Diana Shipping Inc (DSX) 2024 Q1 法說會逐字稿

Hello, and welcome to the Diana Shipping Inc first-quarter 2024 conference call and webcast. (Operator Instructions) And as a reminder, this conference is being recorded.

Turn the call over to Ed Nebb, Investor Relations. Please go ahead.

Thank you, Kevin, and thanks to everyone who is joining us for the Diana Shipping Inc 2024 first quarter conference call. Leading the call today is Semiramis Paliou, Chief Executive Officer, and she will now introduce the other members of the management team.

So I will turn the call over to Ms. Paliou.

Thank you, Ed. Good morning, ladies and gentlemen, and welcome to Diana Shipping Inc first quarter 2024 financial results conference call. As I said, I am Semiramis Paliou, CEO of the company, and it's my pleasure to present alongside our esteemed team, Mr. Anastasios Margaronis, Director and President; Mr. Ioannis Zafirakis, Director, CFO and Chief Strategy Officer; Mr. Eleftherios Papatrifon, Director; and Ms. Maria Dede, Chief Accounting Officer.

Before we begin, I'd like to remind everyone to review the forward-looking statements on page 4 of the accompanying presentation. The first quarter of 2024 started unusually strong with Capesize earnings being the highest in 14 years and pulling along the other sectors. Even though the market has softened since the sentiment is still strong for the balance of the year. In this background, we announced a cash dividend for the first quarter of 2024 of $0.75 per common share.

Turning to slide 5, I will review with you the company snapshot as of today. Our fleet comprises of 39 drybulk vessels in the water with a total deadweight of approximately 4.4 million tons. The company is also expecting to take delivery of two methanol dual-fuel newbuilding Kamsarmax drybulk vessels.

Our fleet utilization has remained consistently high, reaching 99.1% for the first quarter of 2024, attributed to our prudent and efficient management of our vessels. Additionally, as of the end of March, we employed 993 people. Let's see on the shore.

Moving on to slide 6. Let's go over the key highlights for the first quarter and recent developments. In February 2024, the company executed the contract for the acquisition of two 81,200 deadweight methanol dual-fuel newbuilding Kamsarmax drybulk vessels built at Tsuneishi Group for a purchase price of USD46 million each.

These vessels are expected to be delivered to the company in the second half 2027 and the first half of 2028, respectively. We take pride in our role as an industry leader, continually striving to enhance our fleet and operations for the benefit of our stakeholders and the environment. In addition, the joint venture entity wind VARD offshore increased its investment from two to four high-spec commissioning service operation vessels, Tsuneishi to rebuild that VARD yard.

As a result of exercising its option to construct two additional vessels. The continued participation in this venture is another reflection of the company's commitment to a greener and more sustainable shipping industry. These investments also underscore our focus on seeking new opportunities for the company and our shareholders that may arise from the transition to new energy solutions.

Furthermore, continuing the renewal and modernization of our fleet, one vessel has been sold to unaffiliated third-party. Motor Vessel Houston was sold at a net sale price of approximately USD23.3 million. In December 2023, we completed the pro rata distribution of warrants to holders of the company's common stock, of which, as of May 20, 3,284,372 were exercised.

The warrant distribution provided us with an opportunity to raise equity in a non-dilutive manner for our existing shareholders. As of May 2024, the company has secured the revenue for 66% of the remaining ownership days of the year 2024, amounting to approximately USD96.8 million of contracted revenue. Additionally, the company has secured approximately USD48.8 million of contracted revenues for the year 2025, representing 18% of the available ownership days for the entire year.

Ioannis, this will provide a more detailed analysis of our cash flow generation potential based on the current market environment further on. As mentioned earlier, we are pleased to declare a quarterly cash dividend of $0.075 per common share, totaling approximately USD9.1 million.

Finally, we are happy to share that our company has been honored with the Gold Environment Leader Award and Gold Diversity, Equity & Inclusion Leader Award at the 2024 ESG Shipping Awards International.

