trading of this vessel for a (indiscernible) months. The proceeds from in the sale will be ultimately applied to the purchase of the Semirio.

As you know, we previously announced that we had assumed ship building contracts for the construction of two Capesize dry bulk carriers with deliveries expected during the second quarter of 2010.

To summarize the progress we have made in transforming our fleet, at the end of 2004 the Company had seven vessels where we will have 17 ships when all of the vessels that are currently under contract have been delivered. In July 2007, the average age of our fleet will decline to 3.2 years from 3.8 years at the end of 2005. We have also increased our Capesize fleet from one vessel last year to four including the two new buildings to be delivered in 2010.

As we enter 2007, we believe the Company continues to be well positioned to profit from the opportunities in the growing dry bulk shipping market. We have made fundamental enhancements to our fleet, entering into time charter contracts that lock in healthy rates and increase the visibility to our earnings. At the same time we maintain ample financial resources to support our growth in any freight market environment.

With that, I will now turn the call over to our president, Stacey Margaronis.

Thank you Simeon. Thanks again to all who are joining us in this conference call. At this part of our conference call we will summarize the main developments during the past year affecting large bulk carriers and attempt to identify the factors which will play an important role in determining future trends in dry bulk freight markets.

Let's look briefly at the earnings of large bulkers during 2006. Last year the average modern Capesize earnings fell by 10% compared to 2005, was from $50,139 per day in 2005 to $45,139 per day in 2006. However the contrast between the first half and second half of the year was staggering. The average first-half daily earnings stood at $33,237 a day, while for the second half the average came to 57,138, an increase of 72%.

For Panamaxes, the average daily rates for 2006 were $23,778 per day, representing a 4% drop from the $24,701 per day for 2005. Here again average rates went up about 61% between the first half and second half of 2006.

The main reason for this change in fortunes during 2006 is described by analyst Hal Robinson among other things to the Brazilian rainy season, the [rain] strikes in the Amazon area, a severe disruption in the Australian iron and ore mining caused by a bad cyclone season, which was [other than the reduction] during early 2006 in iron and ore shipments compared to the second half of 2005 by about 9 million metric tonnes.

This coupled with the huge number of new buildings joining the fleet during the first half of 2006 caused the collapse in rates between the second half of 2005 and first half of 2006. The process was reversed during the second half of 2006 when shipments of iron ore rose by more than 35 million metric tonnes, overwhelming the rate of fleet expansion.

A brief look at the world economy shows that world growth continues to support the growth in Seaborne trade. According to Goldman Sachs, apart from growth in the United States, China, the Euro zone, India, Brazil and Russia, it would be growth in countries such as Indonesia, Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey, and Vietnam which will also play a key role in boosting international trade from 2007 onward.

Another interesting development is China's continued labor productivity growth. This has averaged more than 6% annually over the past 15 years, beating the average of 3.5% per annum of developed countries. The Chinese economy would not have maintained rapid economic growth and low inflation if the country's labor productivity did not improve dramatically. China's gross domestic product grew at 10.7% in 2006 and prices rose 1.9% year-on-year in November 2006 according to Chinese authorities.

In the Euro zone, the German business confidence index increased to 108.7 in December, the highest level since 1990. The OECD composite leading indicators, the CLI, grew by 0.2 to 109.7 in October 2006, suggesting that there will be continued economic expansion within this economic zone in 2007.

According to Clarkson's research from non-OECD countries, India and Brazil recorded the strongest CLI figures on a six-month basis. The CLI six-month rate of change for India rose for the third successive month. More importantly however, India's debt rating was recently raised by Standard & Poor's to investment grade from a BB+ to BBB-. This may spare overseas investments in India's power, sea, and other industries which are users of commodity shipped in bulk. For now, these industries receive less than 1/10 of the funds invested in China.

In the USA, the recent weakness in the housing and manufacturing sectors appears to have reversed in December 2006, although some economists remain cautious about the future. Nevertheless, industrial production in the U.S. grew in November 2006 at a reasonable 3.8% year-on-year.

Across the Pacific, Japan's industrial production rose 4.9% in November 2006 compared to the same month in 2005, while the economy continued growing at around 2.5% per annum.

What effect does this relatively benign environment of world macroeconomic activity have on demand for the transportation of bulk commodities? Looking at iron ore, according to shipping analysts at Howe Robinson, 2007 should be another strong year for steel production. This should lead to an overall increase in international Seaborne iron ore trade in the region of 70 million metric tonnes and it is anticipated that at least 60 million metric tonnes of this will be shipped in Capesize bulkers.

