Diana Shipping Inc (DSX) 2007 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Diana Shipping Incorporated fourth quarter 2007 earnings conference call. (OPERATOR INSTRUCTIONS). I'd now like to turn the conference over to Mr. Edward Nebb, Investor Relations Advisor. Please go ahead, sir.

Thank you, Nicole. Greetings, everyone. This is Ed Nebb, Investor Relations Advisor to Diana Shipping. I want to welcome you to the company's 2007 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 CEO; Mr. Anastassis Margaronis, President; Mr. Andreas Michalopoulos, Chief Financial Officer; and Mr. Ioannis Zafirakis, Executive Vice President and Secretary.

Before management begins their remarks, let me briefly summarize the safe harbor notice that you can see in its entirety in the news release we issued earlier today. Certain statements made during the 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 filings with the SEC, including the most recent prospectus under the heading 'risk factors'.

And with that, let me turn the call over to Mr. Simeon Palios, Chairman and Chief Executive Officer.

Thank you, Ed. It is my pleasure to report to you on the strong performance of Diana Shipping for the fourth quarter and full year 2007. Our results reflect are well-defined strategies to build a young, high-quality fleet, to manage our charter activities in an optimal manner to benefit from trends in our market and to deploy our financial resources to enhance shareholder value.

I would like to highlight some our noteworthy accomplishments for the fourth quarter and past year. Then, the members of our senior management team will review our market outlook and discuss the financial results in greater detail.

Net income increased 88% for the fourth quarter of 2007 to $36.4m, as compared with $19.4m a year ago. This strong positive trend in earnings primarily reflected the growth in our voyage and time charter revenues, due to our fleet expansion strategy as well as favorable market conditions. For the year 2007 our net income was $134.2m. This represents record annual earnings for Diana Shipping as a public Company, as well as an increase of 120% compared with $61.1m in net income for 2006.

In addition to our strong operating performance, the full year 2007 earnings reflected the sale of Pantelis SP last July. We've continued to implement our fleet expansion strategy during the fourth quarter, taking delivery of two Cape size dry bulk carriers, the Boston in November and Salt Lake City in December. As per plan, four days ago we took delivery of the Norfolk and now the Diana Shipping fleet consists of a total of 19 ships, with two additional Cape size with billings for delivery in 2010.

The efforts to expand our fleet in recent months show that we have continued to strategically deploy the proceeds of our September 2007 equity offering in a manner that is accretive to dividend per share and that will contribute to shareholder value.

In keeping with our commitment to deliver shareholder value, we declare a cash dividend of $0.60 for the fourth quarter. This brings our dividend for the full year to $2.19 per share. Including the dividends, we will have paid out a total of about $292.6m to our shareholders since Diana Shipping became a public Company.

I would like to comment in particular on our fleet management strategies; an important topic at this time of uncertainty in the global financial markets. As we have said in the past, we manage Diana's charter activities to obtain an optimal balance between short and long-term time charter contracts that is reflective of, and responsive to, market conditions.

It is important for me to draw your attention to the Company's already-secured gross revenues for 2008, which are about $281m to $292m. And this represent fixed revenue for only 85% to 89% of our operating base in 2008. Please allow me to remind you that our gross revenues for 2007 were $190m.

This strategy has given us excellent visibility to our revenues and earnings stream for the coming year. Therefore, I can state with confidence that Diana is well positioned to significantly increase our financial performance in 2008 as compared with 2007.

Next month will mark the third anniversary since our initial public offering. I'm pleased to say that we are an even sturdier Company today than we were at the time of our IPO. Our fleet is larger and increasingly diversified. Our financial resources are greater and we have maintained and expanded our relationships with many of the world's leading charterers. Furthermore, we have repeatedly demonstrated our commitment to manage our business to produce growing profitability and return value to shareholders.

With that, I will now turn the call over to our President, Stacey Margaronis. Thank you.

Thank you, Simon. And many thanks to all who have joined us in this conference call. An excellent summary of last year's developments has been provided by shipping analyst, Howe Robinson, in their recently published annual review. During 2007, a total of about 200m tons of additional bulk cargoes were shipped. The Baltic Dry Index rose 108% to 9,143 points. The Baltic Cape Index rose 128% to 13,603, while the Baltic Panamax Index rose 94% to 8,277 points.

Fresh records were set for larger bulk carrier freight rates, as the shortage of Capesize vessels intensified at a time when effective tonnage supply was reduced by growing port congestion, while broadly based industrial demand absorbed all fresh tonnage added to the sub-Cape sectors. Towards the end of the year, iron ore demand stabilized and operational problems in Brazil resulted in delays in loading ports.