Moving on to slide 7, let's review a summary of our recent chartering activities. So we have continued to implement our disciplined chartering strategy by securing profitable time charters for four vessels since our last earnings presentation in February 2024. To provide some detail, we have charted the one Ultramax vessel with a weighted average daily rate of USD16,500 for an average period of 452 days.

Additionally, two Panamax vessels have been chartered at a weighted average daily rate of USD14,573 per day for an average period of 472 days. And one Capesize vessel has been chartered with an average daily rate of USD27,150 and the remaining average period of 543 days.

Slide 8, illustrates our commitment to strategically charter our vessels in a staggered manner. Our emphasis is on securing positive free cash flows through our disciplined employment strategy and positioning ourselves in a balanced way to participate in the market efficiently.

I will now pass the floor to Ioannis to provide a more detailed analysis for our financials.

Thank you, Semiramis. As you can see in this simplified slide from the previous one. The time charter revenues for the first quarter of 2024 that were in the vicinity of $58 million compared to $52.6 million in the same quarter previous year. The our EBITDA also was at $27.8 million compared to $45.9 million. And the net income stood at $2.1 million compared to $22 million for the first quarter of 2023.

This is why the earnings per common share on a diluted basis is $0.01 compared to $0.22 in the same quarter last year. However, the cash position of our company, together with the restricted cash is at $162 million. The long term, debt and finance liabilities is at $628 million compared to $642 million for the same quarter the previous year.

Looking at the summary of the selected financial and other data, I think what we should look at is that the number of vessels has decreased to 39.7, the average from 41.5. And the same applies for the ownership days, which is slightly lower than the previous same quarter last year. So our time charter equivalent is at $15,000 approximately compared to $18.5 at the same for the previous year.

Daily operating expenses, are up $5,800 approximately compared to $5,400 this is a particular trend for this quarter. We do not expect to continue for the other quarters and the average for the year for this going to be lower.

If we move to the other slide, which has the amortization profile and the balanced profile of our debt. You can see clearly that the company has managed very well the facilities and we have no maturities for the remaining of 2024 the entire 2025, and we have the bond maturing in 2026 only.

And looking at the balance profile at the bottom, you can see how well positioned the company has got the remaining amount of debt going forward, very well balanced and controlled. The break-even rate of hours. You can see that there is the ability of the company based on the unfixed days that we have to improve our revenues and end up, with around $4 million above our breakeven for the remaining of 2024.

And therefore, 2025, based on the existing interface, these can be close to $14 million. There is a way on a per day basis for 2025, close to $1,000. Of course, all of which are based on the current, as I say. Something that we need to point out, something that we keep forgetting mentioning to our shareholders is how well we did as regards with the dividends that we paid since the third quarter of 2021.

We have managed to pay around $2.56 per share either as a cash dividend or dividend in kind. Of course, the $0.075 that we are paying now is a continuation of that particular point.

With that, I will pass the floor to Stasi Margaronis for some of the market review. Stasi?

Thank you, Ioannis. Warm welcome to the participants of this quarterly earnings call of our company. If we cast our ties back to the beginning of the year, the bulk carrier market has so far been strong compared to 2023 and it's10 year earnings average. The Clarksons average bulk carrier sector earnings were $16,500 per day from January through the end of April and about $17,500 a day by mid May.

The main factors supporting this trend were firstly, demand growth in the Atlantic for cargoes such as iron ore from Brazil and bauxite from Guinea. Secondly, the Red Sea disruption, which increased the ton-mile demand through alternative routing by 0.7% for Capesizes and 2.9% for Kamsarmaxes and smaller. Sailing Panama Canal restrictions due to low water level have again increased ton-mile.

The increased demand for shipments of bulk commodities to India and China related in some cases contributing to the above mentioned factors were the following events, which were a return of growth of steel production outside China. The return of growth in global grain trade, and finally, China contraction of domestic coal production, government decision though, to influence rates in less directly.

