Diana Shipping Inc (DSX) 2012 Q3 法說會逐字稿

Greetings and welcome to the Diana Shipping Inc. third-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, IR Advisor for Diana Shipping. Thank you, Mr. Nebb. You may begin.

Thank you very much, Jessie, and greetings to everyone, and welcome to the Diana Shipping 2012 third-quarter conference call. The members of the Company's management team who are with us today are 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 Ms. Maria Dede, Chief Accounting Officer.

Before management begins their remarks, let me remind you that under the Safe Harbor provisions any statements which are not statements of historical fact are forward-looking and are made 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 that may or may not prove to be accurate. For a description of the risks, uncertainties, and other factors that may cause future results to differ from the forward-looking statements, please refer to the Company's filings with the Securities and Exchange Commission.

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

Thank you, Ed. Good morning and thank you for joining us today. The performance of Diana Shipping Inc. during the 2012 third quarter reflects continued positive results, an expanding fleet, and a sound capital structure. As a result, we delivered another solid quarter at a time of persistent challenging conditions in our industry.

In particular, we have made progress in our fleet expansion strategy. Today we announced the delivery of the model vessel Polymnia, a newly built Post-Panamax dry bulk carrier of 98,704 deadweight. The vessel was purchased in October 2012 from a third-party seller for the price of $24.6 million.

We also announced today a time charter contract for the Polymnia with Sino East Transportation Limited, Hong Kong, at a gross charter rate of $8000 per day minus a 5% commission paid to our third parties for a period of about 45 to 55 days. The charter is expected to commence tomorrow, November 21, 2012.

Another recent addition to the fleet was the sister ship of the Polymnia, the model vessel Amphitrite a newly-built dry bulk carrier delivered in August 2012. The vessel is chartered to Bunge S.A. at a gross charter rate of $10,000 per day for a period of about 22 months to about 26 months.

The charterer also has the option to employ the vessel for a further 11 to 14 months at a gross charter rate of $11,300 per day. This demonstrates our continued ability to meet the needs of highly respected charterers, which has been a main feature of our approach.

Including the Polymnia and the Amphitrite, our fleet consists of 30 dry bulk carriers. We also have two Ice Class Panamax vessels under construction with delivery expected during the fourth quarter of 2013, which will bring the size of our fleet to 32 vessels.

In total, we have eight vessels aimed to deliver or under an agreement to purchase in 2012 to date. This represents significant progress in the growth of our fleet, and it takes our determination to capitalize upon the opportunities in the current market to build our productive vessels.

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 95% for 2012. The vast majority of our vessels are chartered for periods ranging from 2013 through 2015 and beyond.

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

Net income to Diana Shipping was $12.3 million for the 2012 third quarter compared to $26.4 million a year ago. Time charter revenues for the latest quarter totaled $56.2 million; vessels $64.2 million in the third quarter of last year. Time charter rates average $21,335 for the 2012 third quarter compared with $27,957 in the same period of 2011.

We continue to have one of the strongest balance sheets in our industry. Our cash position at September 30, 2012 was more than $452 million or about $36 million higher than at the end of 2011.

The Company continues to operate with a very manageable degree of leverage. Long-term debt, including current portion, was $459.1 million of principal balance outstanding at September 30, 2012 compared to stockholders equity of about $1.3 billion.

While the environment for the dry bulk shipping industry remains challenging, we will continue to pursue the strategy that we believe will deliver stable and profitable results in the near-term and, thus, will contribute to our growth for the long-term. We will continue our program of selectively and gradually adding to our fleet as market conditions permit to acquire vessels at attractive prices. We will operate our fleet according to balance and prudent chartering policies and 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 leverage.

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

Thank you.

Thank you, Simeon, and welcome to all the participants to this quarterly conference call.

The third quarter this year was unfortunately a continuation of the bad news we have been receiving from the dry bulk shipping market so far this year with the exception, perhaps, of a short breather the market took from its relentless downturn during the second quarter of this year.

The Baltic Dry Index started the quarter at 1013 points and on the September 28 stood at 766. The Baltic Cape Index started from 1204 and closed on September 28 at 1621. The Baltic Panamax Index showed the most significant growth by starting from 993 from July 2 only to close at 425 on September 28.

Importantly, this was not an unexpected development from anyone who understands the basic principles of supply and demand, but some analysts had been hoping that a surprise on the demand side would help to soften the blow and help the Greek markets to perform a soft landing. In a viciously cyclical industry, the market shows no mercy, and in the case of shipping, the rates react accordingly.

Fortunately, things have improved somewhat since the end of the third quarter, and the three indices have recovered to close yesterday, November 19, the BDI at 1054, the Cape Index at 2369, and they Panamax Index at 902.

Let's turn to macroeconomic developments. Briefly, according to the International Monetary Fund, global economic growth for 2012 is forecasted at 3.5%, while for 2013, the prediction is for 3.9% growth.

According to the Chinese Federation of Logistics and Purchasing, the value of the Chinese Purchasing Managers Index for the domestic manufacturing sector dropped to 49.2% in August, down 0.9 percentage points from the previous month. A reading of below 60% usually indicates a negative outlook. The August figure was also the lowest level in nine months, suggesting that the conditions in the weakening Chinese domestic economy has not yet improved. However, in September, the figure came in at 49.8%, and at long last, the index showed positive manufacturing growth with a reading of 60.2% in October.

