Eagle Bulk Shipping Inc (EGLE) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2010 Eagle Bulk Shipping Incorporated earnings conference call. My name is Ann and I will be your coordinator for today's call. As a reminder, this conference is being recorded for replay purposes. At this time, all participants are in listen-only mode. (Operator Instructions). We will be facilitating a question-and-answer session following the presentation. I would now like to turn the presentation over to Mr. Sophocles Zoullas, Chairman and CEO. Please proceed sir.

Thank you and good morning. I would like to welcome everyone to Eagle Bulk Shipping's second quarter 2010 earnings call. To supplement our remarks today, I encourage participants to access the slide presentation that is available on our website, at www.eagleships.com. Please note that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and are inherently subject to risks and uncertainties. You should not place undue reliance on these forward-looking statements. We refer all of you to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties that may have a direct bearing on our operating results, our performance, and our financial condition.

Please note on Slide 3 that the agenda for today's call will be as follows. I will first brief you on our second quarter 2010 results and year-to-date highlights, proceed with a company update, and lastly present our current views on the market. Alan will then give an overview of our quarterly financials and I will end our presentation with some concluding remarks before we open the call for questions.

Please turn to Slide 5 for a review of our second quarter 2010 results and year-to-date highlights. During the quarter, we generated net income of $11 million, or $0.18 per share basic and diluted, which represents more than twice the earnings of Q1 of this year. Revenues, net of charter commissions, totaled $65.6 million and EBITDA was $41.7 million. Fleet utilization for the quarter was an impressive 99.9%.

Eagle continued to be very active in recent months, taking delivery of an additional four new-build Supramaxes since our last earnings call in May. This now brings our year-to-date deliveries to 11 vessels, a transformational expansion of 40.7%, since the end of last year. Our larger scale has allowed us to become more opportunistic in our chartering, implementing a disciplined approach to capturing value in both the short and long-term markets, which contributed to our improved financial performance for Q2.

Please turn to Slide 7 for charter specifics of our 2010 delivered fleet. Out of the vessels delivered since early May, two vessels, the Grebe Bulker and Ibis Bulker have each been placed on three-year charters at a base rate of $17,650 per day, plus a 50% profit share on rates above $20,000 a day. The Jay and Kingfisher, both of which we took delivery in the past week, have been placed on long-term charters for approximately 8.5 years, at a base rate of $18,500 per day plus a 50% profit share on rates above $21,500 per day.

In total, the 11 new builds we have taken delivery of year-to-date will contribute minimum contracted revenues of over $366 million. In addition, profit shares on fixed charters and spot-related indexed charters will allow the company to benefit from additional revenues.

On Slide 8, we depict our on-the-water fleet, one of the youngest, largest and most homogenous in the industry. Eagle's fleet currently totals 38 vessels, or slightly over 2 million deadweight gross tonnes with an average age of only 4.6 years. As our new builds continue to deliver, our average fleet age continues to get younger as the company increases in size. It is important to note that 40% of our impressive growth in the fleet so far this year was achieved with on-time delivery of all of our new vessels from both shipyards in Japan and China.

Please turn to Slide 9 for a summary of Eagle's remaining new building program. In addition to the 11 vessels we have taken delivery of year-to-date, we expect to take delivery of two more in 2010 and the final 7 in 2011, bringing our fleet to a total of 47 by 2012. Minimum contracted revenues for these additional new buildings will total $243 million, excluding any profit sharing from fixed charters, and also excluding one vessel, which is charter-free. Vessel-owned days are expected to reach over 17,000 in 2012, representing a 70% increase in just three years and a compounded annual growth rate of over 25% since the company went public in 2005. Our remaining CapEx is to be funded from existing cash, debt and cash flow from operations.

60% fixed, 20% indexed to the BSI, and 20% open, which we believe is the correct balance going into the seasonally strong fourth quarter.

Slide 11 illustrates Eagle's cargo carrying mix. Our vessels carried over 3.4 million tonnes of cargo during the second quarter, an increase of 7.5% sequentially and over 47% year-on-year. The split between major and minor bulks carried was 65% and 35% respectively. The noticeable strength in the grain and minor bulk markets and relative short-term weakness in iron ore caused Supramaxes to significantly outperform the larger Capesize vessels. It is interesting to note that coal, for second consecutive quarter, represented the largest share of cargo carried by Eagle, illustrating this commodities dominance in the drybulk trade.