An example is the recent announcement that the Chinese government will spend the $42 billion to buy a phone call and remarkable decision impossible to imagine happening outside China, which would have a profound effect on the absorption of the huge surplus of residences remaining unsold following the building boom of a few years ago.

In the short presentation, we will drive to establish, which of the above factors will continue supporting the bulk market, which might drop out and which new ones might merge due to seasonal and other factors. Panama Canal restriction is the most likely factor to drop out of the lift over the short to medium term.

While the Red Sea disruption remains a wildcard. Meanwhile, continued demand for bulk commodities from China and India will depend on factors, as we mentioned later on. Looking quickly at macro economic factors, GDP growth forecast for major economies have not changed much since our last report.

According to the April 20 -- (technical difficulty) April 24, the department and the forecast of the IMF World GDP is expected to grow by 3.2% this year and in 2025 the same way, which with China growing by 4.6% this year and 4.1% in 2025, India by 6.8% this year and 6.5% next year and the US by 2.7% this year and 1.9% in 2025.

The euro area is expected to grow by just 0.8% this year and by 1.5% in 2025. Let's look at demand now it is encouraging to note that according to Commodore Research, year on year, steel production outside China remained strong for this year is expected to continue showing strength as GDP growth increase. Global steel production last year was just under 1.9 billion tons, up 0.1%, while Chinese steel production shrank by about 1% during that period.

Current manufacturing output in China has continued to contribute to significant steel consumption to help counter weakness in demand from construction industry. The iron ore trade is expected to increase this year by 1% to remain stable in 2025. Brazilian exports are expected to grow by 5% this year and reached nearly 400 million tons in Australia and exports are expected to remain flat.

Coal exports, both coking and steaming coal combined are expected to show very small increases with China, India, Indonesia, Europe and Australia each having their effect on total shipments, which are expected to reach about 1.3 billion metric tons. Chinese demand will slow down in European demand will continue to decline.

In China, hydropower production is starting to increase rapidly. And at the same time, China's coal derived electricity generation growth has continued to exceed domestic coal output growth. India is expected to import record volumes of coal as electricity demand is once again outpacing domestic coal production growth.

Grain exports are expected to grow by 3% this year and next reaching about 559 million metric tons during the next grain season. Soybeans from the US to China will be negatively affected due to better price product from Argentina and Brazil. Minor bulk trades that are expected to grow by 4% this year and 3% in 2025, reaching 2,284 million metric ton has been a well is pretty highly correlated to global GDP growth.

Bauxite and other metals such as nickel, manganese ore and scrap are expected to play a major role in supporting the increased rates going forward. Their shipments are expected to increase by 6% this year and by 4% in 2025. So I mean, right. And fertilizers are expected to show strong volume gains as well. Most of the above-mentioned commodities are shipped in Ultramax such as those in our fleet.

Turning to the supply side, according to Clarksons, the newbuilding order book remains low at around 9.3% of the existing fleet indicate sector. The ships on order are about 6.2% of the existing fleet for Panamax Kamsarmaxes, it stands at 12.6% and for Handymaxes are 11%.

Newbuilding contracting of bulk carriers this year is about 130 vessels according to Clarksons, which is 44% fewer than at this time last year. Considering expected deletions and additions to the fleet, the Cape fleet should increase by 1.5% this year and by only 1% in 2025, the Panamax and Kamsarmax fleet is expected to grow by 3.5% this year and by 3% in 2025.

Equivalent number for, Handymaxes of 4% for '24 and 3.3% for 2025. Looking to the end of the year, demand for bulk carriers is expected to be 3.6% higher than in 2023 and supply of bulkers is expected to be 3% higher than last year. You basically take the structure looking at the age of the bulk carrier fleet, 25% of Handymaxes are 15 years old. While for Panamaxes, this percentage goes to 27% and for case it is 16%. Any the weakness in earnings going forward will most certainly a number of these, aging ships to the scrap yard.