At the same time, one of the world's largest shippers of iron ore, Vale, the ex-CVRD company, announced a policy of delaying fresh ton [examinations] with the aim of easing freight market tensions. The effect was that the Cape freight rates tumbled into the New Year, further underlining the sensitive balance between Cape tonnage and iron ore shipments which has been the principal cause of the volatility we have been witnessing recently in the dry bulk carrier market.

Turning to supply, broadly publicized new building statistics show that approximately 225m tons deadweight of dry bulk vessels over 10,000 tons deadweight are on order, representing about 57% of the existing fleet. These vessels are scheduled for delivery over the next four and a half years. The new building Panamax tonnage on order comes to 48m tons, about 44% of the existing Panamax fleet, while 115m tons deadweight of Capes are on order representing about 87% of the Capesize existing fleet.

These figures, taken from Clarkson Research, might vary somewhat depending on the source of the information. However, the main issue here is how many of these vessels will be actually delivered. The expansion of the world's shipbuilding industry calls for untried shipbuilders to overcome problems of procuring basic building materials, such as steel plates, and deliver vast quantities of tonnage on time.

Other factors are the commercial viability of some orders together with their financing at a time of tightening credit conditions. Finally, the quality of a number of the counterparties cannot be taken for granted.

As a consequence of all the above, there is a huge question mark and vast uncertainty over the flow of tonnage that will actually be delivered over the coming three to four years. Unfortunately, only time will tell how it eventually plays out, and this will inject an extra element of uncertainty in the future freight market moves.

As regards conversions, much has been said and written about these, by now, infamous single hull tanker conversions. Accurate numbers are hard to come by, but we consider the information provided by the world shipbuilding database, Howe Robinson, as reasonably accurate. According to these analysts, around 60 tankers have been provisionally earmarked for conversion to bulkers, of which 30 are VLCCs, 11 are Suezmaxes, 17 Aframaxes and three Panamaxes.

As we have said in the past, the whole exercise is fraught with technical risks. Yard space is extremely difficult to find and it is unlikely that even the existing ships earmarked for conversion will, from a technical point of view, find this exercise plain sailing. Nonetheless, it is clear that in 2008, 2009 and 2010 at least some additional converted tanker large ship capacity will be deployed, principally in the long haul Brazil to China iron ore trade.

The future of the Capesize bulkers will also be influenced by the rush to build a new generation of green [LOC] bulkers dedicated to long haul iron ore trade. The main reason for the emergence of this new building interest in very large ore carriers lies with the approximate $50 difference between the per-ton trade for iron ore from Australia to China compared to the Brazil to China voyage.

The answer appears to be, at least for the medium term, to reduce the cost of transportation per metric ton by increasing the size of the vessels to around 300,000 metric tons. These ships could load in Brazil and discharge in certain ports of China. They can offload a full load from Australian ports, hence, the advantage.

There are now some 68 ships in excess of 250,000 metric tons deadweight on order, plus four vessels of 388,000 tons deadweight each. They amount to above 21m tons. It is well worth noting, however, that the Far East run is infinitely inefficient for these ships. Performing about four voyages per annum and without any backhaul cargo means the super-carriers actually transport the same amount of cargoes in a year as an average 175,000 standard Cape bulker performing more productive triangular voyages.

Only time will tell whether these very large bulkers provide an effective long term solution to create per-ton reduction. All we can say is that it will have a negative impact on the supply/demand statistics.

Turning to demand, we cannot have a discussion on demand without looking at steel production. The average estimates of increase in steel production by the Chinese steel mills in 2008, taken from Howe Robinson, JP Morgan and Clarkson, is around 13%. This will result in the production of an extra 63m to 73m metric tons of steel. This will represent the lowest rate of growth since 2001 and the lowest absolute [increase] since 2004.

Taking these estimates into account, Chinese iron ore imports sufficient to insure this increase in steel production comes to approximately 60m tons. This is with Chinese local iron ore production running at around 790m metric tons per annum. Most of this additional iron ore will come from Australia and Brazil. The precise ratio is important, due to the combined effect but, due to several factors, it is difficult to forecast.

Howe Robinson estimates that total iron ore seaborne trade will increase by about 117m metric tons, with 72m coming from Australia, 36m from Brazil and the rest from South Africa, Canada, Chile and Sweden. We should keep in mind that these figures are estimated incremental volumes compared to 2007.

The closely followed iron ore price negotiations are well underway, but very little progress has been made towards agreement on the new contract pricing. With contract prices currently at between $75 and $85 per ton and spot prices at around $185 per ton, the temptation for mining companies to sell as much iron ore at spot prices as they can get away with is enormous.

At the same time, the Chinese and Japanese steel companies are hopeful that the slowdown in global economic growth may lower the price ideas of mining companies, which are now about 70% higher than current contract levels.