The earlier than anticipated iron ore contract agreements, an increase of 9.5% from last year, should help avoid disruptions in trade relating to inventory buildup similar to those witnessed last year when contract price bargaining went on until well in May 2006.

The year kicked off on a high note with Chinese iron ore imports climbing to a massive new high of 35.9 million metric tonnes according to preliminary trade data quoted by Forbes. This marks a significant increase on December 2006 when 28.6 million metric tonnes were imported and surpasses the previous monthly record high of 32.8 million metric tonnes recorded in August 2006.

Furthermore, according to Maersk Broker, stocks at China's iron ore ports are now 41.1 million metric tonnes, up only 3 million metric tonnes from the end of December, suggesting that the surge in iron ore imports is not simply due to stock building by Chinese steel mills ahead of the 9.5% iron ore price increase agreed as of April 1, 2007.

Looking at coking coal, production increases coming mainly from Australia have led the shipping analyst Howe Robinson to the conclusion that this trade could increase by approximately 5 million to 10 million metric tonnes in 2007. As regards thermal coal, analyst predictions have a larger margin of error due to several factors among which are the uncertainty of volumes coming from Indonesia, the traditional swing supplier of last resort; and Vietnam, where production and export figures are difficult to come by.

Nevertheless, Howe Robinson predicts growth in thermal coal shipments during 2007 of between 20 million and 30 million metric tonnes but with good chances of this increase reaching 40 million metric tonnes due to strong demand from the power generation industry.

The overall picture for grains is rather mixed and if current USDA forecasts for 2007 are borne out, the overall increase in tonnage shipped in 2007 will probably be insignificant. A boost in shipments could come from industry estimates of India's wheat import requirements of about 5 million metric tonnes based on an anticipated production of 71 million metric tonnes, down from the original estimates of 75 million metric tonnes for 2007. The growing feed and poultry industries are putting pressure on existing supplies and could result in significant increases in imported grains to that country.

In past presentations and conference calls, we have identified the tonne mile effect as a potential influence on demand for bulk carriers. In October 2006, Chinese imports of Indian iron ore fell by 25% month on month according to Chinese Customs statistics. Most of this shortfall came from Brazil where according to the Brazilian Foreign Trade Secretariat, the January to October 2006 export total surpassed 200 million metric tonnes. This represents an increase of 12.1% year-on-year. The longer haul effect of such switch of suppliers had the expected beneficial effect on demand for large bulk carriers, especially during the second half of the year.

According to Maersk Broker, from the 326 million metric tonnes of imported iron ore by China in 2006, 126.8 million metric tonnes were sourced from Australia, up 14 million metric tonnes year-on-year; 76.4 million metric tonnes from Brazil, up 21.7 million metric tonnes year-on-year; and 74.8 million metric tonnes from India, only 6.2 million metric tonnes more than in 2000. This trend is expected to continue as India has repeatedly stated that it will divert for more and more iron ore from the export trade to domestic use by its own steel mills.

As regards congestion, we have been witnessing a steady increase of vessels waiting to load in the Australian East Coast coal loading ports. According to Simpson Spence & Young's coal port congestion index, average delay stands at 13.5 days, the highest it has been since March 2004.

During the last week of January 2007, there were 105 ships waiting to load at the East Coast Australian load ports, mainly Newcastle, Hay Point, Gladstone, and Abbott Point. Even though delays would vary due to seasonal factors, congestion will not disappear before improvements in port and shore facilities come on stream, which is not expected to happen before 2008 and 2009.

Congestion in Australia's iron ore loading ports is only marginally higher than the 2006 average. Congestion in the Brazilian iron ore loading ports is slightly down to last year's average. It is estimated that in the fourth quarter of 2006 overall congestion absorbed about 10% of the world's dry bulk fleet. \ Turning to supply, numbers have not changed as regards new buildings since last quarter's conference call. At the end of 2006 according to Simpson Spence & Young, there were 234 Panamax vessels on order of some 18,730,483 metric tonnes representing 18% of the existing fleet. Of these, 84 are scheduled for delivery in 2007; 66 in 2008; 51 in 2009; and 28 in 2010 and beyond. The remaining balance were late 2006 deliveries.

