Diana Shipping Inc (DSX) 2014 Q4 法說會逐字稿

Greetings, and welcome to the Diana Shipping 2014 Fourth Quarter and Yearend Earnings Conference Call. (Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ed Nebb, Investor Relations Advisor. Thank you, sir. You may begin.

Thanks very much, and greetings to all. Welcome to the Diana Shipping Inc. 2014 Fourth Quarter and Yearend Conference Call. The members of the Diana Shipping management team who are with us today are Mr. Simeon Palios, Chairman and Chief Executive Officer; Mr. Anastasios Margaronis, President; Mr. Andreas Michalopoulos, Chief Financial Officer; and Mr. Ioannis Zafirakis, Chief Operating Officer and Secretary.

Before management begins their remarks, let me remind you of the Safe Harbor notice, which is attached to today's news release. Certain statements made during this conference call, which are not statements of historical fact, are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act.

The forward-looking statements are based on assumptions, expectations, intentions, and beliefs as to future events 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 materially 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 to discuss the results of Diana Shipping Inc. for the fourth quarter and full-year 2014. The year was highlighted by the continued deployment of our strong financial resources to invest in the expansion of our fleet as opportunities permitted.

In addition, we continued to work to enhance shareholder value through stock repurchases. To review our financial results, the Company reported a net loss of $6.2 million, and a net loss available to common stockholders of $7.7 million for the fourth quarter of 2014. The comparable net loss and net loss available to common stockholders for the fourth quarter of 2013 amounted to $9.6 million.

For the full year 2014, the Company reported a net loss of $10.3 million, and a net loss available to common stockholders of $15.3 million. This compared with a net loss, and net loss available to common stockholders of $21.2 million for 2013.

Our time charter revenues were $46.1 million for the 2014 fourth quarter, up from $39.5 million a year ago. Time charter revenues were $175.6 million for the full year of 2014, compared with $164 million in 2013. The increases over the year-ago period were mainly due to the expansion of our fleet, partially offset by the decreased time charter rates.

Diana Shipping continued to maintain a (inaudible) balance sheet, reflecting cash and cash equivalents of nearly $219 million. Long-term debt, including recurrent portion, was $486 million, compared to stockholder's equity of approximately $1.3 billion.

We deployed a portion of our capital to enhance shareholder value by repurchasing and retiring approximately 2.85 million shares during the second half of 2014, at an aggregate cost of approximately $25.3 million. As a result, the Company's issued and outstanding shares as of December 31, 2014 decreased to approximately $81.86 million.

I am pleased to note that we expanded and strengthened the Board of Directors. Effective March 4, 2014, the Board has increased its size from seven to nine members. Mr. Kyriacos Riris and Mrs. Semiramis Paliou were appointed to fill the newly added positions. The Board has determined that Mr. Riris will serve as an Independent Director.

As for our established strategy, we continue to take advantage of the current market conditions to expand our fleet. We took delivery in February of 2014 of the newly built motor vessel Crystalia, an Ice Class Panamax dry bulk vessel of 77,525 tonnes deadweight. The newly built motor vessel Atalandi, an Ice Class Panamax dry vessel of 77,529 tonnes deadweight was delivered in May 2014.

In August 2014, we took delivery of the motor vessel G.P. Zafirakis, a newly built Capesize dry bulk vessel of 179,492 tonnes deadweight. Continue our expansion into 2015, in January we took delivery of the motor vessel Santa Barbara, a 179,426 tonnes deadweight newly built Capesize dry bulk vessel that we agreed to purchase late in 2014.

We also signed a ship-building contract in early 2014 for the construction of a Kamsarmax dry bulk vessel of approximately 82,000 tonnes deadweight, of we which we expect to take delivery during the second quarter of 2016.

As a result of our expansion activities, our fleet currently consists of 40 dry bulk vessels, with two additional newbuilding Newcastlemax dry bulk vessels, and one newbuilding Kamsarmax dry bulk vessel expected to be delivered in 2016.

We continue to manage the fleet in a prudent manner that promotes a balance of time charter maturities, and produces a predictable revenue stream. Currently our fixed revenue days are 66% for 2015.

Moving forward, Diana Shipping will continue to deploy its strong financial capacity to support shareholder's value-oriented strategies. Specifically we will continue to seek opportunities to expand our fleet in order to be well-positioned for a more promising place of the dry bulk [sector].

At the same time, our willingness to repurchase the Company's stock when and as appropriate, reflects our confidence in the value of our shares, as a long-term investment. With that, I will now turn the call over to our President, Stacey Margaronis, for a perspective on industry conditions. He will then be followed by our Chief Financial Officer, Andreas Michalopoulos; who will provide a financial overview. Thank you.

Thank you, Simeon, and good morning. There is no doubt that the last quarter of 2014 brought a great disappointment to owners and huge movements in earnings of all bulk carriers, unfortunately on the downside.

A year ago, Capesize vessel time charter rates stood at around (inaudible) a day, and hopes were high for 2014, as retail prices at the time approached $60 million. As we all know by now, 2014 ended in a disastrous way, despite seaborne Chinese iron ore imports increasing by about 100 million tonnes.