Please turn to Slide 13 for an update on the industry. As evidenced by our own cargo carrying data, coal is becoming an increasingly important drybulk commodity. In other words, the new iron ore. In 2010, total seaborne coal trade is expected to reach close to 1 billion tonnes. Seaborne trade and metallurgical or met coal, which is used to heat blast furnaces in the production of steel, is expected to reach 265 million tonnes this year, an impressive 17% year-on-year increase. Thermal coal, which is primarily used input for coal-fired power generation is expected to reach 713 million tonnes in seaborne trade this year, a 4% increase year-on-year. The medium- to long-term demand fundamentals look very favorable, thanks to massive investments in new coal plants in Asia.

On the top right corner of Slide 13, we list new plants coming online in 2010 by region and the coal required to power them. The total seaborne coal trade is expected to reach 1.2 billion by 2014, a 40% increase from today's levels. Lastly, the graph on the lower right side of the slide serves as a reminder that 80% of the growth in the coal market is coming from the needs in India and China, which have the lowest per capita use of electricity in the industrialized world. Increasing electrical usage is a long-term trend that will benefit the coal market and, by extension, the drybulk market.

Slide 14 highlights the five-year import/export growth projection in incremental seaborne coal trade. The majority of this incremental demand will come from India and China, with supplies in the short-term coming from Indonesia and the Americas, and in the longer term from Australia once their capacity generation has been ramped up. It is important to note that Indonesia is the second largest incremental increase of global coal exports after Australia at 80 million tonnes, which is a region that almost is exclusively the domain of the Supramax market.

On Slide 15, we provide a breakdown of the projected minor bulk trade for 2010. It is estimated minor bulk trade will reach close to 930 million metric tonnes, an impressive 9% increase year-on-year. As a reminder, minor bulks represent approximately one-third of all drybulk cargoes carried at sea. We believe the capability of a vessel to carry both major and minor bulk cargoes is a competitive advantage which Supramaxes possess. In a weaker iron ore market, as we witnessed in the past quarter, Supramax rates held up very well and significantly outperformed the Capesize market.

Fundamentals for other drybulks also remained strong. For example, demand growth for soybeans, which represent approximately 10% of Eagle's cargoes for the second quarter, is expected to be heavily driven by China's increasing appetite for the commodity. As the standard of living of China's population improves, demand for meat products, pork, poultry and beef and, in turn, animal feed rises. China will import a record 48 million tonnes this year with projected growth at 8% per annum for the next three years.

Please turn to slide 16 for a listing of other factors affecting the drybulk industry. Starting with the graph on the right, hidden intra-Chinese seaborne drybulk demand shows coal trade is projected to reach almost 500 million tonnes in 2010 and this is in addition to the billion tonnes estimated for global seaborne trade. We believe most people don't account for this trade, as it is hard to track, and requires Chinese-flagged vessels but it is very important because it removes a significant number of ships from the market which, in turn, increases utilization of drybulk vessels and will continue into the future. Once again, Supramaxes are the workhorse vessels in the Chinese coastal trade.

Port constraints will continue to cause congestion which, in turn, absorbs supply from the market. Although the press tends to focus on Capesize related congestion, this phenomenon does also affect all asset classes and should not be ignored. For example, we have estimated Supramax related congestion utilizes over a 110 vessels annually, or almost 15% of the fleet. You can see our calculation at how we arrived at this figure on slide 16.

Another factor which we believe will affect supply in the medium term are ship repair yard constraints. A growing seaborne fleet will be competing for ship repair and dry dock services and we believe the industry is not prepared to handle this. These bottlenecks could significantly cause delays of up to 20 days per vessel, another often untracked factor that affects vessel utilization and charter rates.

Slide 17 exhibits the relative advantage the Sub-Panamax fleet has over the larger asset classes for both age profile and new build delivery prospects. The Sub-Panamax class has the oldest fleet with 26% being over 25 years of age, as compared with 14% for Panamaxes and only 6% for Capes.