From the Capesize fleet, there are 179 vessels on order or 36,092,180 metric tonnes representing 26% of the existing fleet. From these new buildings, 44 will be delivered in 2007; 47 in 2008; 41 in 2009; and 40 in 2010 and beyond. Here again the small remaining balance were late 2006 deliveries.

On the supply side it is interesting to know that during 2007 about 50 million tonnes deadweight of dry cargo vessels will be over 25 years old which is nearly double the size of the new buildings which will be delivered during the year. It should be said however that the old ship figures are heavily biased in favor of the Handysize bulkers rather than the larger vessels, even though it should be said the latter do have a shorter tradable life.

Focusing on the larger bulkers, about 21% of Panamaxes are over 21 years old and about 13% of Capes. The latter figures include all ships over 85,000 tonnes deadweight.

With 11% of the world fleet of dry bulkers over 25 years old and a further 6% reaching this age by the end of 2008, scrappings should increase in 2007 compared to the just over 2.0 million tonnes deadweight scrapped in 2006. Shipping analysts expect between 3 million and 5 million tonnes deadweight of bulk carriers to be scrapped in 2007 mainly due to the fast deteriorating age profile of the bulk carrier fleet and the escalating special survey and the repair costs.

Looking at shipping analysts forecasts for 2007, the consensus is for the first half of the year to be stronger than the second, the reverse of what we saw in 2006. These conclusions have been reached by looking at the new building deliveries during 2007 of about 27 million metric tonnes or 7.4% of the existing bulk carrier fleet and making a forecast for scrappings of about 5 million metric tonnes. The overall net fleet growth would be between 22 million and 23 million tonnes, an increase of 6.5%. This means that increase in cargo shipments of around 175 million metric tonnes all other things being equal, be necessary to maintain the average market levels seen in 2006. Analyst predictions of additional volumes shipped during 2007 should easily exceed this figure.

The model assumes that the Capesize bulker will carry 6.25 times the deadweight capacity per year while a Panamax would carry about seven times its deadweight capacity. In reality we know that some ships carry more and others less and there is really no accurate way of knowing the market average.

Having provided the brief overview of the dry bulk shipping market in which we have attempted to identify the most important factors influencing the supply and demand for large bulkers, we are obliged to look at the risk factors which would have a serious influence on supply or demand and disrupt the fragile balance we are witnessing today.

In past conference calls and presentations we have identified the following concerns and risk factors. Firstly, the disruption in the industrialization process in China, India, Brazil, Russia, Vietnam, and other countries which through brisk rates of growth are underpinning demand for the transportation of bulk commodities.

Second, the emergence of new ship building capacity either in the form of brand-new shipyards or new improved facilities of existing shipyards. And thirdly from (technical difficulty) tankers or large container vessels to large bulkers which could change the anticipated supply of dry bulk tonnage during the next two to three years.

However another factor which is being discussed more and more mainly outside shipping circles has to do with the liberalization and deregulation of trade. The unscrutable economic benefits flowing from the above have also created increased financial fragility.

In the recently published book called "Global Governance of Financial Systems" by authors Alexander, Dhumale and Eatwell, international systemic risk is analyzed in great detail. They point out that among other things, financial transactions which initially appear as efforts to hedge against risk can promote financial stability, utilize formulas and methodologies to price such risks which are inexact and very often result in the underpricing of risk. This may very well create more risk than is optimum for financial markets.

Unfortunately the present international legal framework of financial regulation does not cover most of the relevant activities involving the regulation of systemic risk. The effective control of systemic risk in global financial markets requires further consolidation of the existing institutional framework of international financial regulation. It is obvious that even a short-lived interruption of international capital flows, not to mention a breakdown of the world financial system will seriously disrupt international trade with devastating effects for the shipping markets.

A simple example applying to the shipping industry of mispricing of risk manifests itself in the form of speculative ordering of new building vessels by interests which have very little knowledge of the fundamentals governing the shipping markets.

The excessive liquidity evidenced worldwide provides fertile ground for studies of speculative practices. Obviously this kind of activity cannot be subjected to any national or international financial regulation. However, as far as global financial systemic risk is concerned, it is encouraging to observe that recent efforts by the International Monetary Fund, the World Bank, and the World Trade Organization suggest that the more formal legal framework is developing for the supervision of international financial markets.