The Baltic dry index started the year at 2,113, and stood at 771 on the first trading day of 2015. As regarding the Panamax index, it started 2014 at 1,780, and ended the year at 827. While the Capesize index started at 3,733, and stood at 456 on the first trading day of 2015.

So to update on these indices, the Baltic dry index closed on March 3rd at 553, the Capesize index at 490, and the Panamax index at 564.

As has been pointed out recently by the Korean Shipping Messenger, in the early part of this year, the Baltic dry index has slumped to its lowest point in 29 years, hit by a shipping glut, falling commodity prices, and declining import demand from China. We agree with these analysts, and most important factor in the Baltic dry indices decline is industry-wide overcapacity.

Let's turn to macroeconomic considerations. A couple of weeks ago, the IMF downgraded world growth estimates for 2015 from 3.8% to 3.5%, and for 2016 from 4% to 3.7%. China, the world's largest iron ore consumer, expanded 7.4% last year, the slowest pace since 1990, according the statistics bureau. The Chinese government will announce its 2015 growth target in March this year. According to Maersk Broker, this is expected to be around 7%.

In the meantime, the IMF lowered its 2015 growth forecast for China's economy from 7.1% to 6.8%, mainly because of the slowdown in real estate and other investments.

China's trade performance slumped in January, with exports falling 3.3% from a year-ago level, while imports tumbled by 19.9%. The slide in imports is the sharpest since 2009. This data highlighted according to Maersk Broker, a deepening weakness in the Chinese economy.

In January this year, retails sales in the US registered an unexpected month-to-month decrease of 0.8%, despite lower oil prices, which were expected to have increased disposable income and spending. It seems that consumers preferred to reduce their personal indebtedness first, before embarking on more spending on goods and services. Nevertheless Maersk Broker reports that a strong labor market should keep the US economy on solid ground at least through the early part of this year.

It should be kept in mind though that the growth in the United States has a more limited impact from bulk carrier demand than on the containership sector, for example. The reason is that overall the US is a net exporter, rather than a net importer of dry bulk commodities. As regards, things like containerized finished goods, the opposite is most definitely the case.

Let's look at steel now. World crude steel production reach 1.662 billion metric tons in 2014, up by 1.2% compared to 2013. According to Commodore Research, who cites Chinese statistics, Chinese steel output will fall in absolute terms this year. In spite of this, the same organization is forecasting that Chinese iron ore imports will reach 1 billion tonnes this year, increasing by 67 million tonnes, or 7% from last year's record.

This can only come about if Chinese steel mills continue consuming greater amounts of imported iron ore, compared to domestic iron ore. According to Clarkson's, China's Ministry of Finance removed export tax rebates on steel products containing boron on January 1, 2015. It is widely expected that the removal of this export tax rebate may place some pressure on Chinese steel product exports in 2015. And it will help the government stop overcapacity and consolidate China's steel industry.

The crude steel capacity utilization ratio in December of 2014 was [72.7%], which was 2.4% lower than in December 2013. Average capacity utilization in 2014 was 76.7%, compared to 78.4% in 2013.

Chinese steel prices have dropped by 8% so far this year, according to Commodore Research, compared to a drop of 14% during the whole of 2014.

In China, crude steel production increased 0.4% in 2014, compared to 7.5% increase the year before. This was the weakest growth going back for 24 years.

As for iron ore, according to Clarkson's, during 2014 total seaborne imports of iron ore increased by an impressive 12%, and reached 1.328 billion tonnes. During 2015, Clarkson's predicts that global iron ore imports will grow by 6% and reach 1.413 billion tonnes.

According to Pareto Securities, the dry bulk shipping market started the year with concerns about excess supplies of iron ore in China. Obviously, inventories of iron ore along the coastline have declined in recent weeks to 93.2 million metric tons, and they are marginally higher than a year ago.

Unfortunately, as Pareto points out, there are no official statistics on the inland inventories of iron ore, and we share their fears that these stockpiles are actually rising rapidly, and could act as a drag on shipping activity going forward.

Steel mills could very well grow down on these stockpiles, rather than import more steel-making material from the Western Australian area and from Brazil. Such will obviously depend on domestic iron production, which for some unknown reason was increasing during 2014 until it came to a virtual halt at the end of the year.

Clarkson's expects the Chinese iron ore imports to grow 7.5% this year, the slowest since 2010. Furthermore, Maersk Broker reports that China's iron ore imports in January were 78.6 million tonnes, which was down 9% year on year, and down 10% compared to December's record high.

This drop has been partially attributed to the Chinese New Year activities, which started soon thereafter. This steel-making raw material is the biggest commodity carried by dry bulk ships. And China is indeed the biggest buyer.

Coking coal now, global seaborne trade of coking coal dropped, according to Clarkson's, by 1% last year. It's expected to increase by only 2% in 2015. For several years India has failed to meet domestic production targets of coking coal, and has been increasing imports. In 2014 the imports increased by 24% year on year. Projections indicate that with recently commissioned infrastructure projects, coking coal imports are expected to increase by a further 9% this year. India accounts for approximately 25% of projected coking coal imports in Asia.

