Diana Shipping Inc (DSX) 2018 Q2 法說會逐字稿

Greetings, and welcome to the Diana Shipping Second Quarter 2018 Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I'd now like to turn the conference over to your host, Ed Nebb. Thank you. You may begin.

Thank you, Matt and thanks to all of you for joining us for the Diana Shipping Inc. 2018 Second Quarter Conference Call. The members of the 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, Chief Operating officer and Secretary; and Ms. Maria Dede, Chief Accounting Officer.

Before management begins their remarks, let me briefly remind you of the safe harbor notice. Certain statements made during this conference call, which are not historical fact are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act, and such forward-looking statements are based on assumptions, expectations, reactions or 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 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 CEO.

Thank you, Ed. Good morning, and thank you for joining us today to discuss the results of Diana Shipping Inc. for the second quarter of 2018. Our results for this recent quarter reflected the dramatic improvement in the company's financial results and significantly increased financial flexibility. Our performance reflected our long-standing strategy of positioning the business to benefit from an improving industry cycle while strengthening our balance sheet.

To highlight our financial results, the company reported net income of USD 2 million and net income attributed to common stockholders of USD 0.5 million for the second quarter of 2018. This is a significant turnaround compared to a net loss of USD 23.8 million and the net loss attributed to common stockholders of USD 25.3 million reported in the second quarter of 2017.

Reflecting the rising trend in time charter rates, all of the vessels we have chartered in recent months were fixed at significantly higher rates than their previous charters. As a result, time charter revenues rose to USD 53.4 million for the second quarter of 2018 compared to USD 37.8 million for the same period of 2017. The sharp growth in time charter revenues was due to the increased average time charter rates that we achieved for our vessels during the quarter as well as increased ownership days resulting from the enlargement of the fleet.

With respect to the balance sheet, cash, cash equivalents and restricted cash at June 30, 2018, were USD 107.9 million, well above the level of 2017 year-end. Long-term debt net of deferred financing fees was USD 571.9 million compared to stockholders' equity of USD 624.4 million. Our balance sheet has been further strengthened since the close of the second quarter.

We recently announced that the company signed a term loan facility with BNP Paribas for our -- for up to USD 75 million with a maturity date on July 16, 2023, and completed a drawdown of USD 75 million under this facility. The facility is secured by 7 of the company's vessels. The proceeds from the loan facility together with the available cash were used to voluntarily prepay in full the balance of USD 130 million of the existing credit facility with BNP Paribas. It is important to note, that as a result of the new loan facility, 17 of our vessels are now unencumbered.

Also on July 23, the company received the full and final repayment of the loan to Diana Containerships Inc. We're delighted that this loan was repaid in full and ahead of schedule and provided an attractive return on the company's available cash during the recent downturn in the dry bulk sector. Further, we believe the timing of this repayment and the strengthening of the company's balance sheet comes at an opportune time in the dry bulk site.

We continue to manage our fleet of 50 vessels in a responsible manner that promotes a balance of time charter maturities and produces a predictable revenue stream. Currently, our fixed revenue days are 81% for 2018 and 19% for 2019. Looking ahead to the balance of 2018, we're confident that the continuous strategic management of our fleet and solid financial resources will enable the company to continue to benefit from improving conditions in the dry bulk marketplace.

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

Thank you, Simeon, and welcome to all the participants in this second quarter midsummer conference call with Diana Shipping Inc.

The dry bulk market has developed during the last quarter very much as expected with small variances. The Baltic Dry Index started the quarter on April 3, at 1,016 and closed yesterday at 1,774. The Baltic Panamax Index reading on April 3 was 1,455 and yesterday stood at 1,581. The Baltic Cape Index started the quarter at 924 and closed yesterday at 3,461. Admittedly, there had been some oscillations of the indices on the way to the latest numbers, but the market has not behaved in any irrational or emotional manner, at least not thus far.