What will hopefully result is a reformed global governance structure which will maximize the benefits of state coordination in this particular area. As far as our company is concerned, preparing to confront such possible serious downturn in the shipping markets has resulted in firstly, the maintenance of a strong balance sheet; and second, acquisition of modern efficient tonnage which will still operate in a poor freight market environment. This will enable us to weather any future storm and emerge an even stronger company from an environment of corporate shipping failures and bankruptcies.

Having said that, we are optimistic that shipping markets should remain reasonably vibrant for a while and our expansion policy coupled with a continuously adaptable chartering policy will ensure satisfactory earnings and dividends per share for our shareholders.

We concur with the views expressed by Howe Robinson in their annual review for 2006 and outlook for 2007 where they conclude that if China continues its industrialization process without major disruptions and is joined by India and the other countries mentioned earlier on, there should be no fundamental problems in dry bulk shipping market until shipyard capacity expands sufficiently to meet and eventually exceed demand.

I will now pass you to our CFO, Andreas Michalopoulos who will provide you with our Company's financial highlights for 2006 and the fourth quarter of that year. Thank you.

Thank you, Stacey, and good morning. I am please to be discussing today Diana's operational results for the quarter and year ended December 31, 2006.

Fourth quarter of 2006. Net income for the fourth quarter of 2006 amounted to $19.4 million and increased by $5.5 million or 40% compared to a $13.9 million for the same period in 2005. This increase is attributable to increased average hire rates and also to the enlargement of the Company's fleet that went from 12 vessels at the end of the fourth quarter 2005 to 15 vessels at the end of the fourth quarter 2006.

The EPS, earnings per share, of Diana Shipping amounted to $0.37 compared to $0.34 for the same period of 2005 and compared to $0.32 for the third quarter 2006.

Voyage and timecharter revenues increased by $11.2 million or 47% to the $35.2 million in the fourth quarter of 2006 compared to $24 million in 2005. The increase is attributable to increased average hire rates and the increase in the number of vessels in the fleet after the acquisition of the Coronis, the Naias, and the Sideris GS in 2006 and full operation of the Thetis and Erato acquired in November 2005.

Ownership days were 1321 for the fourth quarter of 2006 compared to 995 in the same period of 2005 due to the enlargement of the fleet mentioned earlier. Fleet utilization was 99.8% in the fourth quarter of 2006 and 99.6% in the same period of 2005. The daily timecharter equivalent rates for the fourth quarter of 2006 was $25,323 compared to $23,083 for 2005.

Voyage expenses increased by $0.4 million or 31% to $1.7 million (technical difficulty) in 2006 compared to $1.3 million in 2005. The increase in voyage expenses is attributable to the increase in revenues and the enlargement of the fleet and was partly offset by the elimination of the 2% commission of the management company after its acquisition effective April 1, 2006.

Operating expenses increased by $1.9 million or 44% to $6.2 million in 2006 compared to $4.3 million in 2005. The increase in operating expenses is attributable to the 33% increase in ownership days resulting from the delivery of the new vessels to our fleet and also to increase it in crew costs, stores, as spares. This increase was partly offset by decreases in all other categories of operating expenses.

Daily operating expenses were $4713 in 2006 compared to $4309 in 2005, representing an increase of 9%. The daily operating expense figure of $4713 can also be compared to $4802 for the third quarter of 2006, representing a decrease of 2%.

Depreciation and amortization of deferred charges increased by $1.7 million or 57% to $4.7 million for the fourth quarter of 2006 compared to $3 million for the same period in 2005. This increase is attributable to the increase in the number of vessels to our fleet and the increase in the number of vessels performing drydock and special surveys.

Management fees amounting to $0.5 million in the fourth quarter of 2005 have been eliminated from our consolidated financial statements in the fourth quarter of 2006 due to the acquisition of our fleet manager. However, the acquisition of our fleet manager has caused an increase in general and administrative expenses which for the fourth quarter of 2006 amounted to $1.9 million compared to $0.8 million in 2005, representing an increase of $1.1 million.

Interest in finance costs increased by $0.7 million to $1.3 million for the fourth quarter of 2006 compared to $0.6 million for the same period in 2005. The increase is attributable to interest costs relating to long-term debt outstanding during the period which did not exist in the same period of 2005 and to interest relating to the financing method of accounting for leased property of the management property.