Let's look more closely at China's slowdown, which has been discussed a great deal during the last few weeks. According to China's National Bureau of Statistics, growth in China's gross domestic product fell to 7.4% in the third quarter this year. This was the weakest quarterly meeting since 2009.

According to a recent article in The Financial Times, the following possible explanations were put forward for China's recent slowdown, and these provide some insights for future growth.

First, exports have recently become a drag to economic growth. In spite of the positive increase in September, exports by 9.9% from a year earlier bolstered in part by demand from the United States. With external demand so weak, sluggish exports are predicted to subtract about 1% from China's gross domestic product growth going forward.

The second reason is that investment appears to have finally peaked at nearly 50% of GDP, a record high for a large economy during peak times. Because of the increased capital date, investment is expected to contribute up to 4% to China's growth, down from about 6% thus far.

The third reason is the apparent policy paralysis due to political struggles before the leadership change, which prolonged the recovery of growth with earlier levels.

The fourth explanation is that the government in China has come to the conclusion that slower growth is actually desirable for that country. In the past, huge stimulus packaging helped the economy in the short run, but then made it more unbalanced in its reliance on continuous investments.

Finally, the dimmer view is that, even if the government wanted to promote long-term growth, it would unable to be very successful. This dim review is based on the assessments that private businesses are restricted to a series of sectors such as manufacturing and property that are beset by over-capacity.

In a similar vein, according to an article in the Wall Street Journal, China's leaders hope that domestic consumption spurred by strong rises in wages can play a bigger part in driving future growth. Three-day sales were up 14.2% year on year in September, up from 13.2% in August. Slowing inflation opens up room to do more to support growth to increase consumer demand.

We think the last view is more credible and believe that the government in China is taking a more long-term view to growth, which will inevitably mean acceptance of lower rates of growth, which, after all, is a sign of a maturing economy.

Let's turn to steel now. According to mass broker, global steel use is expected to grow 2.1% in 2012 compared to a forecast of 3.6% made in April. In 2013, steel demand is expected to grow by 3.2% to reach a record high of 1.465 billion pounds. This forecast is based on the expectation that the Eurozone crisis is contained, the US successfully deals with fiscal tightening due in 2013, and that China pursues a soft landing of its economy.

According to Commodore Research, after decreasing for 11 straight weeks, the Chinese stockpiles of steel increased by 2% during the weak start in October 15. Going forward, the same analysts believe that Chinese now will be forced to reduce this production at least in the near-term. However, we believe that by the end of this year the steel market will be supported by the commencement of construction under the newly-announced stimulus program.

According to the World Steel Association, there is currently an estimated 250 million tons of excess steel in the supply chain, equivalent to almost one-fifth of annual consumption. Over half of that glut is in China.

Iron ore -- according to Clarkson's, world iron ore exports are expected to reach 1.167 billion metric tons in 2013, up 6% compared to 2012. Much depends on whether recent efforts by Beijing to halt the drop in the rate of economic growth and manufacturing output will be successful going forward, thus increasing raw material demand.

According to Howe Robinson, over the 12-month period ended September 30, 2012, iron ore outputs reached 317.4 million tons. And according to Commodore Research, in mid-October Chinese iron ore core stockpiles dropped to 90.8 million tons, which were down 4% in a week. This marks the lowest levels that iron ore stockpiles have fallen to since July 2011. These must be monitored closely as a continued decline could be a signal that the Chinese steel market is finally gaining strength.

Thermal coal now -- according to mass broker, growing energy demand in Asia, especially in the term emerging economies, will be the key driver of thermal coal demand going forward. Clarkson's predicts that world thermal coal shipments may reach 811 million metric tons in 2013, an increase of 5% compared to 2012 volumes. They cite rising demand for China and India as the main drivers of this increase in shipments. Export growth in 2013 is likely to come from Australia and Indonesia.

As for Europe, some coal-fired power stations are expected to be closed next year as part of Europe's large combustion plans directive. Overall, European imports of thermal coal are expected to drop by about 2% in 2013, while Chinese import demand is projected to expand and reach 138 million metric tons, an increase of 12% compared to 2012.

According to Commodore Research, Chinese power plants stockpiles of thermal coal totaled 90.3 million metric tons at the end of September, 5.5 million metric tons more than at the end of August. These stockpiles prefer to increase to 92.8 million tons on October 10.

As regards Chinese electricity production, this came to 390.7 billion kilowatt hours in September. This was 11% less than what produced in August this year. Compared to September 2011, the figure is 4.7 billion kilowatt hours higher, an increase of just 1%.

Metallurgical coal now, shipments of metallurgical coal are expected by Clarkson's to grow to 237 million metric tons, an increase of 3% compared to 2012. Growth is primarily expected to be driven by rising demand in India, Brazil and China where economies and industrial production continue to grow.

Australia is expected to remain as a principal exporter of coke and coal in 2013 with a projected market share of 65%. Shipments from that country are expected to grow 7% year over year and reach a total of 163.1 million metric tons.