Turning to microeconomic developments. According to Clarksons Research, a preliminary Chinese customs data in the first 5 months of 2018 value the Chinese foreign trade at 17% higher year-on-year, reaching 1.8 trillion with the value of exports rising by 13% and the value of imports by a staggering 21%. According to Braemar, China's manufacturing index so far this year shows steady growth with the PMI index coming in at 51.1 for May.

Generally, China might face a slowdown in economic growth as domestic demand cools down due to credit availability drying up and as Mr. Trump's trade war threatens to damage confidence. The forecast for 2018 Chinese gross domestic product growth is 6.6%, and for 2019, it's 6.4%.

In the Eurozone, industrial production continues to falter with output across the 19 countries in the Eurozone for the month of April coming in at 0.9% lower than in March. Its Purchasing Managers' Index for the manufacturing sector declined to 1.5-year low at 54.9 in June from 55.5 in May. The euro area forecast for GDP growth this year is 2.4%, which is expected to drop to around 2% in 2019.

In the U.S., the Fed is preparing to raise interest rates faster than previously planned, a surging economic growth forces officials to do more to try to see off the threat of inflation. U.S. manufacturing activity surged in June, but the strong economy and import tariffs were causing bottlenecks in the supply chain, which could potentially affect production in the months ahead.

The Institute of Supply Management (sic) [Institute for Supply Management], ISM, said its index of national factory activity jumped to 60.2 in June from 58.7 in May. Gross domestic product growth for the first quarter was reported at 2% year-on-year. It was a slight downward revision to the previous estimate.

The U.S. economy grew at a 2.9% rate in the fourth quarter of last year. The slowdown during the following quarter reflected weaker consumer spending and the smaller inventory accumulations than the government had estimated. Forecasted, the U.S. GDP growth in 2018 is 2.9% with growth of 2.7% and visits by the IMF for 2019.

As regards demand growth now. According to Clarksons, growth in dry bulk trade is expected to moderate in 2018 to 3% and 4% in terms of ton miles from 3.9% seen in 2017, where the growth in ton mile came in at 5%. As regards steel, according to Gibson, the new application by the U.S. of the 25% steel tariffs to imports from Canada, Mexico and Europe is hurting companies which are traditionally close to the USA. Canada and Mexico are both big importers of finished steel products from the U.S., and Europe exports high-end specialized steel that are not readily available in the United States. According to the union leaders of the steelworkers in the U.S., the country may lose some plants using imported slabs, which might have slows, it is reported, due to problems in sourcing raw material.

Let's look at iron ore now. Gibson's report that in the period from January to May this year, Chinese domestic iron ore concentrate output was 97.03 million tons, down 4.9% year-on-year, according to the Metallurgical Mines Association of China. At the end of June, approximately 155.8 million tons of iron ore was stockpiled at Chinese ports. This is slightly down from a peak of 161-million-ton stockpile a month earlier, which was a record.

Steam coal now. According to Clarksons, world seaborne coal trade is expected to increase by 2% this year to reach 967 million tons. Imports into Asia are expected to go up 3%, while imports to Europe are anticipated to drop by 5% this year compared to 2017. According to Clarksons, seaborne steam coal trade is expected to be partly supported in the short term by high domestic coal prices in China and the relaxation of import restrictions at a number of Chinese ports.

As regards coking coal, world seaborne coking coal trade is expected to increase by 3% this year compared to 2017 and reach 264 million tons. Indian steel production rose by 4% year-on-year from January to April this year, and major mills have been restocking due to low year-end coking coal inventories. In China, however, in spite of increased steel production, coking coal imports fell 32% year-on-year during the first quarter of this year, reflecting supply disruptions in Australia and the longer-than-expected enforcement of winter steel production restrictions into March, which undermined restocking activity.

Turning to wheat and grains now. According to banchero costa, wheat and coarse grain exports are estimated to have grown 2.4% in the 2017 to '18 marketing year mainly due to an increase in Middle East and North American imports. The trade is forecast to grow by another 2.5% in the 2018 to '19 season as imports by South Asia, Southeast Asia and Sub-Saharan Africa increase. However, Chinese imports from the U.S. could be threatened this year due to the ongoing trade tensions, which have resulted in some increase in imports from Brazil.