Now for the year ended December 31, 2006 compared to the year ended December 31, 2005, we have net income for the year prior to (indiscernible) dividend amounted to $61.1 million and decreased by $3.9 million or 6% compared to $65 million in 2005. The decrease is attributable to declining trading positions at the beginning of 2006. The acquisition of the fleet manager on April 1, 2006 reduced net income available to common stockholders for 2006 to $40.8 million.

Voyage and timecharter revenues increased by $13 million or 13% to $116.1 million in 2006 compared to $103.1 million in 2005. The increase is attributable to the increase in the number of vessels in the fleet and was partly offset by declining hire rates in 2006 compared to 2005.

Ownership days were 4897 in 2006 compared to 3510 in 2005. The increase in ownership days resulted from the enlargement of the fleet utilization was 99.9% in 2006 and 99.7% 2005. The daily timecharter equivalent rate in 2006 was $22,661 compared to $27,838 for 2005.

Voyage expenses decreased by $0.4 million or 6% to $6.1 million in 2006 compared to $6.5 million in 2005. The decrease in voyage expenses is attributable to the decrease in commissions in 2006 compared to the same period of 2005 due to the elimination of commissions charged by the management company after April 1, 2006. The decrease was partly offset by an increase due to increased revenues.

Operating expenses increased by $7.5 million or 50% to $22.5 million in 2006 compared to $15 million in 2005. The increase in operating expenses is mainly attributable to the 40% increase in ownership days resulting from the addition of new vessels to our fleet and also to increased stores, spares, repairs, and crew costs.

Daily operating expenses were $4,592 in 2006 compared to $4,261 in 2005, representing an increase of 8%. Depreciation and amortization of deferred charges increased by $6.8 million or 69% to $16.7 million in 2006 compared to $9.9 million in 2005. This increase is the result of the increase in the number of vessels to our fleet and the number of vessels performing drydock and special surveys.

Management fees decreased by $1.1 million or 65% to $0.6 million in 2006 compared to $1.7 million in 2005. The decrease is due to the elimination of management fees after the acquisition of the fleet manager. However due to this acquisition, general and administrative expenses during 2006 increased by $3.4 million to $6.3 million compared to $2.9 million in 2005.

Interest in finance costs in 2006 increased by $1.2 million or 44% to $3.9 million compared to $2.7 million in 2005. This increase is attributable to increased long-term debt outstanding during the year in lease property and was partly offset by a decrease in amortization of finance charges.

Turning to dividend policy, for the fourth quarter of 2006 the Board of Directors has decided to declare a dividend of $0.46 per share. Diana declares and pays quarterly dividends that are substantially equal to available cash from operations during the prior quarter. In calculating the cash dividend, we take into account expenses, drydock reserves, contingent liabilities, and capital needed to support the Company's operations.

Pursuant to our amended dividend policy on September 22, 2006, the fourth quarter dividend has not been increased with interest expense and is not calculated as if we were financed with equity for the outstanding debt as the qualifying debt on our balance sheet did not exceed $150 million.

Thank you for your attention. We would be pleased now to respond to your questions and I would turn the call to the operator who will instruct you as to the procedure for asking questions.

(OPERATOR INSTRUCTIONS) Scott Burk, Bear Stearns.

A couple questions here. I appreciate the detailed market outlook as usual. The port congestion that you talked about, what has been the effect of that on Diana's fleet? Have your vessels been caught up in that? If so, how does that impact revenue and income for you guys?

Well, the revenue is not at all influenced by the (indiscernible) waiting outside the port because the vessels are on timecharter and the charter absorbs that expenditure.

Okay, that's what I thought. Can the charters take any action to try to lessen that impact, like trying to go to a different port? Why would they be willing to just wait in line essentially?

It is up to them to decide what they are going to do. As long as they pay the charter rates we have agreed.

Okay, let me ask you going to the recent purchase of the Semirio, how do you determine what kind of price you are willing to pay on a vessel like that? And then also was there some competition involved in terms of bidding versus other ship owners that were interested in buying that vessel?

I think that the price we paid compared with the charter rate we achieved with a first-class charter, I think overall makes the whole deal an attractive one.

Was there any competition for that particular vessel in terms of bidding for that vessel?

Yes, there was.

Let me ask one final thing. You guys over the last year have ramped up your fixed rate business in terms of timecharter coverage compared to what it was, say, a year ago when you had more spot exposure. In terms of your strategy, is that kind of just trying to lock in what would've been higher rates or is there kind of a shift for your outlook in the market? What has driven that change?

