Diana Shipping Inc (DSX) 2012 Q2 法說會逐字稿

Welcome to the Diana Shipping Inc. second-quarter 2012 conference call and webcast.

At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Edward Nebb, Investor Relations Advisor for Diana Shipping. Thank you, sir. You may begin.

Thank you, Dan, and welcome, everyone, to the Diana Shipping Inc. 2012 second-quarter conference call. The members of the Diana Shipping management team who are with us today includes Mr. Simeon Palios, Chairman and Chief Executive Officer; Mr. Anastasios Margaronis, President; Mr. Andreas Michalopoulos, Chief Financial Officer; Mr. Ioannis Zafirakis, Executive Vice President and Secretary; and Miss Maria Dede, Chief Accounting Officer.

Before management begins their remarks let me briefly summarize the Safe Harbor notice. Certain statements made during this conference call which are not statements of historical fact are forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act.

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 the forward-looking statements, please refer to the Company's filings with the Securities and Exchange Commission.

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

Good morning and thank you for joining us today. Diana Shipping Inc. continues to operate in a [safe] and prudent manner despite the challenging conditions that have prevailed in our industry for some time. The Company delivered reliable revenues and profits, continued to expand our fleet, and maintained a sound capital structure.

During the quarter we announced the delivery of the newly built Philadelphia, a Newcastlemax dry bulk carrier that was contracted in 2010. In addition, in March 2012 we agreed to purchase the Melia, a Panamax dry bulk carrier built in 2005, to join our fleet in May 2012. Just last week we agreed to acquire a newbuilding Post-Panamax dry bulk carrier built by Tsuneishi Group (Zhoushan) Shipbuilding Inc. The vessel to be named Amphitrite is expected to be delivered to the Company later this month.

With delivery of the Amphitrite we will operate a total of 29 dry bulk carriers. We also have two Ice Class Panamax vessels under construction which would bring the vessels of our fleet to 31 vessels. Considering that we own 21 vessels at the time we commenced our current fleet investment strategy in 2008, this represents significant progress in the growth of our fleet.

We continue to manage our fleet in a responsible manner that promotes a balance of time charter maturities and produces a predictable revenue stream. Currently, our fixed revenue days are 69% for 2012. The vast majority of our vessels are chartered to periods ranging from 2015 through 2015 and beyond. We continue to enjoy excellent relationships with many of the industry's strongest and most respected charterers.

Now let me briefly summarize our financial performance for the second quarter of 2012.

Net income to Diana Shipping Inc. was $17.4 million for the 2012 second quarter compared to $27.7 million a year ago. Time charter revenues for the latest quarter totaled $57.6 million versus $64.6 million in the second quarter of last year. Time charter rates averaged $22,256 for the 2012 second quarter compared with $30,597 in the same period of 2011.

We continue to have one of the strongest balance sheets in our industry. Our cash position at June 30, 2012, was in excess of $451 million. The Company continues to have solid access to credit. We drew down $34.65 million on our line with China Eximbank in connection with the purchase of the Philadelphia and also drew down $10.325 million from an increased Nordea Bank term loan facility for the Melia.

We continue to operate with a very manageable degree of leverage. Long-term debt, including current portion and net of finance charges, was $461 million at June 30, 2012, compared to stockholders' equity of $1.2 billion. Our solid financial position helps to ensure stability in a volatile market and is also a source of support for continuing growth initiatives.

As the dry bulk shipping industry continues to face a challenging operating environment, we will apply our consistent, prudent strategies to deliver predictable revenues and profitability. We will continue our program of selectively and gradually adding to our fleet as market conditions permit us to acquire vessels at attractive prices.

We will operate our fleet according to balanced and prudent chartering policies that promote a predictable revenue stream and enable us to sustain profitable operations. And we will continue to manage our balance sheet to provide financial flexibility, provide the capacity to support growth, and maintain an acceptable degree of dividends.

With that I will now turn the call over to our President, Stasi Margaronis, for a perspective on industry conditions. He will then be followed by our Chief Financial Officer, Andreas Michalopoulos, who will provide the financial overview. Thank you.