Looking at international seaborne coal trade, in the absence of any unexpected shocks, such as the recent floods in Australia, Howe Robinson expect an increase in the combined shipments of thermal and coking coal during 2008 of about 40m tons. Most of the extra coking coal is expected to come from the United States and Australia. As far as thermal coal is concerned, most of the additional shipments would come from Australia, Indonesia, Colombia, the United States and South Africa. China and Poland are expected to reduce their exports of this commodity.

As was reported in the Wall Street Journal on February 12, by early January the Chinese Government had reported the closure of no fewer than 10,412 coal mines and announced plans to close a further 1,100 mines. The reasons were primarily safety and efficiency related. This, together with other demand-related factors, has led the National Australia Bank to predict that during 2008 China will become a net importer of about 15m tons of coal.

Grain shipments are expected, according to Howe Robinson, to increase by an overall 15m metric tons in 2008. A modest, as usual, growth rate but important, in the sense that it underpins demand for Panamaxes especially during the river plate shipment season which is approaching. As we have reported in the past, growth rates in soybeans and soybean meal shipments are leading the increases. Most of this increase will be coming from Brazil, while most of the coarse grain incremental volumes will come from the United States.

Minor bulks, some of which are shipped in Panamax bulkers, are expected to rise by about 30m metric tons during 2008. In wrapping up our demand side review, we should mention the often neglected, but fast growing, Chinese coastal trade. According to Howe Robinson, the expansion of this trade is estimated at 100m metric tons for 2008. [The believable] assumption is made that half of the additional cargo volume is carried in Handymaxes and half in Panamax bulkers, performing an average of 20 voyages per annum, the total additional tonnage requirement for 2008 would come to around 36 Panamaxes and 50 Handymaxes. This could make the Chinese coastal trade the single most potent source of demand in the sub-Capesize bulker sectors.

The Panama effect. Briefly stated, the main sources of increased Panama demand during 2008 might be the following. First, with China projected to be a net importer of steam coal during 2008, there will be continued pressure on Japan, South Korea and Taiwan to find cargo from Australia, South Africa and the United States.

Secondly, the potential for South Africa having to increase coal exports to the Asian markets is, in the view of DnB NOR, high. And this should certainly boost the Panama's demand.

Thirdly, the increasingly active grain market, with Asia again the largest contributor to growth, should also be incremental for transportation distances, as shipments are being sourced from origins such as the Black Sea, the U.S. Gulf and Argentina.

[Conjection]. What of conjection, one of analysts' favorite themes influencing the effective supply tonnage? The Simpson Spence & Young Australian port congestion index dropped between July 2007 and January 2008 from an average delay of 23 days to just 14. The ensuing release of tonnage to the market must have been a marginal contributor to the drop in freight rates during the latter part of that period. According to Maersk broker, the vessel queue in Newcastle declined to 27 vessels during the middle of last month. The end of February queue is estimated at 18 vessels.

However, industry analysts ascribe this drop to the decision of many coal traders not to send vessels to these ports because of uncertainty in late December about whether a queue management system will be in place in 2008 to handle the vessel backlog. However, this queue management system will, indeed, remain in place during 2008 and stable queues, longer than seen in the middle of January, are expected through the year.

Meanwhile, recent heavy rains in Queensland could lead to disruption of cargo flows which could add East Australian vessel queues which currently stand at just over 100 bulkers. During this quarter, queues of vessels will be formed in Brazilian iron ore load ports due to disruptions in the loading operations there caused by port repairs and other factors. These are expected to intensify when loading operations resume, as mentioned earlier.

Turning to the outlook, and looking forward, we agree with the view expressed by Howe Robinson that, to assess the broad environment of bulk shipping, we should focus on two key areas on which we have to take a view. The first relates to the much discussed issue of the decoupling of economic fortunes among major trading partners. There is no doubt that the rate of growth of the United States and European Union economies is slowing.

However, there is much less consensus over what this means for the economies of Asia and other developing countries. There are those who argue that the slowdown in consumer spending, falling house prices, reduced residential investment and possible rising unemployment in the United States, on a scale consistent with a recession, will seriously impact Asia's export markets and result in a sharp reduction in manufacturing activity, while the credit crunch could reduce inward investments needed to fund industrial growth.

Other analysts, however, have calculated that any such development would at the worst reduce the growth of Chinese gross domestic product by about 1%, bringing it down to just below 10% per annum. We concur with this more optimistic approach for the following reasons. Firstly, the processes of Chinese industrialization and urbanization are immensely powerful and without precedent as regards their magnitude. Therefore, no-one really knows where they will lead, but there is no doubt that they are changing the world trade balances.