I think that the chartering philosophy depends entirely to our exposure and today the exposure is such that we could have more ships for example on the four timecharter routes or we could have more ships on prompt business, but if of course we go for more ships, if we buy more ships, then we have to think again. So strategy would depend according to the day the vessel is coming open.

Okay. Thanks.

Scott, just one small addition as an answer to your first question. In a rising market congestion as our CEO explained very clearly does not affect our revenues. Indirectly a delay to be able to [refix] the ship in a rising market could have a minor affect in revenues going forward. In a dropping market, it is the other way around. The longer you wait and receive a good rate, the better it is for revenues.

This is something which is practically impossible to put in a model and maybe not worth even attempting to do so.

Interesting. Okay, thanks.

Justin Yagerman, Wachovia Capital Management.

It looks like you're driving nice economies of scale out of the larger fleet on the OpEx side. I just wanted to get a sense for what the run rate that you're looking at going forward is for that on a quarterly basis? Or maybe on a per ship basis if that is the better way to think about it right now?

Justin, this is Andreas. On the quarterly basis, we see that level stabilizing basically around $4900, $5000 per day per vessel. Of course a Capesize vessel compared to a Panamax vessel has a difference in terms of daily operating expenses. So you can put around $6000 for the Capesize and $4800 for a Panamax, and so increasing the fleet -- if we increase buying Capesize vessels, then we will need to do all the adjustments accordingly.

Okay so as you go forward with any acquisitions, we can kind of incorporate that into our estimates. But on the G&A side, obviously as the fleet has grown, G&A has gone up somewhat. What are you thinking right now in terms of G&A going forward on a run rate and I guess how would acquisitions impact that line? How long does G&A stay at about $2 million a quarter or $1.9 million a quarter? If you add one vessel, does that change things? What is the threshold on changing that?

Well, at the moment it is still in the vicinity of $2 million that we budget our [G&A] for the quarter -- per quarter and now we have made a really back of the envelope calculation and said that up to a level of 25 vessels more or less we could manage the fleet with this G&A level.

Now having said that, you must bear in mind that even if we go to 27 vessels, that does not mean that suddenly the G&A will jump dramatically and go from $2 million to $3 million or $4 million level per quarter but it means that we will just need to add a few headcounts to our management operators here.

Now all that having been said, this obviously takes into account a pretty steady level of dollar/euro rate because here in for the G&As you have an influence of the dollar/euro rate, as most of that level are in euro currency.

That is fair and I guess we will leave it to other people to predict that. In terms of -- you have about three more Panamaxes that come up for recharter in the first half of this year, the Protefs obviously was chartered this morning at what seemed like a pretty nice rate.

Simeon, maybe you can comment on the strategy regarding those three ships that you have up. What are you going to be looking for? Are you going to be looking for one-year charters, two-year, three-year? What are you expecting from rates? Would you do another floating-rate charter in this environment? I guess if you could give us any color on what to expect from those recharters that would be helpful.

Justin, we are not going to exclude any four time charter routes in our thoughts because the four the charter routes for the last year, they have been extremely profitable for us and of course we have them well in mind. Today the Nirefs is getting -- with Australian we bought $35,157 plus 4.5% ex (indiscernible) totaling $36,739, which is an attractive rate. We are -- this charter expires at the end, approximately at the end of this year.

With our structure we can have another one and we can very well go for the (indiscernible) with a floating-rate but we will not exclude the possibility of chartering for two years provided the charter is first-class and the rate is in excess of $27,500. All this will depend whether we would do something else buying wise I mean. If we buy something, then we have to think again whether we are going to go long or we are going to trade with short periods.

I guess that brings up what my next question was. I mean obviously you guys have always said that you'll be opportunistic with chartering and with acquisitions and you've shown a willingness to participate even in a strong market. What are you seeing from acquisitions right now? Is the Cape market still more favorable than the Panamax in your view or would you now kind of consider going back into the Panamax market? Are acquisitions even on the table right now or do you expect to be taking a break for a little while?

I think that we have to have a balanced fleet. We have a young fleet. We have a strong balance sheet. We have to have a balanced fleet and I think that at the moment we have 13 Panamaxes and four Capes if we include the ones which are coming from Waigaoqiao in the beginning of 2010. So it looks -- we have to buy some more Capes.