Thank you, Simeon, and many thanks to all who have joined us in this midsummer call to listen to what will, unfortunately, be rather depressing news for the near-term outlook for the dry bulk sector.

In order to get a general idea of how the dry bulk freight market has performed over the second quarter of 2012 we will take the usual look at the various dry bulk indices. The Baltic Dry Index stood on April 2, 2012, at 934 points and closed yesterday at 878. The Baltic Cape Index moved from 1,427 to 1,181 over the same period, while the Baltic Panamax Index started the quarter at 1,051 and closed yesterday at 954 points. This is a pretty grim picture indeed.

But let's look at the macroeconomic considerations. According to the IMS, global growth is expected to come in at 3.9% for 2013, down from its previous estimate of 4.1%. This forecast for 2012 remains unchanged at 3.5%.

Advanced economies are expected to grow 1.4% this year and 1.9% in 2013, while emerging economies are expected to grow by 5.6% this year and 5.9% in 2013. The US economy rose at an annual rate of 1.9% during the first quarter of 2012 compared to 3% during the fourth quarter last year. According to Maersk Broker, Europe stagnated in the first three months of this year but avoided a recession due to growth in the German economy.

Japan's economy expanded at an annualized rate of 4.7% in the first quarter this year and consumer spending was the biggest contributor to this growth.

According to the OECD's leading indicators, growth in most major economies is set to slow down in coming months with only Brazil expected to experience a pickup in the rate of growth. Leading indicators for developing economies signal slowdowns or growth that is below the long-term trend rates.

The leading economic indicator for China has fallen every month this year and dropped again in May, the most recent month for which information is available, to 99.2 from 99.4. The leading indicators for India and Russia are also heading steadily downward. According to Fearnley, during the first quarter of 2012 India's economy expanded at an annual rate of 5.3%, down from 9.2% in the same period last year with the country's agricultural and manufacturing sectors hit by sharp slowdowns.

The OECD's leading indicators are designed to provide early signals of turning points between expansion and slowdown of economic activities.

Wells Fargo recently reported that Chinese GDP grew at 7.6% in the second quarter of 2012, slightly above the government's 7.5% growth target, but was the lowest figure since 2009. That marked the sixth consecutive quarterly decline for Chinese gross domestic profit. However, low inflation could provide the Chinese government with room to adopt a more aggressive monetary policy over the next few quarters.

It was encouraging to note that according to Maersk Broker the Purchasing Managers' Index rose to a three-month high of 56.7 in June from 55.2 in May. This could be a sign that growth in the world's second-largest economy may be steadying up as the Chinese government to steps to stimulate the economy while keeping house prices under control.

Commodore Research reports that recently published data shows that June retail sales in China were 11% higher than in June 2011. This year Chinese retail sales are well on their way to setting another record.

Let's turn to steel production now.

The World Steel Association recently reported that world steel production in the first half of 2012 was about 767 million metric tonnes, a slight increase of 0.9% compared to the same period last year. We are forecasting that global steel consumption will increase by 3.6% in 2012 compared to 5.6% growth in 2011.

As for steel prices, they were generally weaker in June. In China steel output remains higher than last year despite the slowdown in growth. However, there is already overcapacity in the Chinese steel industry and it will be a concern to the steel mills that demand from real estate market may slow.

Iron ore now. According to overall world inputs are expected to increase 6% this year to 1.113 billion tonnes. Their latest estimates for total Chinese imports of this commodity for 2012 stands at 721.5 million tonnes. This would represent growth of 8% year on year.

According to Commodore Research, China produced a record 1.32 billion tonnes of iron ore in 2011. They expect a similar volume to be produced again this year. Despite this, they still expect iron ore imports to China to remain high. Domestic iron ore remains of low quality and steel mills will continue to pursue a large amount of imported iron ore.

Nevertheless, Chinese steel prices continue to come under a large amount of pressure. If this continues, in the near term Chinese demand for imported iron ore cargoes could also come under pressure as Chinese steel mills remain likely to further reduce production.

Iron ore exports from South Africa have, according to Maersk Broker, the future potential to reach 475 million tonnes by 2018. Assuming that China will import 60% of that total, the trade routes between Africa and China is expected to require the equivalent of 574 Panamax vessels or 242 Capesize vessels per year.