Secondly, within China and the entire Asian Continent, there is a rapidly growing internal consumer demand. Furthermore, in recent years China has become much less dependent on inward investment to fund its growth. In the short term, there are ample foreign exchange reserves to divert into the domestic economy should they be required.

Thirdly, so far as basic industrial demand is concerned, by far the largest portion of Chinese steel output will be used in infrastructure, construction and heavy manufacturing within China.

A second area of concern relates to the commodity cycles, which exert huge influence on the shipping market. The cyclicality in commodity prices is feared by freight markets, as well. Three things are said to bring commodity booms to an end. One are external shocks, such as wars and natural disasters, etc. Another is internal bottlenecks and, finally, over investment. The longer the cycle progresses, the greater the chance of one or all of the restraining factors developing.

As far as the short term is concerned, we agree with the views expressed by DnB NOR and Clarkson according to which dry bulk freight rates to ship iron ore, coal and other commodities may climb to record levels over the next six months. This will be driven by Chinese companies returning to work from the New Year's holiday and recovering from the worst snowstorms in five decades. They should then reserve imports of raw materials.

Even though difficult to verify, Chinese iron ore stock imports could be as low as four to five weeks forward demand. If correct, there should be a clear replenishment need during 2008. Chinese importers could also come back on stream once contract prices are settled. At the same time, Brazilian iron ore exports should return to more normal levels as port repairs are expected to be completed by the end of this month. More port congestion could then appear as demand picks up.

According to DnB NOR, there is probably a pent up demand for coal due to short- term capacity constraints and the severe weather conditions in China. Once resolved, this market, as well, should boost shipping rates.

In summing it all up, we confer with most shipping analyst's forecasts that strong increase in cargo demand will continue in 2008, and this is likely to be broadly matched by increases in tonnage supply. Factors affecting the supply and demand balance, such as the [Panama] effect and congestion, will continue having a generally beneficial on this balance.

The risks on the downside include those that have already been mentioned above, such as the downside risks of the whole commodity cycle, the growing bottlenecks in cargo generation and over-investment in ships and shipbuilding capacity. The latter might overshoot demand after 2009.

Looking ahead at 2010 and beyond, all we can say is that, other things being equal and in the unlikely event that all bulk carriers on order are delivered on time, at least the Cape fleet will grow significantly faster than the growth in iron ore volumes and a retrenchment of rates could take place.

From the point of view of world economy, it is with great apprehension that we quote a section from our presentation during the February 22, 2007 conference call when we said, quote, the effective control of systemic risks 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, would seriously disrupt international trade with devastating effects for the shipping markets. Unquote.

We need not remind this call's participants of how uncomfortably close recent developments in the credit market have brought us to the realization of this risk scenario. We are hopeful that these events will, not only cause government and central banks to take short term measures to avoid a more serious problem from developing, but will expedite the creation of a simple but effective system of financial regulation which will prevent more serious manifestations of [these types of] risks from occurring in the future.

The point made earlier by our Chief Executive Officer about our balance sheet policy and prudent chartering strategy should serve this Company well going forward, in what appears to be a positive but also volatile shipping market.

I will now pass you to our CFO, Andreas Michalopoulos, who will provide you with our Company's financial highlights for 2007 and the fourth quarter of that year. Thank you.

Thank you, Stacy, and good morning. I am pleased to be discussing today with you Diana's operational results for the fourth quarter of 2007, as well as for the entire year 2007.

Fourth quarter of 2007. Net income for the fourth quarter of 2007 amounted to $36.4m, an increase by $17m, or 88%, compared to $19.4m for the same period in 2006. This increase is attributable to the increased average hire rate and also to the enlargement of the Company fleet that went from 15 vessels at the end of the fourth quarter of 2006 to 18 at the end of the fourth quarter 2007.

The earnings per share of Diana Shipping amounted to $0.49. Despite the sale of Pantelis SP in July 2007, voyage and time charter revenues increased by $23.7m, or 67%, to $58.9m in the fourth quarter 2007, compared to $35.2m in 2006. The increase is attributable to increased average hire rates and an increase in the number of vessels in the fleet after the acquisition of the Aliki in April, the Semirio in June, the Boston in November and the Salt Lake City in December 2007.

Ownership days were 1,542 for the fourth quarter of 2007 compared to 1,321 in the same period of 2006, due to the enlargement of the fleet mentioned earlier. Fleet utilization was 99.3% in the fourth quarter of 2007 and 99.8% in the same period of 2006. The daily time charter equivalent rate for the fourth quarter of 2007 was $36,459, compared to $25,323 for 2006. Voyage expenses increased by $1m, or 59%, to $2.7m in 2007 compared to $1.7m in 2006. The increase in voyage expenses is attributable to the increasing revenues.