According to Howe Robinson, for the second time in history, U.S. farmers have planted more soybeans than corn. This decision was based on the ever-rising Chinese imports. Unfortunately, after 97% of these soybeans had been planted, China announced the tariff increases on these imports from the U.S. in retaliation to the tariffs Mr. Trump decided to impose on Chinese exports to the USA.

Future contracts for soybeans have since slumped to under $9 per bushel, and many farmers might go bankrupt as a result of this. It is sad that the U.S. President refuses to accept the damage trade wars due to international commerce and local producers on both sides of the fence.

Turning now to supply issues and new building delivery. According to banchero costa, during 2017, 426 dry bulk vessels, over 20,000 deadweight, for a total of 37.1 million deadweight, were delivered. After assumed slippages, deliveries in 2018 could come in at a lower level of around 27 million deadweight.

As for new building orders, according to banchero costa, in 2017, a 175 new orders totaling 24.2 million deadweights were reported; in the first 5 months of 2018, 65 new orders totaling [8.3 million] deadweight.

Supply now. According to banchero costa, the total bulk fleet is expected to grow by 2% this year and about the same in 2019. According to Clarksons, during 2017, fleet growth in deadweight terms remain manageable, as they calculated, at 3% following expansion of only 2.2% in 2016. The Capesize fleet is expected to grow by 3% this year and by the same rate in 2019. The level of surplus capacity has been reduced compared to 2 years ago. And according to Clarksons, Chinese seaborne iron ore imports this year are projected to grow by a relatively strong 4% as a result of continued preference of China's steel mills for high-quality imported ore goes partially by the wider environmental focus in the country. The Panamax fleet is expected to grow by only 1% in both 2018 and '19.

The outlook for this size looks promising as the coal trade is expected to expand in 2018 with Chinese and South Korean imports projected to remain relatively steady. The grain trades are also expected to grow. Although, there are risks from the potential introduction of tariffs on Chinese imports of U.S. grain, including the all-important soybean cargoes, mentioned earlier on.

Turning to scrapping. Some concerns have surfaced recently over the latest European ship recycling regulation due to come into force at the end of this year. True to form, the bureaucracy in Brussels has come up with regulations on scrapping that have a little to do with the real world, but that does not seem to concern the legislators too much.

European shipowners associations across the continent have stressed that the 21 approved facilities do not represent sufficient capacity to meet the demand for scraping. On top of that, it has been recently announced that Chinese yards will not be allowed to scrap foreign flag vessels going forward. We need to wait and see now how things develop on this front.

In the meantime, during 2017, demolitions dropped significantly from 2016 level due to the improvement of ships earning. We saw about 50 million deadweight scrapped in 2017, half of what was scrapped in 2016. According to banchero costa, in the first 5 months of 2018, a total of 27 vessels amounting to 2.6 million deadweight were demolished. Only 9 Capes and 2 Panamaxes were sold for scrap during the first 5 months of this year.

Turning finally to the outlook for our industry. According to Clarksons, the dry bulk market has been recovering since 2016, and even though it will probably not follow a smooth trajectory, further improvements are expected over the next few years. Looking at the order book, we can safely assume that fleet expansion will remain fairly muted with deliveries expected to slow further to around 25 million deadweight both this year and 2019, underpinning expectations of fleet growth of around 2% for both years. Clarksons continue to by saying that provided overall growth in seaborne dry bulk trade remains relatively healthy. The next few years could well see further rebalancing in the bulk area market.

According to Commodore Research, the Capesize market appears to have the best prospect going forward. This optimistic forecast is based on their bullishness for China's iron ore input prospects through the end of the year and also Vale's production.

According to banchero costa, barring realization of a full-blown trade war between U.S. and China as well as the U.S. and Europe, the outlook for the dry bulk market remains generally positive in 2018 on the back of improving vessel supply dynamics as well as strong Asian demand for commodities such as iron ore, grains and soybean.