Let's turn to iron ore stockpiles. According to Commodore Research, approximately 89.5 million metric tons of iron ore is currently stockpiled in Chinese [vaults]. This is about 600,000 tonnes more than just a week ago.

Going forward, we continue to anticipate that Chinese iron ore stockpiles will fluctuate between 95 million and 101.5 million metric tonnes. Maersk Broker count even higher current stockpiling coming to just under 100 million tons, which they ascribe to shrinking downstream demand for this commodity.

Now with regards coking coal, Clarksons predicted that the world exports of this commodity could reach 230 million tonnes this year, which will be 3% higher than in 2011. Coking coal exports from Australia are expected to reach 142.5 million metric tonnes for the 12 months to June 2012 according to the Australian Bureau of Natural Resources. This would represent a 4.9% increase compared to 2011; however, last year severe weather affected coal production and shipments. As for 2013, the estimate for exports is 161 million metric tonnes.

It is also interesting to note that from the total amount of 2.67 million metric tons of Chinese coking coal imports for the month of June this year 32% came from Mongolia on road and rail. Shippers have to watch these statistics carefully going forward as improving infrastructure will allow more and more Mongolian coal to reach the users of this commodity all over China.

Turning to steam coal now, Clarksons here predicts that world imports of steam coal could reach 756 million tonnes this year, an increase of 5% compared to 2011. According to Commodore Research, the ongoing surge in hydropower production has continued to put pressure on Chinese demand for thermal coal and less electricity is being derived from coal burning power plants.

China produced 295.3 billion kilowatt hours of thermal coal-derived electricity in June, which was 2% less than what it produced in May and 6% less than what it produced in June 2011. Gibsons reports that India's thermal coal export are expected to exceed 100 million tonnes while exports to China are expected to double this year compared to last. This is not particularly good news as regards the ton-mile effects and the demand for bulkers to carry this cargo.

According to Maersk Broker, coal exports from South Africa have the potential to quadruple between 2011 and 2018 reaching 269 million tonnes in 2018. Assuming here China now receives 20% of these exports that would require 66 Panamaxes or 28 Cap sized ships per year. If India imports 50% of these exports, the annual vessel requirement to service this freight would be either 114 Panamaxes or 48 Capes.

Turning to grain now. Global imports of grain cargoes are expected, according to Clarksons, to be 265 million tonnes this year, which will be about the same as in 2011. However, there are is likely to be a number of changes in grain export patterns in the 2012/2013 grain season which is just starting now. Increased grain production in the US and potentially reduced competition from other exporters may help to support the [US with the] country's exports currently projected to rise 10% year on year to 80.7 million tonnes.

Let's turn to supply now. So far this year Maersk Broker reported 707 vessels of about 60 million ton deadweight have been delivered, which is approximately 12 million tonnes more than the same period last year. Last year the VLOC fleet grew by about 25% and growth of 29% and 15%, respectively, are expected by Fearnley for this year and 2013.

As regards Capes, the fleet is expected to grow by about 8% this year and remain more or less steady in 2013. However, their fate is closely linked to that of the VLOCs where the numbers are not very encouraging, as mentioned above.

As for Panamaxes, newbuilding deliveries are expected to peak this year with the fleet increasing by about 16%. For 2013 RS Platou expects deliveries for all types of bulk carriers to be in the region of 50 million deadweight tonnes and scrapping at slightly less than 20 billion deadweight tonnes. In 2014 deliveries are expected to reach 40 million deadweight tonnes while scrapping is estimated to be around 12 million deadweight tonnes. Based on these assumptions, RS Platou expects fleet growth to be 7% in 2013 and only 4% in 2014.

Let's look at demolition briefly. So far this year Clarksons Research has recorded a total of 18 million deadweight tonnes having been sold for demolition. This figure is that about 41% higher than the tonnage scrapped during the same period in 2011. The expectation is for over 30 million deadweight tonnes to have been scrapped by the end of this year.

Mitsui O.S.K. Lines, Japan's largest shipping company, has announced that it will scrap or lay-up up to 20 Capesize bulkers by next March to curb excess capacity in the bulker market.