Billing expenses increased by $2.3m, or 37%, to $8.5m in 2007 compared to $6.2m in 2006. The increase in operating expenses is attributable to the 17% increase in ownership days, resulting from the delivery of the new Capesize vessels to our fleet, having also higher daily operating expenses than the Panamax vessels. Daily operating expenses were $5,516 in 2007 compared to $4,713 in 2006, representing an increase of about 17%.

Depreciation and amortization of deferred charges increased by $2.9m, or 62%, to $7.6m for the fourth quarter of 2007 compared to $4.7m for the same period in 2006. This increase is attributable to the increase in the number of vessels to our fleet and was partly offset by the depreciation expense of the Pantelis SP.

General and administrative expenses increased by $3.2m, or 168%, for the fourth quarter of 2007 to $5.1m compared to $1.9m in 2006. The increase is mainly attributable to a cash bonus of $1.7m that was agreed to be paid to the officers and employees of the Company. Increases in salaries and legal fees, expenses for M&A due diligence issues and to the exchange rate of U.S. dollar to euro.

Interest and finance costs decreased by $0.7m to $0.6m for the fourth quarter of 2007, compared to $1.3m for the same period in 2006. The decrease is attributable to reduced interest costs relating to long-term debt outstanding during the period.

Now, for the year ended December 31, 2007 compared to 2006. Net income for 2007, including $21.5m gained due to the sale of the Pantelis SP, amounted to $134.2m; an increase by $73.1m, or 120%, compared to $61.1m for 2006. The increase, apart from the gain of the sale of the vessel Pantelis SP, is attributable to improving trading conditions and the increase in the overall number of vessels in the fleet.

Please note that the acquisition of the fleet manager on April 1, 2006 further reduced net income available to common stockholders for the year ended December 31, 2006 to $40.8m.

Voyage and time charter revenues increased by $74.4m, or 64%, to $190.5m for 2007 compared to $116.1m for 2006. The increase is attributable to increased average hire rates in 2007 compared to the same period of 2006 and the enlargement of the Company fleet.

Ownership days were 5,813 for 2007 compared to 4,897 for 2006. The increase in ownership days resulted from the enlargement of the fleet and was partially offset by the sale of the Pantelis SP in July 2007. Fleet utilization was 99.3% for 2007, compared to 99.9% for 2006. The daily time charter equivalent rate for 2007 was $31,272, compared to $22,661 for 2006. Voyage expenses increased by $2.6m, or 43%, to $8.7m in 2007 compared to $6.1m in 2006.

The increase in voyage expenses is attributable to the increasing revenues and was partially offset by the 2% elimination in commission charged by the management company after its acquisition on April 1, 2006.

Operating expenses increased by $6.8m, or 30%, to $29.3m in 2007 compared to $22.5m in 2006. The increase in operating expenses is attributable to the 19% in ownership days resulting from the delivery of the new Capesize vessels to our fleet, having higher daily operating expenses than the Panamax vessel, as well as increased crew costs, insurances, repairs, taxes and other.

Daily operating expenses were $5,046 in 2007 compared to $4,592 in 2006, representing an increase of 10%. Depreciation and amortization of deferred charges increased by $7.7m, or 46%, to $24.4m for 2007 compared to $16.7m for 2006. This increase is as a result of the increase in a number of vessels through our fleet and was partly offset by the decreasing depreciation expenses for these vessels by the lease [SP].

General and administrative expenses for 2007 increased by $5.4m, or 86%, to $11.7m compared to $6.3m in 2006. The increase is mainly attributable to increases in salaries and a bonus of $1.7m to officers and employees, expenses for M&A due diligence issues, to the exchange rate of U.S. dollars to euro and, finally, to the first quarter expenses of the fleet branch.

Interest and finance costs for 2007 increased by $2.5m, or 64%, to $6.4m compared to $3.9m in 2006. The increase is attributable to interest expenses relating to long-term debt that was outstanding during 2007 and did not exist in 2006.

Turning to dividend policy, for the fourth quarter of 2007 the Board of Directors has decided to declare a dividend of $0.60 per share. Diana declares and pays quarterly dividends that are substantially equal to the available cash from operations during the prior quarter.

In calculating the cash dividend we take into account expenses, dry docking 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. And the qualifying debt on our balance sheet was below [$150m]. Thank you for your attention. We will be now (inaudible) --

(Inaudible).

Yes. Now, we would be pleased to answer your questions and I will turn the call to the operator, who will instruct you as to the procedure for asking questions. Thanks again.

Thank you. At this time, ladies and gentlemen, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS). One moment, please.