On thermal coal, on a worldwide basis, seaborne trade of this commodity is expected by Clarkson's to increase by 2% this year, and reached 953 million metric tons. According to Clarkson's, thermal coal imports to China decreased by approximately 6% year on year in 2014. The reduction in Chinese import demand was partly caused by higher levels of domestic hydroelectric power generation, which also contributed to a rise in Chinese thermal coal stocks.

For 2015, China is expected to import about 188 million metric tons of thermal coal, which will be 2% higher than in 2014.

Indonesian authorities recently announced that the country's coal production target for 2015 will be 460 million tonnes. If that transpires this year, it will be the best event that the dry bulk market could have hoped for coming from Indonesia.

India, according to Commodore Research, is likely to import even larger amounts of Indonesian coal this year, and Chinese coal imports could possibly increase this year as well.

World coal exports only increased by 40 million tonnes, 3.3% that is, to 1.247 billion tonnes during 2014. And the tendency for more shorter coal shipments [means] a negative factor for the market. The world's largest consumer of coal, China, experienced a reduction in total annual imports for all types of coal in 2014 for the first time 10 years, with the exception of 2008, where the dip came about due to the financial crisis.

As for stockpiles, according to Commodore Research, coal stockpiles at Qinhuangdao port, China's largest coal port, have reached 8 million tonnes. The continued rise in coal for stockpiles remains a negative factor for the dry bulk shipping market, and near-term coal import prospects.

Turning to grains now, according to Clarkson's, combined global wheat and coarse grain trade is projected to decline 3% to 297 million metric tons in the 2014-2015 crop year. Chinese, Moroccan and Russian import demand is projected to decline due to a stronger domestic supply than what was reported the year before.

Chinese imports are expected to drop by 27% year on year, mainly due to the recovery from weather-related crop damage, which affected the 2013-2014 season by destroying 20 million metric tons of wheat. Similarly, total grain exports from the United States are expected by Clarkson's to drop during the current crop season by 6% to 73.9 million metric tons.

Let's look at the spot market and time charter earnings for dry bulk carriers. According to Howe Robinson, the huge logistical difficulties caused to Brazilian iron ore shippers by the rainy season, combined with planned annual routine maintenance, have had a major impact on Capesize demand, contributing to the January weakness in earnings for this type of ship.

As of the first week of February, the average spot market earnings for Capes have dropped to a miserable $5,125 per day. As if this was not bad enough, the equivalent rate for Panamaxes stood at $3,906 per day, a rate which is definitely below operating expenses.

The full-time charter route average for Panamaxes stood at $4,424 per day at the beginning of February, while the [Cape] for the sea route was at $6,530 per day. What has had most of these ships to stay away from lay-up, is currently the hope of seasonally improved rates later this year. And secondly, the fact that one year time charter earnings were on average stood at $10,875 per day for Capes, and around $7,500 per day for Panamaxes.

Let's look at supply and the newbuilding order book. Banchero & Costa reports that 746 orders were placed for dry bulk carriers during 2014, of which 145 were for Panamaxes, and 132 for Capes, and 19 for very large ore carriers. As of February 1st this year, there were 162.7 million tonnes deadweight on order, representing 21.4% of the existing dry bulk carrier fleet.

Of this total, the Capesizes on order represent 69.1 million deadweight, equivalent to [22.3%] in Panamax fleet. The greatest disappointment though is in the Handymax sector, with a staggering 26.8% of the existing and relatively modern fleet is on order. Deliveries of all types of bulk carrier newbuildings are mainly concentrated in 2015, except for the Capes, where 2016 we see 33.2 million tonnes deadweight delivered compared to 27.7 million tonnes this year.

Scrapping, demolitions of dry bulk carriers during 2014 came to 251 vessels, according to Banchero & Costa totaling 15.3 million tonnes deadweight. This year to date, about 55 bulkers have been sold for scrap of 4.154 million tonnes deadweight, compared to 305 ships or 15.9 million deadweight tonnes during the entire year in 2014.

The average age of bulkers being sold for scrap has dropped to 25.4 years, as of early this year, according to Braemar ACM Shipbroking. This has been coming steadily down since 2011, when it was around 32 years. Clarkson's reported the age of all dry bulk ships scrapped during 2014 was 27.3 years.

As for demand, according to Clarkson's in volume terms, global seaborne dry bulk trade grew by 4% year on year in 2014, boosted largely by growth in the iron ore trade. Bulk seaborne trade growth is expected to be 4% up year on year, and reach 4.668 billion tonnes this year.

Looking at supply now, the newbuilding delivery in 2014 amounted to 514 vessels, according to Banchero & Costa, total of 48.1 million tonnes deadweight.

The Panamax and Post-Panamax fleet is expected to grow this year by 6%, and by only 3% in 2016, according to the same source. The Cape and VLOC fleet is expected to grow by 6% in 2015, and by the same percentage in 2016. Interestingly enough, the Handymax fleet is expected to grow by a massive 12% this year, and 6% in 2015. This will undoubtedly put pressure on Panamax earnings this year, and possibly next.