You have shown a willingness as long as the long-term rates are there to pay up for tonnage in the current market. Is that still your feeling? And how liquid is the Cape market right now, in that if you're willing to pay those kinds of rates, are there vessels out there for you to acquire? Are you looking at anything currently?

There are ships which we can go for, provided of course there is the appetite from first-class charterers, because we are not going to buy something like that without having the cover from a first-class charterer.

Right.

So yes, there are ships which you can buy today and there is willingness from first-class charterers to support you.

When it comes to Capes, are you only interested in new builds, or are you --?

Yes, (multiple speakers) it has to be accretive for the age profile of the company, which as you see, it is 3.2 years and the task is huge. So the only thing you can see is the very, very modern Capes or the resales.

Got it. So anything you're buying at this point is basically three years or younger?

Yes, 3.2 or younger to be accretive there too.

All right. That's helpful. Andreas, just another question for you. On the new builds that you have coming in 2010, when is the next -- you have put 20% down on those off the term loan that you have. When is the next payment installment due on those and how much is that?

The next payment installment is typically, and in that case as well, [fee] cutting. And obviously, we do not know when it is going to happen, because that usually is between 12 and 18 months before the delivery that that happens.

So we're probably looking in the 2008/2009 type timeframe?

We are looking around, yes, 12 to 18 months before delivery. So, yes, around 2008, 2009. And the percentage is 10%.

So it is another 10% on each vessel.

That's right.

Around 2009. Okay.

2008, 2009, yes.

But bear in mind that the way the Waigaoqiao is performing at the moment, we may see the vessels coming a little bit earlier, too.

(technical difficulty) Okay. I guess you [lost] it. How much earlier are vessels being delivered from that shipyard right now?

The last stock we took delivery, which was the Sideris GS, was scheduled the delivered in September and we took delivery in -- sorry, we took delivery in November and it was scheduled for May.

Got it. So kind of six months-ish?

Yes.

And then I guess just another question. I don't know if you've ever brought this up before, but are the Sideris, the Semirio, and the two new Capes that you're buying, are those all sister ships?

Yes, indeed. They are sister ships.

(multiple speakers) Cape Sister ships?

Yes.

Thanks for the time, guys. I appreciate it.

Doug Mavrinac, Jefferies & Co.

Great, congratulations on a great quarter. I just had a few market questions and they touch on some of the topics that Stacey brought up in his industry discussion. Stacey, first you had mentioned or you recited some current Chinese iron ore inventory figures. Can you repeat for me when those figures were as of? Were they at the end of December or where they at the end of January for the Chinese iron ore inventories?

Those were basically a provisional end of January figures which were compared to end of December and were based on the again provisional numbers for importation of iron ore during January 2007.

So they would already be taking advantage of or including the surge in activity we saw after the CVRD and Bao Steel price agreement.

That's right.

Second, looking at the South American grain trade and with the harvest being a little bit more robust than I think people were expecting, can you describe kind of what's going on in that trade currently and how the better-than-expected harvest may effect how long rates could be strong in that particular market?

Yes, the problem with the stronger harvest is that we're not entirely sure and even the shippers are not exactly where this grain is going to go. And as happens always it will go to areas which have suffered lower-than-expected harvest and for the time being we do not know exactly where that will be. It depends on weather conditions, even last minute weather conditions so depending on where the extra grain goes, that will affect the demand for Panamax primarily ships because the longer the haul of course the more beneficial it is with demand, the shorter it is the other way around.

But overall we do not expect anything dramatic to happen there to influence the balance between supply and demand for Panamaxes trading in grain at least.

Would you expect some of that to maybe replace what is being lost out of Australia due to the drought that is taking place there?

We very much hope so because that will be the most beneficial effect from tonne mile point of view, yes.

Right, and what are you currently seeing in terms of one-year type charter rates in the Panamax market?

The one-year Panamax today, Atlantic [around] for example depending from the ship is between $35,000 and $37,000 daily. The Pacific around is between $31,500 and $32,500. That is the Panamax. For the Capes, the Atlantic around is between $77,000 and $80,000 and the Atlantic for us is between $91,000 and $96,000.

Perfect, perfect. And then just one final question that has to do with the longer-term supply outlook of dry bulk ships. If you were to place an order today, is a 2009 delivery date a possibility in any of the Korean yards or would it be more of a Chinese yard type of availability date?