So we conclude this brief overview of the state of the bulk area market by repeating management's positive stance as regards to the medium term outlook for the bulk iron industry, during which period, the company will seek to strengthen even further its balance sheet and gradually create further value for our shareholders.

On this note, I will pass the call to our CFO, Andreas Michalopoulos, who will present you the financial highlights of the first half and second quarter of this year. Thank you.

Thank you, Stasi, and good morning. I'm pleased to be discussing today with you Diana's operational results for the second quarter and 6 months ended June 30, 2018.

Net income and net income attributed to common stockholders amounted to $2 million and $0.5 million, respectively. Earnings per common share was 0. Time charter revenues increased to $53.4 million compared to $37.8 million in the second quarter 2017.

The increase was due to the increased average time charter rates that we achieved through our vessels during the quarter and revenues derived from the addition to our fleet of vessels Astarte, Electra and Phaidra delivered in May 2017. The increase was partly offset by a decrease in revenues due to grounding of the Melite and her sail in October 2017.

Ownership days were 4,550 in the second quarter 2018 compared to 4,491 in the same quarter 2017.

Fleet utilization was 97.9% compared to 97.8% for the same quarter of 2017, and the daily time charter equivalent rate was $11,773 compared to $8,173 for the same quarter of 2017.

Voyage expenses $0.8 million for the quarter compared to $2.1 million for the same quarter 2017. The decrease in voyage expense was due to a gain from bunkers of $2.1 million compared to gain of $0.4 million in the same quarter 2017.

Vessel operating expenses amounted to $24.6 million compared to $22.3 million for the second quarter of 2017, an increase by 10%. The increase was due to the 1% ownership days resulting from the enlargement of the fleet and increased crew insurances and maintenance costs of the vessels.

Daily operating expenses were $5,398 from the second quarter of 2018 compared to $4,971 for the same quarter of 2017, representing an increase of 9%.

Depreciation and amortization of deferred charters amounted to $13.1 million.

General and administrative expenses were $6.7 million for the same quarter -- as for the same quarter last year.

Management fees to related parties were $0.6 million compared to $0.4 million last year due to the increase in average number of vessels managed by Diana Wilhelmsen.

Interest and finance costs amounted to $7.3 million compared to $6.7 million in the same quarter of 2017. This increase was attributable to increased average interest rates in the quarter compared to the same quarter of 2017 and was partly offset by decreased average debt. Interest and other income amounted to $1.1 million compared to $0.9 million for the same quarter last year. The increase was due to the increase in interest rates on deposits.

For the 6 months ended June 30, 2018, now. Net loss amounted to $1.1 million, and net loss attributed to common stockholders are amounted to $4 million. Loss per share was $0.04. Time charter revenues increased to $101.8 million compared to $69 million for 2017. The increase was attributable to increased average time charter rates that we achieved through our vessels during the 6-months period, the increase in ownership days due to the enlargement of our fleet and less off-hire days compared to the same period in 2017.

Ownership days for the 6 months ended June 30, 2018, were 9,050 compared to 8,804 last year. Fleet utilization was 98.9% compared to 98% for the same quarter in 2017 for the same period, I beg your pardon. And the daily time charter equivalent rate was $11,097 compared to $7,627 for the same period in '17. Voyage expenses were $2.8 million for the 6 months ended June 30, 2018.

Vessel operating expenses amounted to $47.5 million compared to $43.6 million for 2017. The increase in operating expenses was due to the 3% increase in ownership days resulting from the enlargement of the fleet and increased costs for crew, vessels' maintenance and environmental costs. Daily operating expenses for the 6 months ended June 30, 2018, were $5,248 compared to $4,957 for 2017, representing a 6% increase. Depreciation and amortization of deferred charges amounted to $26 million for 2018.