Thank you. Ladies and gentlemen, our first question comes from the line of Justin Yagerman with Wachovia. Please go ahead.

Yes, it's Justin Yagerman with Wachovia. Can you hear me?

Yes, very well. [What do you want, Justin]?

Okay, great. It seemed like there were some technical difficulties there. Trying to get a sense of what you're seeing in the sales and purchase market right now. It felt like the first month or so of this year was very muted compared, obviously, to the high levels of activity we saw in 2007. Curious what the landscape is like right now, given that rates have come off and now come back so sharply. Where are owner's heads about sales and purchase of vessels and how are you guys thinking of approaching that market initiative 2008?

Well, I think, Justin, at the moment there are two kinds of potential sellers in the market and, of course, we are talking about the re-sales of new [business] re-sales. The first kind of seller is the guy who has bought a vessel about a year or a year and a half ago at a much reduced price, and he can see the price still a little bit higher today, and he wants to sell. Now, this type of seller is very strong and he has money to finance the whole deal.

But the other type of seller is the one who has gone and ordered a lot of ships thinking that he will raise a very high finance of the region of 80% and he finds it today very, very difficult to get any finance, let alone 80%. So you understand that there are two layers of the market.

Now, as regards to the seller with money in his pocket today, I think for a Cape with delivery middle of 2009, you can get these at approximately $135m. Now, as regards to the Panamaxes, the last done was the [Clio] which was sold at $105m, back in October of 2007. Now the price of that vessel today has been reduced quite substantially.

I hope I've helped reply your question, Justin?

Yes, I guess. And then I guess a follow up to that is do you think -- I mean it -- those asset values reflect obviously pretty hefty rates at 135 per a Cape and 105 for a Panamax and, understandably, the Panamax rate is probably -- the price has probably come in a bit. Do you think that rates right now support those kinds of acquisitions, or if not, what other markets are you looking at to try and find growth for the fleet, this year?

Well, I still think the best bet today is the Cape's and the Panamaxes as regards to the rates that we are getting. Don't forget that the last done for a Cape with prompt delivery, which means up to August 2008, it was $75,000 for five years, which is a very nice rate. And I suppose this perhaps the highest we have ever seen.

Now, as regards to the Panamaxes, the rates you can get today, it's approximately $72,000 -- $68,000 to $72,000 for a year or, for five years, $35,000.

Got it. Okay. I guess a question that may not have affected you as much, but I'm curious to hear, we obviously saw a very sharp decline in rates in a very short period of time. Did you hear about, or experience any issues with counterparties out in the marketplace with rates having come off that hard, that fast? And did you -- I doubt that you guys have, because of the quality of the counterparties that you have, but have you spoken to anybody in the market who has experienced any issues with their contracts as rates fell well below what some of these contracts had been signed at?

I don't think there has been any renegotiations but, Justin, don't forget that the timing was not enough. It was very short lived. And now, again, the rates are back to where they were at the top.

Yes, point taken. I guess one last question, as far as the direction of the market goes right now. You guys sounded fairly bullish, and we've heard that for a few other carriers out there, but with some trepidation about what the supply/demand equation is to come.

What are you hearing from counterparties? You guys signed a five-year contract recently with Cargill. Is there a lot of period interest, or would you characterize as a one-off transaction and what is that duration looking like? Are there five years readily available for Cape's? Are there five years readily available for Panamaxes? That seems like a very long time for a Panamax?

Well, provided you have invested in these spots, and for the Cape's I mean up to August 2008, and for the Panamax within about a month from today, I think you can see the rates for one year or, for the Panamax for one year, or even five years.

And for the Cape's, yes, there are takers for five years. The sentiment remains positive for the dry bulk market. The Cape's and the Panamaxes are firming. The FFAs have risen over the past several days. The coal prices continue to move higher. The import demand from China remains strong and with the increase of time charter activities supporting the spot market, the near-term outlook implies further market strength.

Okay. Thank you so much.

Thank you, Justin.

Thank you. Our next question comes from the line of Jonathan Chappell with JPMorgan. Please go ahead.

Thank you. Good afternoon. Simeon, if we could take the answers that you gave to the previous questions and translate those to Diana's strategic development over the next few months, first, do you think that Diana would be interested in continuing fleet growth in 2008, based on the returns that you see on vessels?

And then second, with the two Panamaxes that are rolling off in the next couple of months' charters, would you foresee shorter term contracts for those ships, or would you put those Panamaxes on the two and three-year contracts that you said are still out there in the market?

The options that rest in front of us today are the following. A Panamax with prompt delivery, like our Niref's and Protef's, can be chartered with a first-class name for 46 months at $70,000 to $64,000, for a year at $72,000 to $68,000, for two years at $61,000 to $60,000 and for five years at $35,000 and, as I said before, the momentum is positive.