Total deliveries in 2015 are expected to reach approximately 61 million metric ton deadweight, inclusive of ships which have been scheduled for delivery in 2014, but have been delayed.

This brings us to slippage now, which according to Banchero & Costa, (inaudible) deliveries during 2014 was around 20% in slippage terms. So far this year, due to delayed deliveries from 2014, 127% of the order book has been delivered so far, compared with scheduled deliveries. This percentage will undoubtedly go down as the year progresses. But it is unlikely that slippage will exceed 20% during 2015.

The outlook now, according to Commodore Research, about 11 Capesize orders have been changed to tanker orders so far this year, which is a positive development for 2016 and beyond. Braemar (inaudible) reports that after the spring festival is over, the scope of recovery in bulk carrier earnings will be fairly limited.

They foresee that the (inaudible) will be moving around 700 and 800 points towards the end of this month. A large number of newbuildings commissioned during the good years of the mid-2000s came online in 2008 to 2009 at precisely the wrong time. Unfortunately, this overcapacity has only worsened during the years since then.

The result of this trend is unfortunately that rates seem likely to remain low for a long time, as the industry overcapacity works itself out of the system. That will, in all likelihood, remain the case, even if global, mainly Chinese, commodity demand recovers potentially.

So this is once again the environment, which the management team at Diana Shipping has been implementing investment strategy, which we have repeatedly stated and explained. Our priority is to preserve the strength and integrity of our balance sheet, and gradually increase leverage towards the 60% to 65% or even 70% mark.

We believe that purchasing vessels at this point in the cycle will prove to be profitable investments, as the market strengthens gradually from 2016 and beyond. We also believe that provided there is continued restraint in ordering, the lack of the bank finance and even greater lack of investor appetite in the capital markets will eventually lead the industry to better days. Older ships will be scrapped, and earnings will gradually increase. This should find our Company in the advantageous position of owning mostly very modern ships with a large income-generating capability.

That will be the time when our dividend can be reintroduced, and all the vessels can be sold at very advantageous prices. The Company can then expand through this, and so fresh equity, which will enhance both our ability to pay a dividend, and the level of those dividends.

To close on a more positive note, on the state of the dry bulk carrier market, allow us to present a quote from Shakespeare's play Richard III, Act I, Scene I, where the physically deformed Richard III recites. "Now is the winter of our discontent, made glorious summer by this son of York."

This quote, full of metaphors which usually appears only in its first half, ignoring the second, creates a false impression of doom in what Richard, here resembling the poor bulk carrier ship owner, is trying to express. Indeed, what Richard is saying here is that the long winter is now made glorious summer through his rather succession to the English crown after dethroning Henry VI.

Likewise in shipping, better days will indeed quickly succeed the winter of discontent, when the market [withdraws] the private equity funds from their important and damaging, unfortunately, role in shipping, and ship owners show the strength in ordering newbuildings.

Then, as Richard said, all the clouds have lowered death on our house in the deep bosom of the ocean will be buried.

I will now pass on this note, the call to our CFO, Andreas Michalopoulos, who will provide us with the financial highlights of the last quarter and whole year 2014.

Thank you, Stacey, and good morning. I am pleased to be discussing today with you Diana's operational results for the fourth quarter and year ended December 31, 2014. For the fourth quarter 2014, net loss amounted to $6.2 million. Net loss available to common stockholders amounted to $7.7 million. And the loss per share was $0.10.

Time chartered revenues increased to $46.1 million, compared to $39.5 million in the fourth quarter of 2013. The increase was attributable to the revenues derived from the vessels Myrsini, delivered in October 2013; P.S. Palios delivered in December 2013; Crystalia, delivered in February 2014; and Atalandi, delivered in May 2014; and G.P. Zafirakis, delivered in August 2014.

This increase was partially offset by decreased revenues due to the decrease in our average time charter rates that we achieved for our vessels during the quarter compared with the same quarter of 2013.

Ownership days were 3,588 for the fourth quarter of 2014, compared to 3,241 in the same period of 2013. Fleet utilization was 99.2% compared to 99.5% in the same quarter of 2013. And the daily time charter equivalent was $12,090 compared to $11,694 in the same quarter of 2013. Voyage expenses were $3.5 million for the quarter.

Vessel operating expenses amounted to $22.3 million, compared to $19.9 million in the fourth quarter of 2013, an increase by 12%. The increase was attributable to the 11% increase in ownership days resulting from the enlargement of the fleet.

Daily operating expenses also increased, mainly due to increased repairs and maintenance costs, taxes, and environmental costs; and were partially offset by decreased crew costs.

Daily operating expenses were $6,225 for the fourth quarter of 2014, compared to $6,155 in the same quarter of 2013, representing an increase of 1%.

Depreciation and amortization of deferred charges amounted to $18.3 million. General and administrative expenses increased to $7.5 million, compared to $7.4 million in the fourth quarter of 2013. The increase was mainly attributable to increased number of employees and salaries, and was partially offset by decreased compensation costs on (inaudible).