A brief look at congestion now. Congestion in Australian ports rose significantly during the first quarter of 2012 while Chinese ports registered fewer delays in the second quarter of this year compared to the second quarter of 2011.

According to Commodore Research, approximately 95 vessels are anchored outside major Australian coal and iron ore ports. About 30 vessels are anchored outside Brazilian iron ore load ports. From this total, approximately 75 are Capesize bulkers, which is about the same number of ships waiting to load with these two cargoes about a week ago. Congestion has been relatively stable over the past few weeks.

Let's turn to the newbuilding order book. The dry bulk carrier order book, as reported by Clarksons Research, stands at 2,137 vessels or just under 171 million deadweight tonnes, which represents about 26.1% of the existing fleet by capacity. These sort of numbers include 319 Capes, representing in tonnage terms 24% of the existing fleet, and 767 Panamax vessels, which includes ships up to 100,000 deadweight tonnes, representing 36.3% of the existing fleet.

A large chunk of these ships are scheduled for delivery during the balance of this year, although it is expected that a significant number of these scheduled deliveries will be postponed. We find reasonable the assumption made by Fearnley that about that about 305 of all vessels on order will either never be delivered or their deliveries postponed until up to 2014. This year they see bulk carrier fleet growing by about 12% net of scrapping and other deletions from the bulk carrier fleet.

Regardless of (inaudible), assuming there is not going to be a surge of new ordering in 2013 it looks like a year with considerably fewer deliveries than 2012. Tuck-in newbuilding [ordering spree] should be very difficult to implement due to difficulties in obtaining finance. Lack of financing could keep owners from ordering new vessels, hopefully, paving the way for a meaningful recovery across the size spectrum of the oversupplied bulk carrier segment.

Within this tight credit environment the Korean Eximbank announced only recently that it will provide $871 billion for exports of ships and offshore plans. The main reason is to support the ailing shipbuilding industry within that country.

As regards new contracts (inaudible), so far in 2012 Clarksons has seen the total order book decline by 19% in terms of deadweight compared to the size of the order book at the end of 2011.

Ship values now. Values are expected to decrease further during 2012 according to Fearnley and we are not expecting freight rates to increase. Fair values of Capesize bulkers are back to levels seen in 2003. The same holds true for Panamaxes. RS Platou estimates that there is overcapacity of about 30% in the shipbuilding market today, therefore, shipbuilding prices should remain under pressure for the remainder of the year and for 2013.

Now our outlook. According to Fearnleys, the dry bulk market is expected to remain low with little volatility over the next couple of months. About 30 to 40 Panamaxes are waiting outside Chinese ports with unsold coal cargoes. RS Platou foresees freight rates for bulkers recovering somewhat into the second half of 2013, but it is forecasting average time charter earnings to stay around $12,000 per day for the whole year.

Over the longer term, however, we agree with the view expressed by Morgan Stanley Research that the sector will continue to be under pressure over the next 12 to 18 months, mainly due to rapid fleet expansion. Nevertheless, as vessels deliveries decline and economies gradually recover, there should come an improvement in freight rates towards the end of 2013, especially as Asian demand for raw materials remains robust and iron ore supplies are set to grow, particularly from Australia.

So unless there is a surge in ordering bulkers, during 2013 the growth of supply should be marginally ahead of demand growth, but in 2014 demand growth should comfortably exceed supply growth. This could trigger the beginning of the next sub cycle in dry bulk shipping with a gradual upturn in fleet utilization and freight rates leading to higher ship values.

The Diana Shipping Inc. investment strategy has not changed, as witnessed by the recently announced purchase of the newbuilding resale vessel Amphitrite. The Company continues expanding its bulk carrier fleet in a steady manner and with conservative debt levels. We firmly believe that the bottom of the dry bulk shipping cycle has not been reached just yet, but may not be too far away.

Without attempting to predict the bottom of the cycle we will continue to purchase vessels which will increase our cash flow without adversely affecting the strength of our balance sheet. This investment strategy has served the Company well during the down cycle and has allowed us to be in a position to take advantage of attractive opportunities as they presented themselves.