As for European demand, this is expected to fall by 2% this year and increase by 3% in 2013 at 45.9 million metric tons.

Grain, now. The United States Department of Agriculture has lowered its 2012-2013 global grain trade forecast to 282.7 million tons, 2% less than its previous forecast of 287.6 million, made just one month ago. Compared with the 330 million metric tons of grain estimated to have been exported worldwide during 2011-2012, the 2012 to 2013 grain trade is expected to decline by 14%. The largest drop in grain export is expected to come from Australia. The region is expected by Clarkson's to export a total of 26.5 million metric tons, a drop of 12% compared to last year.

Specifically, as far as wheat is concerned, the USDA predicts that Australia's 2012 to 2013 wheat harvest will total only 23 million pounds. If this materializes, it will be 22% less than was produced in 2011-2012. Canadian exports are expected to take up some of this slack, but price increases caused by severe drought in many parts of the world have taken their toll on demand.

A brief look at congestion now. According to Commodore Research, approximately 125 vessels were anchored as of three weeks ago outside major Australian coal and iron ore ports. Approximately 35 vessels were anchored outside major Brazilian iron ore ports. Out of these 160 vessels waiting outside major Australian and Brazilian coal and iron ore ports, approximately 110 of them were tapes.

On new building contracting, according to Clarkson's, overall contracting activity thus far in 2012 has fallen by 53.1% year over year in terms of deadweight tonnes. The largest contracting decline has been in the container sector, which has seen the number of new orders fall by 78.7% year over year, while dry bulk carrier contracting has come down by 56% compared to last year.

Turning to shipbuilding capacity, according to Clarkson research, activity in shipyards around the world has dropped, and a record 965 shipyards in 2008 have come down to 538 in October 2012. This represents a drop of 40% by numbers over the last four years.

Furthermore, Clarkson's data shows that 240 of the yards with active orders at the start of 2012 do not have vessels on their books with delivery dates past the end of this year. A rather dark picture for ship builders indeed, but a necessary evil if the market is to ever return to a state of balanced supply and demand.

Demolitions now. So far in 2012, mass broker estimates that 25,703,000 deadweight tons of dry bulk carriers have been sold for scrap. Deliveries, as a comparison during the same period, reached a staggering 83,794,181 deadweight tons. Clarkson's predict that by the end of 2012 approximately 32.3 million deadweight tonnes of vessels will have been sold for scrap. If this materializes, it would be considerably more than the 23.1 million deadweight tonnes scrapped in 2011. Out of a total, approximately 12.8 million deadweight tonnes are expected to be Capes and 8.2 million deadweight tonnes Panamax and Post-Panamax ships.

The only cloud on the horizon as regards future scrapping is that, according to statistics provided by mass broker, 79% of the Capesize fleet is 15-years-old or younger. The figure for the Panamax fleet is 73%. This will eventually replace the natural path on the number of Capes which can be scrapped over the medium term. Young ships will most likely be laid up rather than sold for scrap because no longer do they materialize.

In terms of the supply of time niche and some fleets, the new building order book according to Clarkson research is continuing to swing. As of October 1, there were 266 Capes on order, representing in tonnage terms about 19.5% of the existing fleet in deadweight tonnes. The equivalent numbers for Panamaxes are 703 ships, representing 32.1% of the existing fleet. About 25 million deadweight tonnes of Panamaxes are scheduled for delivery next year. While fleet growth is expected to be slower in 2013 compared to 2012, it is still expected to be significant, especially in the Panamaxes. This sector is anticipated to have grown by 16% during 2012.

According to Clarkson's, in 2013 the Capesize fleet is expected to increase by approximately 4.3% to 298 million deadweight tonnes and Panamaxes by 11.9% to 200.1 million deadweight tonnes. These statistics are, according to Clarkson's figures, based on yard-by-yard analysis of historical and expected order book delivery performance. We suspect this means a slippage rate of no more than 25% on average across the different size ranges.

According to the Korean shipping messenger, on October 10, the Ministry of Transport in China reveals its plan to expand the state-owned fleet during the 12th five-year development projects starting in 2011 to 2015. By organizing a large-sized modern fleet during that period, China will be able to enhance transportation capacity for the importation of major commodities. As had hoped, undue consideration will be taken of implementing market forces in the implementation of this ambitious plan.

A brief look at demand now. According to Clarkson's research studies, dry bulk trade is expected to increase by 5% in 2012 as growth in Chinese iron ore imports and seaborne thermal coal trade have continued to provide additional cargoes to the seaborne markets. However, this rate of growth is slightly slower than in 2011 when dry bulk seaborne trade grew by 6%. This is a result of several factors, including slow economic growth in China and Europe this year, reduced Indian iron ore exports and other less important factors such as Indonesian export regulations, etc.

For 2013, Clarkson's predicts total dry bulk rate will increase by a further 5% to reach [6.646 billion] metric tons.

Now let's look at the future. According to mass broker, the dry cargo market is expected to remain volatile with no immediate major improvements to be seen in the fourth quarter of this year. Changes in the Chinese leadership may boost confidence, and the effect of the country's most recent $158 billion investment package may surprise analysts and spark a much-needed demand boost for bulk carriers.