Interest and finance costs were $2.2 million for the quarter, compared to $2 million in the same quarter of 2013. This increase was mainly attributable to increased average debt and average interest rate in the fourth quarter of 2014, compared to the same quarter of 2013.

Interest and other income amounted to $0.9 million, and was the same as in the fourth quarter of 2013. Income from investment in Diana Containerships amounted to $0.2 million. This compared to a loss of $2.1 million for the same quarter in 2013.

Moving to the year and the December 31, 2014 now, net loss for Diana Shipping Inc. amounted to $10.3 million. Net loss available to common stockholders amounted to $15.3 million, and loss per share was $0.19.

Time charter revenues increased to $175.6 million, compared to $164 million in 2013. The increase was attributable to the enlargement of the fleet, and was partially offset by decreased average time charter rates.

Ownership days were 13,822, compared to 12,049 for 2013. Fleet utilization was 99.4%, compared to 99.3% for 2013. And the daily time charter equivalent rate as $12,081, compared to $12,959 for 2013.

Voyage expenses were $10.7 million for 2014. Vessel operating expenses amounted to $86.9 million, compared to $77.2 million for 2013, an increase by 13%. The increase was attributable to the 15% increase in ownership days resulting from the enlargement of the fleet. Despite the increase in total operating expenses, daily operating expenses decreased mainly due to decreased average crew costs, insurances and other operating expenses. This decrease was partially offset by increased repairs and maintenance, taxes, and environmental costs.

Daily operating expenses were $6,289 for 2014, compared to $6,408 for 2013, representing a 2% decrease. Depreciation and amortization of deferred charges amounted to $70.5 million for 2014.

General and administrative expenses amounted to $26.2 million, compared to $23.7 million in 2013. The increase was mainly attributable to increased number of personnel and salaries.

Interest and finance costs amounted to $8.4 million, compared to $8.1 million in 2013. This increase was mainly attributable to increased average debt and average interest rates during 2014 compared to 2013.

Interest and other income amounted to $3.6 million compared to $1.8 million in 2013. The increase was due to interest income and finance fees deriving from our loan agreement with Diana Containerships Inc., partially offset by decreased interest income due to the reduction of our average cash balance.

Income from investment in Diana Containerships Inc. amounted to $12.7 million, and was mainly due to additional investment of $40 million during the year, increasing our share ownership in Diana Containerships to 26.34%. This compared to a loss of $6.1 million in 2013.

Share repurchase program, during the second half of 2014, we repurchased and retired 2.8 million shares, for an aggregate cost of about $25.3 million, and subsequently to yearend, we additionally repurchased and retired 413,804 shares for an aggregate cost of $2.7 million.

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

(Operator Instructions) Amit Mehrotra, Deutsche Bank

Great. Thanks very much. So you all have been bearish on the dry bulk market for some time now. And you've been absolutely right. But with the shift in sentiment and sort of the decline in asset values, I'd imagine that you are incrementally less negative. And I'm just trying to understand and get a better understanding of that. Maybe a way to ask it, sort of on a scale of 1 to 10, you know, 1 being no change to your bearish outlook, and 10 being that you think there is now sufficient negative sentiment for dry bulk to recover, where is your thinking on that scale? And what levels of scrappings or lay-ups do you think you would need to see to further impact that-- that changing view?

Hi, Amit. This is Ioannis Zafirakis speaking. We are, to put this bluntly, at number 1. We have not changed whatsoever in our bearish view about the market. We have not seen the scrapping and the laying up of vessels that we want to see before we start going up the scale.

The psychology as regards to market turning positive, soon has turned a little bit more to the left and less optimistic, but not at a pessimistic level. We want to see that before, and some other things as we have explained in the past, before we start going up in the scale of your question.

Okay. Maybe I can just follow up on that then. I mean given that view, does that change the way you-- Diana Shipping thinks about capital allocation, say for the next 12 to 18 months? Is it maybe you steer even more cash into share buybacks or the container business, instead of using it to buy sort of new dry bulk vessels. Is there any change that we can expect, given that view of sort of 1 on that scale?

Theoretically speaking, no, because as you know, we are more on a set way of doing things. And having said that, psychologically there is an element where by having the view that we have, we are not very quick in our decisions to buy a vessel. We are not offering the price that we should have had to offer to buy vessels that we have inspected.

But the answer to your question is that we should not change the pace of our vessel purchases. And the staggering manner of our purchases ensures from the one hand, the survival of the Company, even in a prolonged down market. But at the same time, we are seeking of a good average in our purchases, rather than pinpointing the absolute bottom.

Right. Okay. Just last question, with respect to your available days for the first quarter and for the full year, can you just provide us how many days are locked in and at what rates versus the TCE rates that you achieved in 4Q of a little over $12,000?

Of course this is easy for anyone to see from our website, but we have a fixed coverage for 2015 at the moment that's around 66%, with an average daily time charter of $12,300 per day.

Okay. Great. Thank you very much.