I will now pass the call to our CFO, Andreas Michalopoulos, who will provide you with the financial highlights of the second quarter and first half of this year.

Thank you, Stasi, and good morning. I am pleased to be discussing today with you Diana's operational results for the second quarter of 2012 and six months ended June 30, 2012.

For the second quarter of 2012 net income for Diana Shipping Inc. amounted to $17.4 million and the EPS $0.21. Time charter revenue decreased to $57.6 million compared to $64.6 million in 2011, and the decrease is attributable to decreased average time charter rates that we achieved for our vessels during the period compared with the second quarter 2011. The decrease was partly offset by revenues derived from the vessels Arethusa, Leto, Los Angeles, Melia, and Philadelphia delivered in July 2011, January, February, and May 2012, respectively.

Ownership days were 2,472 for the second quarter of 2012 compared to 2,093 in the same period of 2011. Fleet utilization was 99.6% in the second quarter of 2012 compared to 98.6% in 2011. The daily time charter equivalent rate for the second quarter of 2012 was $22,266 compared to $30,597 for 2011.

Other revenues for the second quarter of 2011 amounted to $0.6 million and consists of revenues derived from the management and administrative agreements between Diana Shipping Services SA and Diana Containerships, Inc. Full year's expenses were $2.9 million for the quarter.

Operating expenses amounted to $15.4 million and increased by 9%. This increase is attributable to the addition of new vessels in the fleet which resulted n the ownership days to increase by 18%. The increase was offset by decreases in all categories of operating expenses, but mainly repairs and maintenance.

Daily operating expenses were $6,218 for the second quarter 2012 compared to $6,724 in 2011, representing a decrease of 8%. Depreciation and amortization of deferred charges amounted to $15.3 million. General and administrative expenses increased by $0.4 million, or 6%, for the second quarter 2012 to $6.6 million compared to $6.2 million in 2011.

Interest and finance costs were $1.9 million for the quarter compared to $1.2 million in 2011. This increase is attributable to increased average interest rates during the period and increased average debt. Income from investments in Diana Containerships Inc., the gain from our investments in Diana Containerships Inc. amounted to $0.4 million compared to $0.5 million for the same period in 2011.

Turning now to the six months ended June 30, 2012. Net income for Diana Shipping Inc. amounted to $37.3 million and the EPS was $0.46. Time charter revenues for the six months ended June 30, 2012, increased to $115.2 million compared to $134.1 million in 2011. The increase is attributable to increased revenues due to the addition in our fleet of the vessels Arethusa, Leto, Los Angeles, Melia, and Philadelphia, and was partly offset by decreased average hirer rates during the six months ended June 30, 2012, compared to 2011.

Ownership days where 4,785 for the six months ended June 30, 2012, compared to 4,199 in 2011. Fleet utilization was 99.7% for the six months ended June 30, 2012, and 99.2% in 2011, and the daily time charter equivalent rate was $23,229 compared to $31,104 for the same period of 2011.

Other revenues for the six months ended June 30, 2012, amounted to $1.2 million. Voyage expenses were $5.1 million for the six months ended June 30, 2012. Operating expenses amounted to $30 million and increased by 14%. The increase is attributable to the 14% increase in ownership days resulting from the delivery of one vessel in 2011, four vessels in 2012, and the increased stores and [spares]. The increase was partly offset by decreases in insurance and repairs and maintenance.

Daily operating expenses were $6,275 for the six months ended June 30, 2012, compared to [$602,097] in 2011. Depreciation and amortization of deferred charges amounted to $29.9 million for 2012. General and administrative expenses decreased by $0.1 million, or 1%, for the six months ended June 30, 2012, to $12.7 million compared to $12.8 million in 2011.

Interest and finance costs increased by $0.9 million to $3.4 million compared to $2.5 million in the same period of 2011. This increase was attributable to increased average debt during 2012 compared to 2011 and increased average interest rates.

Income from investments in Diana Containerships Inc. The gain from our investments in Diana Containerships Inc. increased [$2.7] million compared [to $0.6] million for the same period in 2011.

Thank you for your attention. I will turn back the call to Mr. Palios.