According to Commodore Research, the Chinese iron ore demand stays firm, which is likely, because iron ore prices remain very attractive. Capesize rates are likely to find another amount of additional support. They, however, remain bearish as regards the near-term prospects of the Chinese steel market, but a decline in steel production has so far not reduced significantly Chinese demand for imported iron ore.

We agree with Clarkson's who conclude that since it will take a considerable amount of time for the present oversupply in the market to be absorbed, there is likely to be continued pressure on the bulk market in the short term.

In the medium- to long-term, however, we find the view put forward by Howe Robinson more plausible than the rest. They point out that with the exception of the 2008-2009 trade credit collapse, there has been no sustained stock builds or capacity closures amongst exporters of major bulk commodities. They recently say that China has always stepped in to purchase surplus cargoes whenever and wherever they have been made available. What nobody knows is how far the domestic growth rate in China has to fall before this trend will cease.

Even in the event of a soft landing in China, much will depend on international commodity price levels relative to their domestic production costs in China. Therefore, an appreciating renminbi with low dollar commodity prices could create a situation where domestic producers, particularly iron ore and coal producers, bear the brunt of economic slowdown, allowing imports to be much less effective than they would otherwise be by such a negative gross domestic product growth development.

With all this in mind, Diana Shipping Inc. will continue pursuing its ship acquisition program along the lines explained during press conference calls and meetings with shareholders and investors. Based on this strategy, the fleet has gradually grown to 30 operating bulk carriers with an average age of less than six years and two new buildings scheduled for delivery at the end of 2013. Throughout this process, the Company has borrowed conservatively, has maintaining intact the strength of its balance sheet.

I will now pass the call to our CFO and Treasurer, Mr. Andreas Michalopoulos, who will provide you with the third quarter and nine-months 2012 financial highlights. Thank you.

Thank you, Stacey, and good morning. I'm pleased to be discussing today with you Diana's operation results for the third quarter of 2012 and nine-months ended September 30, 2012.

For the third-quarter 2012, net income for Diana Shipping Inc. came out to $12.3 million and the earnings per share was $0.16. And total revenues decreased to $56.2 million compared to $64.2 million in 2011. The decrease is attributable to the decreased average time charter rates that we achieved for our vessels during the period compared with the third quarter of 2011. The decrease was partially offset by revenues derived from the vessels Leto, Los Angeles, Melia, Philadelphia and Amphitrite delivered in January, February, May and August 2012 respectively.

Commission days were 2624 for the third-quarter 2012 compared to 2202 for the same period in 2011. Fleet utilization was 99.3% compared to 99.7% in 2011, and the daily time charter equivalent rate was $21,335 compared to $27,957 for the same period in 2011.

Other revenues for the third quarter of 2012 amounted to $0.6 million and consist of revenue derived from the management in an administration agreement between Diana Shipping Services, Inc. and Diana Containerships, Inc.

Voyage expenses were $1.1 million for the quarter. Operating expenses amounted to $17 million and increase by 21%. This increase is attributable to the addition of new vessels in the fleet, which resulted in the ownership base to increase by 19%. The increase was also due to the increase in repairs and maintenance and other costs and was offset by decreases in insurance, same-stores and staff.

Daily operating expenses were $6460 for the third quarter of 2012 compared to $6387 in 2011, representing an increase of 1%.

Depreciation and amortization of deferred charges amounted to $16 million.

General and administrative expenses increased by $0.1 million, or 2%, for the third quarter of 2012 to $6.2 million compared to $6.1 million in 2011. The increase was mainly attributable to the delayed order fees and annual meeting expenses and was offset by decreases in salaries and bonuses.

Interest and finance costs were $2.2 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 debts.

Income loss from investment in Diana Containerships Inc. now. The loss on our investment in Diana Containerships Inc. amounts to $2.5 million compared to a gain of $0.4 million through the same period in 2011. The loss for the quarter in 2012 was due to the increase in the shared capital in Diana Containerships Inc. after a follow-on offering completed in August 2012, resulting to the dilution of the Company's investments in Diana Containerships Inc. and a reduction of our shareholding interest in the Company from 14.45% to 10.36%. This loss was partially offset by operating gains.

Turning now to the nine months ended September 30, 2012. Net income for Diana Shipping Inc. amounted to $49.6 million, and the EPS was $0.61.

Time charter revenues for the nine months ended September 30, 2012 decreased to $171.4 million compared to $198.3 million in 2011. The decrease is attributable to decreased revenues due to the decreasing pre-average high rate achieved during the period compared to the same period of 2011, and those costs were offset by increased revenues due to the addition to our fleet of the vessels Arethusa, Melia, Philadelphia and Amphitrite delivered in July 2011, January, February, May, and August of 2012 respectively.

Ownership (technical difficulty) was [$9409] for the nine months ended September 30, 2012 compared to $6401 in 2011. Fleet utilization was 99.5% for the nine months ended September 30, 2012 and 99.4% in 2011. And the day time charter equivalent rate was $22,561 compared to $30,015 in the same period of 2011.