Gregory Lewis, Credit Suisse

Yes. Thank you, and good afternoon. Stacey or I guess Ioannis, could you talk a little bit about the dynamic that we're seeing year to date? I mean you characterize that it's miserable. But when I look at Capesize vessels and Panamax vessels, pretty much every day this year it looks like they are not even covering their daily operating expenses. So I mean, I guess I'd just be interested in how you view the sustainability of rates that low before we eventually see, not necessarily a stacking response, but a hey, I have a handful of vessels and I'm just going to idle them, because I'm actually losing money at running at these rates. I'd just be curious on sort of the thought process around that.

This is a very good question, and it has to do with the fact of how long ship owners, they can keep them in task. The fact that the interest rates at the moment as we speak are at a very, very low level, helps a lot. And we all know that a vessel-- when a vessel is losing money, it's a big liability. And especially in a high-interest environment.

The history says that ship owners, they try to sustain. They try to [bend] some costs before they take the decision to lay up a vessel or to put the vessel [aside]. And we are still at that phase where the focus of the ship owners are such that they can sustain the fact that they're losing money. And that's another reason why we are not very optimistic about the near future.

But there will be a point where they will bleed to death, and they will say, enough is enough. I'm not covering my variable costs. Let me lay up the vessel or try to sell it, or even scrap it.

And further to what Ioannis said, you have to understand that there is a differential between rates on the spot market and there is a differential of rate for the 12-- or the 2-year period. Now by having this differential in rates, the first one is [focused] around-- for the Capes around $4,000 to $5,000 daily, as opposed to a two-year for a good vessel at around $11,000 to $12,000 daily.

So the $12,000 is well above the running expenses of the vessel. Admittedly, for a two-year period we are committing the ship. But anyway, it's above the running expenses of the vessel, the pure running expense of the vessel.

Okay. Thank you, Mr. Palios. I guess that was a long question. So with that, I'll turn it back to the operator. Thank you.

Fotis Giannakoulis, Morgan Stanley

Yes. Good afternoon, and thank you. You have always been very vocal about the weakness of the market and obviously the market has performed exactly as you have said. We're [now] trying to ask you to forecast the future. Can you give us your experience, share with us your experience about how long usually this market, these weak markets last. We are right now below operating expenses, as you mentioned. Although the one-year rates, they are slightly above.

But the spot market is well below operating expenses. Based on your past experience and your judgment, how long do you think that this situation can continue?

I think on this subject is what is we have been talking quite substantially for a very long time. But the criteria that is that when the potential buyers lose interest in buying ships, and is happier to have less ships than more ships, then you have a psychological effect that things are taking place in such a manner that a different equilibrium comes to place. Because if the appetite is not there, the prices are going down, the vessels have definitely to lay up, and things are moving to the proper direction in putting the market in a different place altogether.

And this up to now, it has not been so. For example, at our ships today, Capes that they have been inspected by almost 10 people. And there is still appetite, admittedly at lower levels. But the appetite is still there. And psychologically that appetite has to go away.

Fotis, the things that we have been saying is that the deeper the downturn, the quicker the recovery is going to be. If we are hovering around these levels that all of us we are considering that to be the low part of the cycle, and that we are at the low level, then that will take much longer compared to a scenario where we truly have a bloodbath, as I keep saying, we have a hiccup even on the demand side, for example. And the steeper the downturn, the quicker the recovery is going to be.

But do not expect from our side to give you a forecast for the market. We never said that we know what the market is going to do after six months from today. What we keep saying is that stop trying to forecast. Look at the fundamentals. Look at the events that have happened, and see whether we have seen any events towards the right direction.

And if you look carefully that you will notice that we have not seen any events taking place towards the right direction.

Yes. I understand that. But my question had to do mostly over the fact that the-- even in this bleak market environment, with your negative outlook, we have seen that after the financial crisis you have bought approximately 20 vessels. And obviously the prices are very attractive versus the historical, and they can give you a very young fleet when the market recovers. But my question has to do with the fact that as the market continues to be weak, and you also continue to acquire more vessels. Your acquisition capacity is declining. And can you give us an estimate of how much more capacity do you estimate that you have, given the pace of your acquisitions? Can you keep buying one vessel a month that you are targeting for one, two years? What is this duration that this purchasing power can last, if the market stays long? And how likely do you think that it is that the market will stay longer than this capacity will remain?

As we have said in the past, our first priority is to ensure the survival of the Company for as long as possible. At the same time, we want to keep buying vessels in this lower part of the cycle, because we strongly feel that we should have this type investment.

We have, as we kept saying in the past, we were talking about one vessel every two months. We will try to spend, let's say something like the vicinity of $15 million every two months. And at the same time, we will make sure that our cash flow, our loans, et cetera, are going to be serviced in such a manner that we will buy some more vessels for the next year, at least. And then from then onwards, we can survive a bad environment for another two to three years.

This is our target.

So the target is to buy six more vessels during 2015, over the next 12 months, and then wait and see.

Five more vessels and spend something in the vicinity of $70 million from our own equity.