Gentlemen, I would like to make a correction. Our fixed revenue days are 96% for 2012 -- 96% 2012, not 69% as erroneously stated before. Thank you.

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

(Operator Instructions) Michael Webber, Wells Fargo.

Just wanted to start off with a question around [vessel] acquisition, which is always pertinent with you guys considering your cash position. Can you maybe give us some color in terms of what you are seeing in the market in terms of vessel -- A) vessel classes and then B) whether we are talking single vessels or on-block deals?

Obviously you guys have been busy earlier this year with single vessel acquisitions, so maybe just a little bit of color about what we can expect through the back half of the year from you guys?

Mike, we will be focusing again as always on Panamaxes, Camsarmaxes, Post-Panamaxes, Capes, and Newcastlemaxes. Our potential candidates come from three stables. The first stable comes from the newbuildings, the second is the sales, and the third is, let's say, the maximum five-year-old secondhand ships.

Now the newbuilding orders have to include all the goodies which we have accumulated on our inspections of secondhand tonnage, plus all the new technological improvements on the shipbuilding industry, which is the long-stroke engine, the slow RPM, the electronic engine, the new hull structure, making the vessel more efficient. This statement making the vessel more efficient is marginal but anyway it is a little bit more efficient.

Now the resales we have to focus on first-class yards and the maximum four- to five-year-old secondhand ships also they have to come from first-class yards.

As regards the [newbuilds], the delivery we should expect something in 2014 but we will continue our strategy in purchasing ships every two, two-and-a-half months as we have been doing all along. You can understand that we are in a very good position and we will be trying to increase our leverage in the next two to three years again.

Sure, that makes sense. You mentioned the first-class yards and looking for more modern designs and generally higher-quality ships. In terms of what you're seeing and what comes across your desk is there a higher concentration in those kinds of assets, or do you really have to weed through 70% of the reports that come across your desk before you find something that might look attractive?

Well, I think that these last three months that has elapsed from the previous time we spoke together there are more ships available to purchase indeed. There are much more ships available to purchase and better quality ships.

Interesting, interesting. Just changing gears quickly, and, forgive me, I didn't see it anywhere in your release, but it doesn't look like you had bought back any stock in the quarter. Actually share count looks like it has inched up a little bit.

Can you maybe give us some color around your thoughts there with the stock obviously off a bit; when you guys might think about allocating some of that cash towards equity and away from steel?

We are assessing that. As you can imagine, Mike, we are looking at that constantly and if need be we will not hesitate in a steady manner, obviously, not to destroy everything we have done so far, i.e., our liquidity and our public presence. But we are assessing that and if need be we will buy back steadily some shares.

All right, that is fair. One more for me and I will turn it over. I mean the cost lines look relatively aligned, but G&A picked up a little bit quarter over quarter and OpEx came in on a DBOE basis a little bit under our expectations. Can you first talk about what drove that modest uptick in G&A on the quarter over quarter and then maybe some annual guidance there, for both G&A and OpEx?

Yes, I think for operating expenses we were slightly better than expected, as you say, this quarter. I think this should come back to equilibrium during the next quarter, and the same is true exactly for a G&A. We were slightly higher this quarter.

We have had some -- the 20-F filing, things like that, which typically puts you slightly higher. But overall we are perfectly within our [yearly] budget and you should see those variations alleviate throughout the year.

Okay, fair enough. So that Q3 G&A line item should be a little bit closer to maybe 6,000 than 7,000 as it was in Q2?

Yes, you should have between -- I mean as usual between 6,300 to 6,500 depending on obviously the vessels we buy, etc. But that should not move that much from there.

Okay, great. That is very helpful. Thank you guys very much for the time, I appreciate it.

Thank you, Mike.

Justin Yagerman, Deutsche Bank.

Josh Katzeff on for Justin. Just wanted to follow up on Mike's questions on kind of the current S&P market. When we talk to other owners we hear that there are a lot of people actually inspecting vessels out there, but maybe can you talk about your competition actually on bidding on ships? Do you have a sense of how many people you're going up against?