Looking at the age structure of the fleet, it is interesting to keep in mind that a significant number of large bulk carriers would become 15 years old and 2026 and faced their third special survey. Their future will much depend on their condition and environmentally friendly they can become with retrofit another intervention.

And definitely another pool of potential scrap candidates, depending on then prevailing market conditions. About 25% of the bus fleet capacity are estimated to have a D or E rating for CII as of the end of 2023. So as mentioned earlier, slower operating speed increase EST retrophy. Some demolition of the older units and increasingly to market are factors that will influence the freight market going forward.

Turning to demolition, according to Clarksons, 5.4 million deadweight worth of losses was scrapped in 2023. And so far, 1.5 million deadweight has been scrapped this year. It's compared with plus for 2025. This is expected to increase to about 7 million deadweight kind. This year about 1.8 million deadweight of Capesize vessels are expected to be scrapped and about 2.4 million deadweight in 2025.

Panamaxes and Supramaxes are expected to be expressing the tune of about 2.5 million deadweight this year and 3.7 million next.

And look at assets that newbuilding prices according to Clarksons have increased by 3% this year with Newcastlemax prices having gone up by 6% and Ultramax newbuild prices haven't gone up by 3%. Smaller ship prices have been more or less steady. Secondhand ship prices have been going up across the board, particularly since early this year.

The three month trend for five year old Cape is up 12% and for older, 10 year old ships as much as 21%. For Ultramax that prices go five years. Our investments have increased by 9% and 10 year old ships by 14% with similar increases in the prices of secondhand Ultramax.

So finally, let's look at the outlook, apart from unexpected factors such as adverse weather, which can have a negative effect on the supply-demand balance, we are cautious about 2025. We agree with Clarksons that the bulk carrier sector supply-demand balance initially appears somewhat softer in 2025 which could lead to a softer freight market.

Dry bulk demand is expected to increase by about 1.6% in ton mile, assuming that the disruption has seen by the end of this year. Meanwhile, fleet growth is expected to come in at around 2.5% in 2025. Even slower operating speeds increased CSD repeating, increased Demolition of older units will all influence the market in 2025, hopefully counter balancing this negative effect of surplus tonnage mentioned above.

So to summarize, we should be focusing on the following positive and negative factors which may affect the drybulk industry over the next few quarters. On the positive side, relatively low new building order book with deliveries spread over the next four years.

Secondly, continued sailing restrictions in the Panama Canal threat, the risks of attack increasing ton-mile demand, China's contraction of domestic coal production and increasing congestion even slower operating speed and continued growth in Asia outside China.

On the negative side, we have to look for new geopolitical disruption in and tight monetary policy leading to the worldwide recession. Secondly, the reversal of higher congestion trend easing of tensions in the Middle East, allowing again pre and sales trends through the Red Sea. Large increase in newbuilding ordering due to excessive optimism.

And finally, development of a trade war between major trading nations such as the US and China.

At this point, I will pass the call to our CEO, Semiramis Paliou for the highlights of our company's business strategy going forward.

Thank you, Stasi. And before we open the call up to our questions and answer session, I would like to summarize the key points from today's presentation. We adhere to our strategy of providing relative stability in a cyclical business and aiming to maximize long-term shareholder value. A corner stone for exactly executing this strategy is the prudent and active management of our balance sheet.

We are continuously renewing and modernizing our fleet, enhancing our ecological footprint with greener investments. This aligns with our commitment to sustainability and environmental responsibility. Our focus is on generating and securing positive free cash flows. We also remain committed to rewarding our shareholders with attractive cash and in-kind dividends whenever possible.

And lastly, we're keeping abreast of developments in the shipping and energy sectors for potential attractive opportunities presented to us.

With that, thank you all for joining us today, and we look forward to addressing your questions during the Q&A session.

(Operator Instructions)

We have reached the end of our question and answer session, and I'll turn the floor over to management for any further or closing comments.

Okay. Well, with that, I would like to thank you again and we look forward to catching up on our next call with our next financial results. Thank you very much.

Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.