Thank you. That's very helpful. And one more technical question about your debt financing. Andreas, I think that you have one balloon that is coming due this quarter in March. Are you going to refinance that, or are you going to repay that in cash?

We are going to ultimately refinance the balloon. We are at the moment finalizing on this refinance. For technical reasons, we might not be ready on the 10th of March, when this is to be repaid, so we will use our cash to repay it, and then refinance it swiftly after.

And because it's part of an overall, as Ioannis said, let's say, we are looking at our loans on the vessels that are unencumbered at the moment to see what we can do with them. We are also going to leverage the new acquisitions like the Santa Barbara, which we acquired at the beginning of the year. So all that is part of that package, together with the motor vessel New York that rightly so, you said that is coming due in a few days.

Thank you very much for your answers.

Jon Chappell, Evercore

Thank you. Good afternoon, you guys. Quickly on the share buyback. I mean given your view on the market, I think your view on asset prices, given your rate outlook, I would have to think that as Ioannis said, you're still a 1. So you think that the market is going to continue to be weak.

If your stock right now is trading roughly at NAV, maybe a little bit at your current asset prices, but if you're expecting asset prices to drop still very meaningfully, is that a good use of capital, buying back your stock in what could be perceived as a big premium to where you think asset values will ultimately end up? Don't you want to retain more cash for the ultimate bottom purchasing?

Jon, if you think about it, this is exactly the same question as Fotis's question. For us, buying back our shares is either buying back our shares or buying a vessel. In the [shared] way of looking at acquisition, as I explained earlier, instead of buying a vessel every two months, we could spend this $15 million buying back our shares, if they were trading below net asset value, in a similar manner without purchasing a vessel.

You should consider the repurchasing of our shares as an investment at this part of the cycle. So it goes together with our vessel acquisitions. So from the moment we said that we will keep the same pace and we will make sure that we will be buying, even at least part of the cycle, and having the outlook that we have. Then you shouldn't worry about the share repurchase if we are to do any.

Except if you are worrying with the fact that we are buying still vessels without, and not waiting to see the absolute bottom of the market.

Okay, understood. And then just one follow-up. And you are ready to maybe more substantially move when you think of things at closer to the bottom, and maybe pick up the pace a little bit. I'm just curious about your ultimate financing goals. At the prior peak, you had been able to take on significantly more debt than you're sitting at today. Could you finance up to 60-plus percent of the acquisition? Are the banks there for that type of lending in this environment?

Yes. At the moment, they are there for that type of leverage. And we intend to explore that to the maximum.

Don't forget that Mr. Margaronis also talked about 75% [ultimate] level in a dropping price environment. So it is very probable that the way that prices are going that we would end up being financed at the 75% level that we set.

Right. Okay, thank you, Ioannis. Thanks, Andreas.

Magnus Fyhr, GMP Securities

Hey, and good afternoon. Most of my questions have been answered. But just as a follow-up on the asset purchases, any preference you mentioned $70 million of equity, 60% financing buying five ships. Do you see any opportunity, better opportunities in the bigger-class vessels or do you find-- basically it's on kind of a case-by-case basis?

I think it's a matter of case by case. And I think that any sales is a very good target provided you have purchased them at reasonable prices. But there will be a number of re-sales. And we are focusing more there than the second-hand tonnage. Although the second-hand should be very young. Still we prefer the vessels which are coming straight from the shipyards. So that's where we are focusing those.

As regards to size the vessels, as we have said in the past, we strongly feel that market prevails as regards to prices. So for us, if the vessel is technically is something that we like and operationally wise we do not differentiate between a Panamax from a very big Capesize vessel too. Because we are not paying the same price. We don't have a preference. Let me put it like this.

All right. Thank you. That's all I had.

Sal Vitale, Sterne, Agee

Good afternoon, gentlemen. So most of my questions have been answered. I just wanted to make a comment Ioannis, I think I agree with what you said earlier about the state of the market in terms of the psychology that there may be less optimism, but there is not yet the degree of pessimism that we need for a recovery.

Just I guess following up on that comment, as you saw recently this week that there was a pretty significant order for additional newbuildings by a private-equity backed firm. How do we think about what you-- what's your opinion of what needs to happen, how bad things need to get, or maybe how long things need to stay at this level for the optimism to decline even further? Any thoughts there would be helpful.

What you said at the beginning and what we said previously about having a real pessimism in the market is something that we should look for. What you described about the new order that recently happened from a private fund is exactly the wrong ingredient for the market to turn positive soon. There is still a hidden optimism in a lot of places. What we need to see is this private money erratically going out of the market, even some of the big companies having problems meeting their CapExes. That seen all over the news, and then people start thinking twice before they spend money on the fifth special survey of the vessel even before.

And we still have, for example in our case, your sales will have 10 analysts wanting to ask questions. The next time that we will have less and less analysts really interested about the dry bulk sector, it will be a very good point for the market to start, for us, to start thinking positively.