Well, there is a secondhand vessel today, let's say, a five-year-old ship and you are inspecting here you are going to have approximately eight people interested in the ship. But you have to understand that it is a different matter when you buy for a single ship. It is a different matter when you buy for an entity.

Here there is a program. So the difference is that here is a [dynamic money as opposed to study], and that is the beauty of being in the stock market. You understand what I mean?

I think so. Just moving on, maybe a bit more broadly in the Cape sector. I guess maybe a month or so ago we heard some talk about some major owners potentially idling ships. Are you hearing about any kind of wide scale idling or are people kind of currently operating their ships?

Some of the ships that we have on charter have been known to wait for their next employment, ordered by the head charterer to do so, but we are not aware of a large number of ships being laid up or idle in the bulk carrier industry yet. It is mainly delays to pick up next employment, which can be seen around the world, that is all.

Got it. Just looking at kind of the recent charters done on the Panamaxes, I guess can you walk us through exactly how you decide on whether to fix a ship on a one-year or a two-year charter?

For us fixing the vessel (technical difficulty) it depends on the whole portfolio approach that we have, and you understand that we have to introduce this new vessel or the vessel that it is opening as regards the charter at that into the whole picture and see where we have another vessel opening or not opening at the same time in the cycle. And we are positioning the vessel in such a manner to always have a vessel to fix in every period.

So when we fix for a year or two years or three years you should not take it as Diana taking a position what the market is going to do. This is the beauty of our strategy hedging our risk that we don't have to call the market. We are very happy with the average of the market, and this is what we are going to continue to be doing by physically hedging the charters of our vessels.

Got it. And just one more quick question before I turn it over, I guess with regard to leverage and how you think about that I mean should we just be expecting Diana to increase its leverage through its acquisitions, just maybe I guess 50% leverage on new vessel purchases?

Exactly. That is what we have stated in the past and we feel that is a safe assumption to make.

Got it. Appreciate the time, thanks.

Brandon Oglenski, Barclays Capital.

Good morning and good afternoon, everyone. Maybe if I can just follow up from one of the last questions there. When we look at the Arethusa in the release it looked like you put that on a pretty short duration charter. Can you maybe speak specifically to that vessel and why you are going a little bit shorter on the term than maybe you would have on other vessels?

No, it is not a matter that we have put the Arethusa for a shorter period than other vessels. We thought it was a good idea to have another vessel opening before the end of the year, and this is what we did in order to keep the portfolio approach intact as we have suggested earlier. It doesn't mean anything.

Okay. And it's looked like there was -- it looks like the Salt Lake City you mentioned is on drydock right now. Should we assume that that is coming off in the next few days? And what would that mean for the drydocking scheduled for the second half of the year?

Yes, Salt Lake City in a few days is going to be offhire and you can see the expected dates on our website of delivery of that vessel to the new charterers. But the previous charterers, they have agreed to compensate the Company for the earlier delivery of the vessel.

Apart from Salt Lake City, the other vessels up until the end of the year that are due for drydocking are in the third quarter motor vessel Protefs and motor vessel Norfolk. And (inaudible) for motor vessel Protefs and special survey for motor vessel Norfolk. And for the fourth quarter we have an intermediate survey for motor vessel Melia, Nirefs, and Alcyon.

So three vessels for the fourth quarter, so that is the schedule, more or less, until the end of the year.

Okay. Then on the expense side, because I think we have covered everything else pretty well on the call here, is there anything specifically that you can do to address maybe some further cost reductions? I mean it looks like you have held expenses pretty much where we thought they would be, but any further items that you can drive there?

I think we are extremely efficient in the way we deal with our expenses, and you must take into account that together with all the expenses comes at a full presented maintenance program that we have for our vessels and that ensures that they are performing as expected and as best as possible to our charterers. So to your answer, we feel comfortable with our expenses and the way we deal with them very comfortable.

Okay. Thank you, gentlemen.

Thank you.

(Operator Instructions) It appears we have no further questions at this time. I would now like to turn the floor back to management for closing comments.

As always, we appreciate your interest in and support of Diana Shipping. We look forward to speak with you in the months ahead. Thank you.

This concludes today's teleconference. You may now disconnect your lines at this time and thank you for your participation.