Scrapping remained at low levels during the quarter due to the healthy rate environment, but as we look forward almost 2,000 vessels of the global drybulk fleet is over 25 years of age and will eventually need to be scrapped. This phenomenon acts as a safety valve that will contain vessel growth and improve the supply/demand fundamentals going forward.

Slippage rates for the drybulk market are currently around 43%, while the Sub-Panamax fleet is greater at over 45%. It is widely believed that these slippage rates will continue for the remainder of this year and into 2011 for reasons we have now stated in the past, including shipyard and financing issues.

I will now turn the call over to Alan who will review our financial performance.

Thank you, Soph. Slide 19. I would like to offer a brief recap on our second quarter results of operations. Eagle had a great quarter. We achieved record net revenues for the quarter of $65.6 million, compared to the 2Q '09 figure of $53 million. All vessels were on time charter during the quarter.

Operating income for the quarter was $23.5 million, compared to 2Q '09 figure of $20.1 million. EBITDA, as adjusted for exceptional items under the terms of our credit agreement, was $41.7 million for the quarter, compared to the 2Q '09 figure of $33.8 million. Finally, net income was $11 million or $0.18 per basic and diluted share for the quarter.

Slide 20. Just a few comments on our balance sheet. At the end of the second quarter we have $120 million in the bank, including $18 million of restricted cash. During the quarter, we borrowed $102 million, in order to fund our new building program. We took delivery of three ships during the quarter. So far we've taken delivery of two more ships this quarter and are scheduled to take delivery of one more this quarter and one during the fourth quarter. Our debt stands at $1.08 billion at the end of the quarter and we are compliant with all of our bank covenants.

Slide 21. We are not making any changes to our expected cash cost per vessel, of $11,397 per day, for the second half of 2010. This remains one of the lowest in the industry. Our estimated daily vessel operating cost is $5,116. Our technical management fees, paid to our vessel manager,s are estimated at $307 per vessel per day. We were under budget for the quarter and for the first half of the year.

Our estimated cash, general, and administrative expenses for 2010 is $1,521 per vessel per day. The increase to-date is due to the 40% growth rate in the company since the beginning of the year. Based on our current interest rate swap profile, we estimate our interest expense, net of interest income, for the second half of 2010 will be $3,850 per vessel per day.

Finally, we've maintained our estimate that our average drydock costs at $603 per vessel per day on the basis of an average drydocking cost of $550,000 once every 2.5 years. We have either two or three drydocks per quarter scheduled for the next four quarters.

With that I'll turn it back to Soph, who will complete the presentation.

Please turn to Slide 23 for concluding remarks. The evolution of Eagle over the last five years has achieved the goal to become the premier brand in the mid-size bulk carrier market. We have stayed true to our story from the beginning and we believe we are now in a position to leverage this brand and build value as we look forward to the remainder of 2010 and beyond. With 38 modern vessels currently on the water, representing over 2 million deadweight tonnes of capacity; we are one of the world's largest owners of Supramaxes. This asset class is uniquely positioned and has proved to be much more resilient in volatile markets than larger vessels while also offering considerable upside in rising markets, thanks in part to the versatility in carrying multiple types of cargo.

In short, the Supramax is the workhorse of the drybulk market. Looking forward, Eagle maintains a well balanced approach with approximately 60% of its vessels fixed for the remainder of the year. The company has a portion of the fleet on long-term charters going out to over 8 years, providing for strong visibility and cash flow. As a result, our growing platform is allowing us to become more opportunistic in our chartering strategy and, hence, capture more value from the drybulk market, as we saw in this quarter's results.

We have been able to consistently demonstrate our well-managed growth and continued superior operating performance with almost 100% utilization during the second quarter which, combined with our new opportunistic charters, will help us maximize our revenues going forward.

Lastly, our New York-based management team has proven its technical, operational, and commercial capabilities to fully utilize our large world class fleet and to build value for our shareholders in the future.

I would now like to turn the call over to the operator for questions.

Thank you. (Operator Instructions). And our first question comes from the line of Natasha Boyden with Cantor Fitzgerald. Please proceed.

Thank you, Operator. Good morning Soph, Alan.

Yes, hi Natasha.

Hi Natasha.