General and administrative expenses increased to $13.7 million compared to $12.4 million in the same period of 2017 mainly due to increased payroll costs. Management fees to related party were $1.2 million compared to $0.9 million in 2017. The increase was due to an increased average number of vessels managed by Diana Wilhelmsen during the period compared to the same period in 2017.

Interest and finance costs amounted to $14.3 million compared to $13.1 million in 2017. This increase was attributable to increased average interest rates compared to the same period last year, while average debt is decreased. Interest and other income amounted to $2.5 million compared to $1.6 million in 2017. This increase was mainly due to the increase in interest income from Diana containerships due to increased average debt and interest rates during the 6-month period compared to the same period last year but also due to increased interest on deposits.

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.

(Operator Instructions) Our first question is from Amit Mehrotra from Deutsche Bank.

This is [Chris Mader] on for Amit. So my first question is around potential fleet high-grading. Now that you guys have kind of cleared the liquidity runway with the BNP refinancing, and we've have seen rates inflect above cash breakeven levels. Would you guys look to add some younger tonnage?

This is Ioannis Zafirakis speaking. We have explained that many years ago, and we keep saying that, that the growth period for a company in shipping should be at the lower part of the cycle, and the more you are getting into the after part, growth is not at the first option. You shouldn't be expecting us to add more vessels if we are at the same position as we are today. And if we buy vessels, it's going to be based on the revenue capacity and the capacity for a long-time charter, which you may see us doing. But we have no plans like this as we speak.

Okay. That's reasonable. Could you also provide us with an updated debt paydown schedule following the BNP refinancing for the back half of '18 and then 2019 and 2020 if possible?

Yes, we can. For the last quarter of 2018, the fourth quarter, you will have that amortization of $12 million, more or less. Then, if we go to January to until March 2019, you have $43.4 million. But in there, you need to consider a balloon for Crystalia, Atalandi and Maera of about $33 million. So the second quarter of '19, it's -- the number is $30.2 million. But again, there is another balloon from -- [don't have] -- with ABN for Ismene and Selina of [$97 million]. Then third quarter, it's $9.3 million. And finally, fourth quarter of '19, it's $14.4 million. And again here, you have another balloon of $4.9 million for [Boston] and Houston. So I guess, that helps. Now if you want an additional information I didn't give you, for this quarter, the third quarter that is, it's -- the payment is $64.4 million, $64.5 million let's say, which includes the $55 million we prepaid to BNP.

Okay. That's helpful. And then so, I guess, just kind of now trying to bring that back to like an all-in cash breakeven level. If we're to assume -- and obviously, the debt amort kind of jumps around. But if you're assuming maybe they get an average amort of around $15 million a quarter. We're coming out with an all-in cash breakeven of a bit under $12,000 a day. Does that sound right to what you guys are looking at?

Yes, that's sound correct.

Okay. And then just finally one quick housekeeping item. I see you guys ended Q2 with about $34 million due from related parties. Is that the amount we -- you will receive from containers in Q3, or is there something else in that due from related parties number?

Oh, that's mainly the amount received from container ships.

(Operator Instructions) Our next question is from Fotis Giannakoulis from Morgan Stanley.

You mentioned about the significant improvement in the market and the financial position of the company. I'm trying to understand what is the next goal for Diana right now? Obviously, you're not going to buy any vessels at this part of the cycle. I was wondering if this is a part of the cycle to sell some of the older vessels, the 2001 vessels, or this is the time to continue to delever your balance sheet. It seems that it's already low lever as right now or to start introducing a dividend.

Fotis, we -- I see that after so many years you know us very well, and you know very well what we do at the upper part of the cycle. And you are absolutely right that selling some of our vessels is an option that we are seriously considering. And also, the reintroduction of a dividend at a point is certainly something that we do at the upper part of the cycle. And although it seems that you like more speculative plays reading your reports, you see that we are delivering to whatever we have promised since 2005. And based on our strategy, you see that it seems that we will manage once again to deliver exactly what we promised, and we consider ourselves to be the best risk-reward player around.