Other revenues for the nine months ended September 30, 2012 amounted to $1.8 million. Voyage expenses were [$6.2 million] for the period. Operating expenses amounted to $47 million, an increase by 16%. The increase is attributable to the 16% increase in ownership days resulting from the delivery of one vessel in 2011 and five in 2012. The increase was partly offset by decreases in insurance and in repairs and maintenance.

Daily operating expenses were $6341 for the nine months ended September 30, 2012 compared to $6328 in 2011.

Depreciation and amortization of deferred charges amounted to $45.9 million in 2012. General and administrative expenses increased by $0.1 million or 1% for the nine months ended September 30, 2012 to $18.9 million compared to $18.8 million in 2011. The increase was mainly attributable to legal improvement fees and legal expenses with the (technical difficulty) salaries.

Interest and finance costs increased by $1.9 million to $5.6 million compared to $3.7 million in the same period 2011. This increase was attributable to increased average debt during 2012 compared to 2011 and increased average interest rates.

Income loss from investment in Diana Containerships Inc., the loss from our investment in Diana Containerships Inc. amounted to $1.8 million compared to a gain of $1 million for the same period in 2011. The loss was attributable to the Company's dilution due to the capital increases by Diana Containerships Inc. as mentioned earlier, reducing the Company's ownership to 10.36% from 14.45%.

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

(Operator Instructions). Michael Webber, Wells Fargo Advisors.

I just wanted to jump in and talk briefly about all your charters. I mean you locked up the Arethusa for two years at $7300, and I will say you are getting about $8000 for the Polymnia on the spot market. Why lock up the Arethusa for that long if you are getting a higher rate in the spot market? And I know the asset classes aren't identical, but -- and it does fit with your strategy, but is there any inkling at all to maybe not locking that tonnage up for so long at such a low rate?

Well, as we have said many times in the past, we have other vessels that we can fix if the market improves, and it doesn't matter what -- how we fix one vessel. You should look at always our portfolio in order to have the chartering. And the fact today that we have this different as regards to the sign on how long we will be chartering vessels proves to you exactly the point that we do not take the view that the market is going to be low for the next two years, but at the same time, we are willing to charter a vessel for two years as long as we have other vessels that they are opening in between.

Right.

Look at the entire picture always.

No, no, I understand the portfolio approach. On the Polymnia $8000 for spot, is that just a function of the fact that there's not a long-term contract available there? What was behind the decision to trade that spot?

There is always a long-term contract at a specific price. We chose to go shorter for that vessel and longer for the others.

But, Mike, I think that you have to understand what is the difference between static money and dynamic money. Here you have a balance sheet which will allow you to weather out the volatility of the market.

Now it's not the same thing if Diana Shipping Inc. goes and buys a ship today as opposed to somebody who has some money in the bank. It is probably a little different. So that approach has to maintain through all times, and that is what we are doing. We are creating a very strong balance sheet to weather out the ups and downs or the trade bumps. That is what that is trying to do.

Yes, I understand. I don't think anyone is questioning the balance sheet. I think just on the Arethusa, I guess maybe coming at it from another angle, how much lower can that two-year rate really feasibly get? Is it really feasible that you could really dip below two years at $7300 a day?

Yes.

Okay.

In the market will go as far as down as the running expenses of the ship, and the running expense of the ship is approximately $300, less than that.

All right. Okay.

And then moving on quickly, I guess, to your purchases. You guys have been more active this year in terms of acquiring tonnage, and your fees have increased. I'm just curious as to what you guys -- what is coming across your desk right now and what you are looking at over the next three to six months, whether it be more focused on new build or second-hand client, size, and whether you think you'll be able to maintain the pace you guys have had in 2012?

I think we will be finding ratable tonnage to meet our requirements. Admittedly, at this particular moment, there are not enough ships, first-class ships for sale. And the reason is that the interest rate is so low that I think the sellers have not come to terms, have not come to grips. They have to adjust their selling prices, but they will soon adjust their prices. And we will be able to find treatable ships and from first class stables.

Okay. Thank you. I appreciate that. Thanks.

Gregory Lewis, Credit Suisse.

I guess my first question is it looks like about 0.5 million shares were retired. I'm assuming that was related to the buyback; is that correct? And if so, is there any money left on the buyback?

The buyback was too big. The buyback is $100 million worth of stock buyback program. The sales that you are missing, it is a small portion of that.

And you are looking at, Greg, at the nine months here. For the quarter, it was much less. And so it is very staggered, the buyback program that we have put in place.

Yes, I was just wondering, are you able to disclose how many shares you bought back over the quarter?

Yes, we bought back 67,381 shares.

And the available?

[7381] shares.

Okay. And what was the dollar amount on that?

The dollar amount was a net amount and included $472,452.

Okay. And when we think about that, is that a function of stock trading below what you deem as your adjusted NAV or NAV?

Now. Greg, you know very well that the market is very volatile, and the NAV of the Company changes together with market conditions. It doesn't mean that we will always be buying at that price that you speak. It depends on also on our expectations. It depends also on the market conditions at that time and also the fact whether we can find investors to buy at that time or we are buying back our stock.