Which kind of ship are you talking? Are you talking for a Panamax or for a Cape?

Either or both.

Theoretically there is no available space for 2009 and as a matter of fact there is no space for 2010 either. (multiple speakers) But sometimes they have some slots like the one I was talking before we were due to take delivery of the Sideris in May and we took the vessel in November. So if that continues, maybe there are going to be some slots, but theoretically today there is no space available for those ships in China or in Korea or in Japan.

Perfect, great. That answers my question. Thank you very much.

Kevin Maczka, BB&T Capital Markets.

Another question if I could on the shipyard capacity side. You mentioned that some of the shipyards are actually delivering vessels early and you did a nice job breaking out what the orderbook looks like over the next few years. I'm just wondering what you're seeing out there in terms of potential new capacity coming on line? I think you said in your remarks that that was one of the primary risks here that we would see potentially new capacity come on line. Is that a realistic thread in the near-term?

I think what is coming out until 2010 is pretty much known to almost everybody and the new years that's coming out, I don't think they're going to reflect to a dramatic change or an increase of the capacity as regards to the Capes or the Panamaxes. So I think that we are pretty safe to assume that the capacity which is published today is correct.

Okay and just another question on your vessel sale. I think you sold your oldest vessel in your fleet which was still relatively young and if I'm right I don't think you have anything that was built prior to 2001 in your fleet currently. So is it safe to assume that further vessel sales are not likely at this point?

Yes, I think it is correct to assume that it is the older ship and we thought that it was a good window to sell a ship because don't forget that we are on the stock exchange but also we are a shipping company and we have to act like that. So we have sold the oldest vessel and the vessel which is a Cape. So an eight-year old Cape compared with our fleet average age is three times what we should have. It is almost eight years old, so our average age is 3.2. So it is quite old for us.

All right, gentlemen. All my other questions have been answered. Thanks for the time.

Gregory Lewis, Fortis Bank.

Great quarter. Could you provide a little more color on the sale of the Pantelis? I know you mentioned that it was primarily to reduce the average age of the fleet, but was that primarily the reason?

Don't forget that we have bought a similar ship, a little bit bigger. The vessel will be delivered in July to the new owners, the Pantelis SP, and we're going to take delivery of the Semirio in June. We have the Pantelis SP at 47,500 and the charter rate was coming to an end including the option they had in March 2008. Therefore the Pantelis SP could not be chartered today easily at the current rate, whilst the Semirio could have chartered and we did charter with a major charterer at $51,000.

So everything was accretive. It was accretive in deadweight tonnes. It was accretive in age term. It was accretive chartering wise. It was accretive in everything. So you have to see it in conjunction with the new building we took, namely the Semirio.

So in other words when you went in to purchase the Semirio in the back of your minds you were thinking about selling the Pantelis? Is that safe to say?

Well that was -- yes. (multiple speakers) We had alternative ways to buy the vessel. If you have a line of credit from Royal Bank of Scotland of $0.5 billion, it is easy to buy a ship.

Okay, just one other quick question. You mentioned as one of the risk factors of tankers or container ships switching to bulkers. Have you been approached or have you heard of any shipyards or owners of those new building tankers or container ships approaching any bulker owners?

Well have a horizon up to 2010 and that's where we are focusing. And if today you have a shipyard ready to build a vessel with delivery after 2010, you will find it very difficult to change it from a tanker into a Panamax or into a container or another ship. So I think that although theoretically it is there, I don't think that there are going to be a lot of changes like that, a lot of changes between the tankers to Capes.

And it is also unlikely that we would be approached by the owner having ordered the ship. It will be the shipyard once they get the cancellation of the order that we will try to find a replacement order for what they are building. They will of course try and get someone to order the same ship and buy the same hull, and if they fail, then they will approach owners of ships like dry bulk carriers in order to fill in the berth and the slots.

Okay, perfect. That's all for me. Thank you.

Jon Dawson, Dawson-Herman Capital.

My question has already been answered.

(OPERATOR INSTRUCTIONS). Sir, there appears that we have no further questions. I'd like to turn the floor over to management for any closing remarks.

Let me thank you again for joining us today and for your support of Diana Shipping. We are proud of our results in growing a successful company and enhancing shareholder's value. And we look forward to sharing our continued success with you in the future. Thank you.

Thank you. This concludes today's Diana Shipping conference call. You may now disconnect your lines at this time and have a wonderful day.