Ioannis, in this potential of a dividend reintroduction, how shall we think of your dividend? In the past, when you first went public, you followed a floating dividend strategy. Of course, at that time, the balances was fully delevered. It was debt free. How shall we think about the dividend right now? And given the fact that you trade until a steeper discount when [they've been in] the market. I was wondering if there are any thoughts of potentially buying back some of your shares.

No, buying back shares is like buying back vessels at the upper part of the cycle. What we do is we will reintroduce dividend. You're not 100% correct that when we were paying dividend, we were debt free. We ended up debt free after having paid a lot of dividend. If you look back another year, you would see that we were paying dividend. We had debt, but we ended up being debt-free after a while. And I have to remind you how shipping works: you buy vessels, you operate them, you make money, you sell them, and you get the fruits of having vessels operated and selling vessels. And this is how it's going to be done. Certainly, we are not in a position to tell you that we have decided something like this right now or this is something that we are telling you is going to happen soon. But this is our way of thinking that we have explained many years ago. So to cut the long story short, if you look at us selling vessels, it is very, very probable to see a nice dividend after that.

Ioannis, can I clarify about if it's going to be a special dividend, is it going to be a floating form of paying dividend, or how shall we try to model it?

Fotis, you shouldn't try to model it because Ioannis just told you we have not even decided that we're going to give any kind of dividend at the moment.

But...

Monetary. But you should look at our strategy from 2005 and you're well placed because you know it very well from the beginning.

But in addition to what Andreas says, looking at sales and estimating dividend is a good start.

Okay, that's very helpful. One more question on some of the comments that Stasi made earlier about the trade situation and the risk that the trade conflicts pose to the overall shipping market. I'm trying to understand, vis-a-vis the other segments of shipping and also given the size of the market, how important is the U.S-China trade? What kind of implications this can have for the overall dry bulk demand apart from the soya bean market? And how -- what kind of probability do you put in your strategy of full-blown trade war, and how do you prepare yourself for it?

We're starting from the last of your several questions. There is a very little to do to prepare in a company like ours with the chartering strategy that we have and what appears to be a policy of having ships always to fix regularly in the market. So we are not going to be caught at any point with more ships than our policy dictates to fix at a certain point in time as regards the market. So we are not concerned about how our market strategy is going to be affected by the trade war because there's nothing we can do. We're not going to try and outsmart politicians and these things that their decisions have on the market. What we believe it is going to happen is that after people realize that the initial measures of imposing tariffs have adverse effect all around, as I mentioned earlier, even in the country that imposed them, let alone the measures that are taken against the country that started this, which is the U.S. We think that all this is going to die away quietly, and we put a very low probability on an all-out trade war developing. If it does, that will affect all commodities and virtually all finished product shipment. It will also possibly reach out to all cargoes and things that we are not concerned with. So it's going to be a very, very huge disaster, and I can't believe that people don't realize this. So politicians are testing the voters, I think, and the commodities for the time being have not being affected greatly, as we said, beyond soybeans. But we're beginning now to see the effect on steel exports, as I mentioned earlier, high-end finished steel products, and on some containerized goods. I won't mention them here because I don't have reliable information to present. But empirical evidence shows that there are some fears that even finished products shipped in containers might be affected and are already being affected by these tariffs that are being imposed on commodities, which is strange to think about. But is there are fears, generally, unfortunately, and we hope that this thing doesn't escalate.

Let me add, Fotis, on what Stasi said. I think we have always tried to put in place ourselves in the middle and not in the corner, and this is the beauty of being in stock market. You can do that provided you have clarity, transparency and you are focused on what you said from day 1. And if you stick to what you have said, you're bound to have less effect from any wars here, there or any anywhere. And furthermore, bear in mind that America needs China and China needs America. They cannot go about for a war because it will not help anybody.

That's extremely helpful. One more question, if you can comment also about the possibility of -- or the possibility of Chinese stimulus and the fact that China seems to be shifting away from the delevering to support its growth. How do you view this can impact the demand for dry bulk vessels?