You understand that this is where the management has take a commercial decision as to when, and with whom, and for how long, to charter the vessel. Our chartering policy, together with our capital structure, gives us the flexibility to assess the market conditions even at the last moment before committing the vessel.

Taking advantage of the current momentum, together with our portfolio approach to our chartering policy, we believe that we will do the best for our shareholders.

Okay. And on the fleet growth, would you be a buyer of second-hand tonnage today?

Well, we have to assess two things. First of all, to be accretive to the earnings per share. And secondly, we have to judge whether there is appetite from the money market.

Okay. Andreas, I have one question for you, on the G&A. You mentioned the $1.7m cash bonus; I assume that was one time or, at least fourth quarter, in nature only. If we were to remove that from the fourth quarter number that would leave us about 3.4m, which was still materially higher than in previous quarters. Would that be a good run rate to use going forward, or should we consider some of the other things like the M&A exploration as one-time events? Where would you look at G&A on a quarterly basis for 2008?

Yes, hello, John. First of all, let me clarify on the one-off, 1.7m bonus. Two things. The first thing is that the Compensation Committee proposed to the Board this bonus towards the -- to end the fourth quarter of 2007. So it was something that was unknown to all of us.

The Board decided to give that bonus to all officers and employees; that's point number one. Whether its going to be there next year or not, that also I do not know. And this will depend on a series of indicators that the Compensation Committee of our company looks at and proposes or not, to the Board. And as a last point on that one, it is the first year since the IPO in 2005 that the employees and officers get a bonus.

On the other point, indeed, in the G&As we had some -- we had two things. The first thing was the M&A due diligence issues which also, unfortunately or fortunately, whatever, I cannot foresee whether we will have such issues in the future.

As you know, as a public Company when things come up or exist, and that things that could fit to our strategy, our financial strategy, as we have explained many times, what this financial strategy was, we are obliged to look at it. And usually when we look at it we look at it very thoroughly and this incurs some costs. Something that happened this time around. And now -- so whether we should consider that for next year, I don't know. I -- at the moment I would say, no.

And the other point to mention on the G&A that we must not forget, is the U.S. dollar to euro rate, which obviously these lines, as I've said many times before, is euro denominated mainly. And this obviously has hit us pretty severely on this fourth quarter, looking at the euro/dollar rate where it has gone. So I hope that answers your question as much as I can answer your question.

Okay. Thank you, Andreas, and thank you, Simeon.

Thank you. Our next question comes from the line of Scott Burk with Bear Stearns. Please go ahead.

Yes, hello, Andreas. I just have one follow up on that G&A question. Could you tell us how much the M&A due diligence, how much of the 3.4m that made up? I know there's like --

Yes. I will give you a range, but the range that I will give you, first of all, cannot be considered as indicative for future M&A type due diligence that we may have and cannot be taken for granted, but it was around -- between $700,000 to $900,000.

Okay. So if you back that out you're getting closer to something like 2.5m run rate?

Close to the run rate that we have stated over previous quarters, indeed.

Yes. Then another question on the expense side. The OpEx was a little bit higher than what we had in our model as well. Are you seeing some cost pressures there? Does the fourth quarter rate, in terms of dollar per ship day, does that represent a good run rate going into 2008?

There are two things to that, as well. The first one is the mix between Capesize vessels and Panamax vessels. You understand that all the new vessels that came into our fleet during the fourth quarter, and as well as the new vessel that came now, on the February 11, the Norfolk, were Capesize vessels. And to be clear, Capesize vessel has higher costs than a Panamax. So changing the mix obviously increases your average of daily operating expenses. That's the main point.

And the second point, yes, we do feel in our Company some cost pressures that we are tackling regarding crew and insurances as well as some lubricants. But we feel very comfortable as a Company that we're very well positioned due to our long track record, our new vessels, our experience as a management to tackle those increases as efficiently as possible.

But allow me to add to this very interesting answer by Andreas, to say that there are some operating expenses which are elastic and some which are not. And the main, inelastic element of cost, of course, are the salaries for the seamen. And for the demand that exists today for seamen, there is nothing that Andreas' prudent financial management or anybody within this management team can do to reduce that because we do not have excess personnel, excessive personnel in numbers, onboard the ships considering you want to keep them in good condition and maintain them.

And if we are to get quality seamen, we have to pay up the salaries that these people demand and which the competition pays. Otherwise we tend to have inferior crew and you know that these high-value assets cannot be run by second-rate seamen.

More flexible, of course, costs are others that we try to control through negotiating insurance premium and contracts for the provision and supply of lubricants and various other consumables. But the major cost, which in the operating expenses are the wages, are pretty inelastic.