We have made it clear to everyone that for us the share repurchase program that it is nothing more than an investment that we consider to be a good investment for our shareholders. It is not as if we were trying to keep our stock price at a specific level.

Okay. Great. And then just another question, more on the fleet. It looks like you had two vessels, the Triton and, excuse me if I am pronouncing this long, the Alcyon. And it looks like the Alcyon was expected to be delivered back to you yesterday, and the Triton is sort of in this band window from early November into February. I guess my first question is, has the Triton been re-delivered back to you at this point, just given the fact that the charter rate is a little bit more than 2.5 -- 2 times the current spot rate?

If you look at our fleet employment table, you will see that the Alcyon has been given back to us two days earlier than they should have, and they have agreed to pay for the two days. And it is currently undergoing scheduled maintenance.

Okay. So when do you get that back in the fleet?

Soon. It's not going to take --

A couple of weeks?

A lot of days. Let's say a week, 10 days.

Okay.

And the other question was about --?

The Triton.

The Triton, as you can see, the earliest possible delivery date is 11 November, which was not delivered to us. There is some more way to go. We are seeking further employment, but still the vessel has started to shorten marine.

Okay. So, in other words, even though some of these rates are above market, we shouldn't assume that they're going to be delivered at the earliest --.

Hold on a second. Hold on a second. If the Titan is 11 of November, 2015.

Okay. Yes, I'm sorry. I missed that. Anyway, okay, guys. Thanks.

That is another year to go.

Yes, I see that. Okay, I thought that was the 2012. All right. Apologies. Thanks.

Fotis Giannakoulis, Morgan Stanley.

Yes, I would like to ask -- to try to understand how you are thinking with your future acquisitions. Right now you have a significant amount of cash in your balance sheet. I understand that this is a very volatile market and you're trying to navigate in a very volatile market, but how exactly are you thinking -- how much cash do you need to have in your balance sheet in order to protect yourselves from fluctuations versus future acquisitions?

Thank you for your questions. We will continuously be buying ships, and the reason is that we have to gear up the Company as we are going along to a total of 50% financed at the end of the dollar period. That is the end.

So, if you see how much cash we have today, you will realize that we have plenty of room to keep on buying, and we will be keeping buying ships. Because nobody knows when the market is going to change. So we have to be prepared. And what we are focusing on is the 50% leverage on our fleet at today's prices. So that another ship is to the bulk.

This is exactly the reason why we are not willing to spend a lot of money at one point in the cycle. We will continue buying the vessels, and that will always leave the necessary amounts on our books. And theoretically it will have been the best situation for us. If we were 50% financed as a Company one day because it might be 10%. But we don't know that. But we think that we are going to do rather well with the way we are doing the purchases in the next period of two years.

What I will also try to understand is if there is a possibility of any special dividend at any given time, if you think that all these cash are not easy to be deployed during the current market or this is something that you have not considered and you're going to use this cash to expand your fleet?

There is a possibility where we will have been left with a large amount of cash in our books and the market will turn. Then there is a possibility that we would make a special dividend with the amount that we have left aside. But from the moment we are below a part of our cycle, we do not intend to pay any type of dividend. But if we take the hypothetical scenario that the market turns tomorrow with very good prospects that is going to stay at the higher part of our cycles, then there is a possibility of a special circumstance dividend. But do you see the market turning tomorrow?

That is actually -- was going to be my next question. I know that you are not giving a forecast, but I would like to see what is your base case with some degree of confidence and how do you see the market is evolving during 2013? I heard earlier Mr. Margaronis mentioning that the quarter has started a little bit better. Is this a turning point of a slow recovery, and what is your view on that?

I think what you have to realize is that there are a lot of things to be delivered until the end of 2012 and certainly in 2013. Of course, the demand for tonnage if you see it in 2008 and you compare it with 2013 and 2012, you will see that there is an increase across the board of 30% for both the iron ore, all types of corn and a little bit less on the grain. But there is an increase of demand.

The problem is the lack of tonnage around now, and it is enormous. And what Stacey said before, also don't forget, that the Capes, which is the key issue here are a lot, and they are fairly young.

So I think the market will have to keep low for some time, and we have to watch it not to be overoptimistic in some glimpse that the market eventually does.

Overall, I think the market has to absorb the tonnage, which is around -- which is coming from the shipyards.

Being an analyst, you can add better than we can. And if you look at 2013 and the additions to the Capesize fleet compared with the Panamax fleet, you can see that with normal demand growth additions the Capesize fleet will have better support than the Panamaxes will.

If the Panamaxes find support with these huge numbers which are going to be delivered, then the Capesize ships should do better. The reason is that we are going to have iron ore demand being there to support the pictures for Capes. But there are lots of young ships. We shouldn't forget those that were delivered over the last few years. And as Mr. Palios mentioned, these ships have to find business. And the age profile is unfortunately nearly 8% at less than 15 years on the Capes. And it's not getting any better; if anything, it's getting worse.

So we have prepared for pressure on earnings of these ships in 2013. But if things go as predicted by most analysts, the Panamaxes will probably be suffering more than the Capes.