So we don't think that it's going to affect it anytime soon because the programs for purchasing commodities are basically there for at least this year and part of next year, restocking or destocking depending upon the commodity. So in our view, for the medium term, it will have no effect; for the long-term, it might. It depends very much how this business with the trade wars and the import tariffs is going to develop. That is what we should watch more carefully, I think.

Fotis, this is Ioannis, again. We go back to what we keep saying in all the sentiment and the effect of the fear or optimism of something happening, whether it's going to be greater than the actual fact. And if you remember, we always say that from the one hand, you have the fact and on the other hand, you have the fear or the optimism of something happening. And if the one is greater than the other, the effect is the opposite. So let's see how this is going to develop. To give you an example, imagine if everyone is getting really scared about the trade wars, then supply is going to go down. And if it goes down further than the demand is going to go down due to the trade war, then the result is going to be positive. So we soon waste all of our time calculating demand and supply without looking at the same sentiment for that.

Our next question is from Randy Giveans from Jefferies.

Obviously, Diana's been active in the time charter market in recent weeks and months. So is that mostly to kind of capitalize on the recent rate strengthening, or are you expecting kind of a rate pullback later in this year?

You see, although we have an opinion or we think we know what the market is going to do, by having the hedging strategy that we do by having vessels to charter every 10, 15 days, we are bound to get, as we keep saying, mathematically the average of the market. So we do not want to forecast as we speak what do we expect about the market. It is true that we like what we see as regards demand and supply, but all scenarios for us, they're open. We take the agnostic view as regards the revenues. And therefore, we keep hedging the way we charter our vessels. And as I say, mathematically, we're going to have the average of the market for a 2019, for 2020, whatever that is going to be. And if the average is good, then we're going to have nice results.

All right, that's fair. Kind of a structural question. So there's been a lot of news recently regarding a coal slowdown in China, inventories at elevated levels, more and more power generation switching to gas. Have you seen the slowdown in kind of Chinese coal fixtures recently? Or do you expect, I guess, Chinese coal fixtures to slow meaningfully in the coming months?

No, we don't actually see that yet. There's been threats about shipments of coal going down for years now, especially looking at hydroelectric power, wind power generation and gas -- switching into gas. The problem is that people cannot actually calculate correctly the rate of increase in the demand for electricity. It seems that there is a continuous, in our view, underestimation of this. And therefore, every year that we expect to see a drop in steam coal demand -- imported steam coal, it doesn't seem to materialize. So effectively, we're not pessimistic as regards the fixtures for coal apart from short-term events that, really, nobody can forecast.

Okay. And then one Diana-specific question. So you have about $82 million cash, not including the $34 million received from Diana containerships, then another $25 million in restricted cash. So all in, that would be about 140 million in cash. So what is that kind of amount you want keep on your balance sheet? Do you have like a maximum or minimum cash balance or target cash balance?

No. We don't have a maximum or minimum cash current. First of all, the number is a $107 million for the quarter, but -- the total number. But we don't have a maximum amount of cash. We need a minimum amount of cash, and the minimum amount of cash that we need is the minimum that is required by our loans. But apart from that, no, we don't have a target cash amount or a minimum cash amount. We want to use our cash the best we can and the most efficiently we can to be not only safe during the bad moments of our very cyclical industry but also efficient during the good moments of the -- this industry.

If you look at our balance sheet, it is -- it looks very, very healthy, and it is the most appropriate balance sheet to implement any such strategies that you may have. But certainly, to implement the strategy that we have described the last 13 years have been publicly listed.

Sure. And just to be clear, that $107 million, that's the $82 million and the $25 million restricted. But if I include the $34 million received from...

Yes, yes, yes, you're right. Yes, but we paid $55 million to the BNP loan.

This concludes the question-and-answer session. I'd like to turn the floor back over to management for any closing comment.

Thank you again for your interest in and support of Diana Shipping Inc. We look forward to speak with you in the future. Thank you.