Okay. And then I wanted to ask one question about the two new buildings that you have right now, the schedules for delivery in 2010. We've seen some other ships that delivered a little earlier than expected. I just wondered how -- what the progress -- for some other companies. What is the progress on those? Is it too early to tell? Could they possibly be delivered in late '09 instead of 2010?

Yes, most likely we are going to have the vessels about five to six months earlier. But, of course, at this particular moment we have no indication from the yard. But the way they go and the developments of the size of the yard, the extra lifting capacity they are putting etcetera, it looks that we are going to have the vessel about five to six months earlier.

And, Simeon, is that due to the -- because it's a really good yard, or if we see acceleration of vessel like that it may offset the vessels that get delayed on say the new -- the brand new shipyards.

Well, I think the yard is a very good yard and I think the end products, the SWS Cape, is well known now and it has established itself. It's definitely a good yard.

Now, as regards to whether by making the yard more efficient whether they will be able to build further tonnage, I think that this lack of appetites from the major banks to lend money to have an adverse effect.

Okay. So the new building has slowed down more on the financing side?

Yes. The major thing today is the finance.

And we have to take into consideration as well, the fact that the problem and the uncertainty that I referred to as regards the new shipyards relates to a huge number of contracts. Some of which have already been sold on to other owners at the time that the shipyard hasn't even been built.

So, here, we have the established shipyards, like Simeon expressed a view on, SWS and others, which are not many. And a huge number of secondary yards that don't exist yet, and some of which are being built, from which no doubt a few will produce good ships sometime, but we fear that the majority will either never produce ships or they will produce them very late. And that is the problem here that creates an issue with providing accurate forecasts of future tonnage supply.

Okay. Thank you.

Thank you. Our next question comes from the line of Greg Lewis with Credit Suisse. Please go ahead.

Yes, good afternoon. My first question is you alluded to the slowdown in the coal exports out of Australia with, potentially, South Africa picking up that slack. Have you looked at South Africa's ability to increase it's coal exports? Do they -- in other words do they have capacity to increase?

If I could make two points, first of all, the Australian slowdown is a very short-term event, while the South African increase in exports of coal is a long-term event. The short-term event has to do with the floodings that they've had and the difficulties in bringing cargo to ports because of this. That should be over within weeks or maximum months.

And as far as new cargo is concerned, there is a sort of forecast by analysts that the rail capacity and the shipping capacity are going to be matched by 2010 with the infrastructure work which is happening, which is still going to be short of what the miners would like, but not by a huge amount, less than 10% short. So in the long run, Australia will be exporting coal in higher quantities than they are now, in higher volumes.

In South Africa we have noticed that there is potential to increase exports. It is not enormous, because of various other bottlenecks and problems that they are facing, but it does exist. And everything that will come out of South Africa has the advantage as far as demand is concerned, for ships, of adding to the ton mile effect, because of where South Africa happens to be geographically vis a vis most Asian nations, especially North -- the North Asian areas.

So in the long term we see increase from South Africa, of a few million tons I should say, not much, much more. Not more than 5m or maybe 6m or 7m tons over the next two or three years. And within Australia, of course, because the volumes are already much higher, we see significant increases between now and 2010.

Okay, great. And then my last question, I guess for Andreas. It looks like filing the delivery of that last Cape that your debt level is going to be above that semi-permanent level that you targeted about a year ago. Is there any thoughts about increasing that semi-permanent debt level?

At the moment we have drawn down 146.5m from the revolving credit facility with the Royal Bank of Scotland, so we are still below. But we will go down a further amount during the course of next month, where we will be on or about 200m. There is a thought of increasing the level from 150m to on or about 200m. That needs to be discussed internally, and as soon as this decision is taken, we will come up with a Press Release.

The reason why we are thinking of doing that is that since the September 22, 2006, where there were 13 vessels on the fleet, we have increased this number of vessels, increased the number to 19 vessels by acquiring Capesize vessels which have a much higher deadweight tons, as you know, than Panamax vessels. So the mix, let's say is -- it increases even more the number of vessels, so we feel that the semi-permanent debt of on or about $200m is totally justifiable for our Company.

Nevertheless, as you know that we -- as soon as a decision is taken by our Board of Directors, because this is a Board of Directors' decision and not mine, certainly, we will come out with a Press Release for that and you will be the first to know.

Okay, great. Thanks.

Thank you. (OPERATOR INSTRUCTIONS). And we have no further questions. I would like to turn it back over to management for closing remarks.

As always, we appreciate your interest in, and support for, Diana Shipping. We are confident in the future of our Company and we look forward to speak with you next quarter. Thank you.

Thank you, ladies and gentlemen that, does conclude our conference call.

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