As mentioned towards the end of my little presentation, I mean it's exactly what Ioannis described which is wrong with the market. These private equity funds have to lose interest in the bulk carrier market. Because the funds that they can make available and put forward for increasing their investments in shipping have more and more damaging effects the lower the asset values go. Because more ships can be bought for a certain specific amount of an investment.

And their investments go into the hundreds of million or billions, rather than a few million dollars apiece. So we have a problem there. And as long as there are many private equity funds willing to invest and take an interest in dry bulk shipping, the market will unfortunately remain at relatively unprofitable levels.

Thank you. That's helpful. Then just a quick follow-up. Stacey, earlier you mentioned several forecasts. I think you mentioned that 7.5% is currently the Clarkson's forecast for Chinese iron ore imports at 7.5% for increase for 2015. So is it your personal opinion we'll see a number somewhere closer to the mid-single digits? What's you view on that?

Yes. I mean the estimates vary from 6% to 7.5%. The thing is that the number is high, that 1 percentage point is a lot of cargo. But the problem unfortunately is not that, as you mentioned earlier. The problem is the ships that are going to be available to carry that cargo, whether it's 6% or 7% increase compared to 2014. And that's what bothers us at this stage of the development in the market.

We have to have strong demand for sure. But we need supply to go down. That's imperative. If the supply of ships keep coming, they really have been coming up to now, and will be coming this year and next. Regardless of what the Chinese do, the only thing that they will manage by increasing their import is to make low rates less low, let us say, and avoid having even lower rates. But that's all we're going to see if that develops. It's not going to be a turning point for the market.

Okay. Well thank you very much. I appreciate your time.

Ben Nolan, Stifel

Thanks. And it's tough to follow on when you're looking for fewer analysts to ask questions. But I did--

I was (inaudible) for you will not be--

I have just a few sort of modeling expos clarification. I was hoping maybe you could say how much, or what your CapEx, your current CapEx profile is for 2015 and 2016. And then also, the debt amortization profile. And I know, as Fotis mentioned, that there's the maturity coming up. But how much should we-- how much should I think about modeling in terms of annual debt repayment? And then also what's the CapEx profile?

I think the debt repayment you will see in a few days in our 20-F. And the best thing is to refer to that, because that would take a lot of our time now to go through our debt, especially due to the fact that we have a diversified portfolio of banks.

In terms of capital expenditure, as you know, we have only three vessels on order. Therefore, for those three vessels until the end of-- we only put a 15% down payment until the end of 2014. In the first quarter of 2015, we had only the (inaudible) of the first impact in March of 15% down payment, $7.305 million.

And during the rest of the year, we will have still counting for the two other vessels. That's for both the Newcastlemax remaining and the Kamsarmax DY6006, which would be a down payment of 15% for each of them.

And then you will get also during this year, mainly toward the latter part of the year, the (inaudible) for the three vessels. Now in terms of (inaudible) and CapEx, for the Newcastlemax, the payments will 10% of the purchase price. And for the Kamsarmax, it will be 5%, the payment for the (inaudible). And then no other CapEx will be here. The rest will come in 2016, when we will get the delivery of the vessels.

Okay. That's helpful. And as it relates to the vessels, or maybe as it relates to the broader market, given your outlook for the space, have you considered at all or felt out the yards with respect to maybe delaying the delivery of those vessels? And do you expect there to be much push from ship owners to-- any maybe could you talk to the success of ship owners in postponing delivery of new vessels.

I don't think we are-- with only three vessels on order, and considering two things, one the purchase price of those vessels, and two the number of those vessels that are only three. We don't foresee to delay those vessels on our side. But we feel that some other owners might be actively looking in delaying those vessels, especially the ones that will not be able to secure finance for the remaining orders that they have. But that's for them to answer. Not so much for us.

Part of what Andreas said is for sure that the two Newcastlemaxes which we have on order will be first on the list to be chartered, because of highly economical, consumption, et cetera. And the same holds true for the Kamsarmax.

So we are not having a problem in the delaying the ships. As long they are put in a slot where we don't have any other Newcastlemax to charter at the time, neither a Kamsarmax. So that's the governing factor. So we are going to proceed as scheduled.

And we're also already discussing leverage on those.

Right, right. My last question relates to the share repurchase program. I'm just curious how much is left available under you repurchase program, and whether or not you have done any so far in-- any addition in 2015 thus far?

Thus far we have done 0.4 million shares in 2015. We have [stopped] around the end of January 2015. That's $2.7 million. So in total, we've done out of $100 million, we've done $27.9 million. So we have plenty remaining. But what is the most important is what Ioannis said at the beginning of this call regarding share repurchase is that we trigger the share repurchase only because we can't a vessel available during the particular time span when we're looking for a vessel, either because it's not technically correct or because we have not been able to secure a vessel.

So we only use it for that purpose.

The $70 million remaining is certainly a number that we do not intend to use within this year.

Okay. That's helpful. And that does it for my questions. I appreciate it. Thank you.

We have reached the end of the question-and-answer session. I would now like to turn the floor back over to management for closing comments.

Thank you, again, for your interest in and support of Diana Shipping. We look forward to speaking with you next quarter.