All right. Shall I take it as a possibility that there are going to be more opportunities in the Panamax sector for acquisitions, and how do you view the market with rates being at around $7000? Companies are struggling even to cover operating expenses. And in many cases, clearly they cannot pay the interest from this cash flow. Have you seen banks or owners that they cannot deal with their obligations in their debt service coming to you offering vessels at attractive prices?

And do you see that these prices that we have seen recently they can move even lower, or we might have rates above them on their asset values?

What is the definition of low, Fotis? It is a gray area here. You have to wait until, strategically, the freight market comes in line with the sale intensive market. And because the interest rate is so low, because money is low, this process is going to take a little bit longer. You were not around in 1985 when the interest rate was 23% in dollars. Then this lagging effect came quicker. But today it will take some time, and that is what we have to somehow wait. But, of course, we will be keeping balance sheets as we have arranged every two months or so because that is our principle that we have based our Company since inception in 2005, and we are going to carry on doing exactly the same thing.

In closing my questions, about 10 years ago when you first established this Company, did you place some orders in a very similar market but perhaps not as bad as the market is today? Is this something that you might be considering, putting new building orders in the current market?

Yes, Fotis, slowly we are going to be doing both. We are going to be buying secondhand, but at the same time, we will be placing orders. We consider the two year time of delivery of an order today or at any time, for that matter, to be a rather attractive feature, and this is why we will be ordering vessels.

And, of course, we have to wait a little bit longer for the yards to understand that there are not going to be too many buyers around at that time, and they are going to be willing to offer us nice terms and nice vessels as well, particulars.

Thank you, gentlemen. Thank you for your time.

Justin Yagerman, Deutsche Bank.

This is Josh on for Justin. It's been a long call, so I'll keep my questions short. Just a follow up on the new buildings. With the limited availability of second-hand tonnage, should we expect your next purchases to be in the new buildings?

The limitation on pricing vessels is a feature of this month. We consider this picture is not going to continue. We will be able to find second-hand vessels. But nevertheless, the new building, as we said, ordering is an option for us.

Got it. And just when you went over the incoming supply of ships in the various sectors, Capes and Panamaxes, where do the Post-Panamaxes fit into this dynamic? Are they more linked to the Capes or the Panamaxes?

Well, don't forget that it is very true, and after a year, the Panama Canal will open. And as the Panamax vessels will not have the same effect as they have today.

So I think the amounts of funds which are coming around will increase from the 70,000 tons vessels (technical difficulty) to something bigger. And I think that there is no bad thing to have in your fleet, ships for Panamax. I think they will be good to have around.

Got it. Okay. And one last question. For the past couple of years, you guys have said that when time charter rates hit operating expense levels or below, that is the best time to buy. We're now getting to those levels. And I hate to beat a dead horse here, but should we expect maybe an acceleration of purchases on a quarterly basis more than maybe just one or two ships to maybe several ships? Is that a possibility today?

You should not expect us to increase or decrease the pace of our purchases. We will try to keep it steady. We should not get influenced by what is happening around us short-term. We will continue to be buying vessels, as we have said many times, in a steady manner.

All right. I appreciate the time. Thanks.

Sal Vitale, Sterne, Agee.

I just have a quick question, just a follow-up on one of the questions asked earlier. I think I understand your portfolio approach. If I look at your fleet, I count, I think, 11 vessels that are coming up for redelivery next year.

So according to your portfolio approach, if I understand it correctly, you will only -- if rates remain where they are now, which no one knows where they will go next year, but if they do, I guess your approach would be that you would not -- you would only fix a portion of those at rates similar to current rates and then let the rest trade on the spot market. Is that correct?

Well, don't forget that we have the option of spot rate in the ships. And, of course, we have also the option of laying out this, too. But because you have an active portfolio approach, you don't care whether the vessel is laid up. You have a balance sheet which is going to support you, and that is the difference between static and dynamic money.

Let me add something here. By fixing -- regardless of the periods that we fix the vessel, you understand that from the moment we have a vessel to fix in any time in the cycle, we have this boat exposure whether we want it or not. So basically asking us whether we will leave some vessels trading at spot, it's a bit confusing question, and I'm going to reply to that a bit differently.

Our vessels are going to have employment. They want some of them are going to have a smaller period or I would call it a longer period. But the entire fleet is going to have a kind of a spot exposure whether we -- whether it is easy for someone to see or not because we will have already vessels to fix. If you have best-in-class vessels and you charter a vessel every 15 days or so in this cycle, this is your spot exposure.

Don't forget also to add to your way of thinking the newly purchased vessels that are going to be placed in between the existing charters. And --

Right. And --. I'm sorry, go ahead.

And besides that, also, your next vessels may be with a time charter attached. So you can play -- you have a lot of safety valves here and that is if you give of this approach.

And then just a follow-up, if I could. When you mentioned also the possibility of laying up a vessel, in this type of market, how long would you consider laying up of a vessel for? Is that just months and months just to see when the market turns and then just employing it? Is that what you are saying?

The reference to laying up, it was the sort of view that we have such a strong balance sheet that the entire picture of the Company will not change dramatically by having one or two, even one or two vessels being laid up in a really bad time. But at the same time, we have said that we can not afford to be losing $1000 per day on a low charter rate simply because we have the other vessels compensating for the ones that are going to be losing some money.

Entering into a layup situation is an expensive exercise. You need to spend some money to lay up a vessel, and then you need to spend some more money to reactivate the vessel. And this is a problem that a lot of our other companies will have to face before ourselves.

Correct. That makes sense.

And then if I could just ask one other question. I think you said earlier that there are vessels that are being -- I think it was Capesize that are being scrapped at about 15 to 16-years- old right now. Is that what I heard correctly -- did I hear that correctly?

Yes, there are two ships which were built in 1997. Both were Capes -- 170,000 tons for one and 175,000 tons the other, and they were built in 1997 from very good yards, too. And they went for scrap at $430 per ton like it was displayed.

Okay. Then just to place that into context, if I look at prior, really challenged markets again similar to our market, just going back in time, what was the youngest age at which the Capesizes, the Panamaxes were scrapped in higher bad markets?

Well, there were ships. The last quarter, the last Eternity both were -- everyone was 0.5 billion tons shipped. And they never received cargo. Those were deal CCs. They never received cargo. They went to be laid up, and then they went for scrapping.

Okay. Thank you. Thank you very much.

Thank you.

David Beard, IBERIA.

I had two questions. First, I was wondering if you could comment or elaborate a little bit more on the pricing level for used ships. It seems like the pricing level has not really caught up with the reality of race for deliveries. I wanted to hear your thoughts.

And second, as it relates to new builds, I also wanted to hear your thoughts, again, on the quote/unquote ecoships and what the trade-off looks like new versus used as it relates to more fuel-efficient vessels? Thank you.

Except the low charter rates that someone may see at any time in the cycle, at the same time we have, as Mr. Palios said, the nursing of the bank or the bank nursing problem. But also we have the psychology for the market.

We cannot say that we are in this position that everything is very good. The nursing from the banks to the owners is in good condition, and the psychology is now turning to be really bad.

When the psychology turns really bad, you will see this pricing coming in terms with the charter rates. And this has always been the case. There is always a time lag between the two, and also you need to have a change in the psychology as regards to the markets.

As regards to the ecoships question that you mentioned, we do not consider the benefit of the ecoships to be this degree that the yards are trying to present it to be. There's going to be a small saving. And, of course, when you order a vessel, it is good to take the new technology rather than the old one. But to cut the long story short, the ecoships would not be the reason why someone should invest in a new building. The reason why someone would invest in the new buildings is the timing and the price that you will find the vessel. There is no harm done buying an ecoship, but the most important pattern is the correct timing of that purchase.

As you can imagine, with cost recessions, we have seen that the values of the ships always drop with a lag to the earnings. And the main reason was mentioned by Ioannis, which is the psychology -- to get a general conviction that things are not only there today, but remain bad for the foreseeable future. And once that becomes the prevalent view, then you get both the bank and the shipowners more willing to expose the tonnage at prices that are obviously very disadvantageous to their investments, projections and the returns.

Thanks. That's very helpful. Thank you.

You're welcome. Thanks.

Brandon Oglenski, Barclays.

This is Keith filling in for Brandon.

It seemed like you guys have been focused in the second-hand purchases in Panamaxes. Can you maybe speak to some of the opportunities in the Capesize? I mean is that just the way that you want to shape the fleet being a little bit more heavily into the Panamax side right now or maybe new build opportunities in the Capesize?

Well, we are constantly looking for further acquisitions, and we do inspect a lot of ships. And I think our fleet is pretty well-balanced between Capes and Panamaxes maybe because Panamax is not enough. But at the end of the story, it will be balanced.

Okay. So maybe any thoughts on second-hand Capesize pricing? I mean is that something you guys have been looking at?

On the second hand, it's not -- you don't rule out the second hand because we believe that the market will recover well before the 15 year wage that you need in new building to meet your projections. I think the markets have to come to a sort of balance well before that.

So if the vessel you are buying today is five years or eight, even five years, it has another, let's say, 10 years useful life. So I think it's okay provided it is from a good stable and she does not give you a lot of headaches whilst you have the vessel in your fleet.

Okay. That is some good color? I had a separate question. Is there any dry docking guidance that you guys can provide for us for 2013, and I think you guys do have a couple of contracts rolling off here in thinking about dry docking costs for next year?

First of all, as we said, (technical difficulty) TO dry dock for the fourth quarter. And at the end of November, we have information available to the vessel Melia, and we also have dry docks going on, some repairs for Melite and Naias.

Then for 2013 -- and this is a preliminary schedule -- as usual, it can change. For the second-quarter 2013, we have foreseen two dry docks motor vessel IPO for an intermediate survey. And then for the third quarter it is scheduled is for motor vessel journey to go to dry dock and intermediate survey as well.

And finally, for the fourth quarter, we have intermediate survey for three vessels scheduled modern vessel Polymnia, model vessel Danae and model vessel Triton.

For your budget, you should use for all the vessels that I mentioned for 2013 the number of approximately $350,000 for each and 15 to 20 days of hire in your budget for those dry dock type of schedules.

Okay. Thank you for your time. I will pass it along.

Thank you. There are no further questions at this time. I would like to turn the floor back over to management for any 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.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.