As you point out in the presentation, Supramax rates have performed very well over the last six months or so, particularly relative to the larger vessels. Having said that, you bought a large amount of unfixed days in the latter half of this year. So I am really just trying to get a handle on how you think about what level of -- what exposure you are comfortable with in this market, and can we expect to see you fix more [variable] vessels?

We are exactly where we want to be. I'll tell you Natasha, we are expecting -- we have this very clear strategy. We think Q3 will continue to be sloppy, but we think Q4 will be good. As I am sure a lot of you have seen recently, there has been a big Russian drought with grains. We are talking about what the statistics are showing to be the biggest drought of the harvest in over 50 years, that we think will be a big stimulant for Supramaxes in Q4 with the grain season coming online with a real ton-mile expansion. We also see a lot of activity in the minor bulks, intra-Asian coal trade. The heating season, as we all know, is going to come back online, so that's thermal coal. So we have very specifically positioned the fleet to capture value in Q4, after what we expect to be a continued sloppy Q3.

Okay, great. And understanding what the Supramax is, I wonder if you can sort of give us your opinion on the impact of the Indian ban on ire ore exports? And if some thought that might benefit Capes as China looks towards iron ore from further away?

Are you talking about Capes taking iron ore from India?

Well, no. The Indian ban on iron ore export might have an impact on Supramax rates, because they are banning the export. So what the implication is, and what we've been reading is, China might look to source iron ore from further away such as Venezuela and Australia?

I tell you one thing that we've been doing a lot of that I think people miss is we are doing a lot of iron ore out of Australia. So I don't think that will meaningfully impact us. The thing that's been driving our rates, I would say the last two quarters more than iron ore as we discuss today, has been coal. Intra-Asian coal has been huge for our ships for the second quarter in a row now.

Okay, great. Thank you very much.

Thank you, Natasha.

And our next question comes from the line of Doug Mavrinac with Jefferies. Please proceed.

Thank you, Operator. Good morning Soph and Alan.

Yes, hi Doug.

Hello. I just had a few follow-up questions and the first one has to do with just kind of the macro outlook. I mean there is a lot of talk and uncertainty about the direction of the global macro economic outlook. When you look at Supramax rates, I mean you guys know pretty much everything and I think it appears as though broad based commodity demand remains relatively robust. So my question is, geographically, have you guys seen much in the way of a deceleration or acceleration in terms of specific geographies when it comes to broad based minor bulk demand?

For minor bulks? I would say for minor bulks -- you know what our big thing is, which actually is -- it's major, but if you look at sort of a soybean meal and soybeans. The two big products that we see are huge movers for the market in the foreseeable future are coal, really thermal coal, and also grains that we expect will be a two-year phenomenon, partly because of the drought in Russia because that will affect two year's crops, but also soybean and soybean meal because of the factors we spoke about with regards to poultry and dairy, and meat products. And that's all tonmile demand too. That's Atlantic-to-Pacific trade. That is basically the domain of Supramaxes and also Panamaxes, but not Capes.

Okay, good. And then kind of when you look at, I am glad that you mentioned the Chinese coastal trade because it seems as though not a lot has been spoken about that. But, when you look at that region of the world, I mean are they still taking ships out of the internationally flag fleet and putting them into the Chinese flag fleet to accommodate that increase in demand geographically?

In a very, very big way. We had first brought this up to the market I think in 2006. And by the way it's a very hard thing to track. But it sucks all the Chinese fleet off of the international market, which then has a very positive effect for companies like Eagle. And if you think of Chinese coastal bed, first of all it's a huge number. I mean the number I gave out was just coal. It's about 480 million tonnes annually moving coastally. That's basically Supramaxes, also Panamaxes, but really not Capes.

Okay, got you, thank you. And then just the final question. Looking at Eagle's fleet list and delivery schedule, it is hard to believe that you guys are only about 16 months away from seeing all of those ships delivered. And so my question then becomes, what's next for you guys, I mean what are you looking at in terms of future opportunities? I mean what do you see in the horizon for Eagle and how do you expect to position yourself for that here in the next 6 to 12 months?

Well, I think this is probably the third quarter we've hinted to it to the market that we -- and I said it I think a little more clearly today, which is the fleet is really second-to-none in the world and you can keep adding ships and keep adding ships, but at some point you have to leverage the brand to get closer to your industrial end users. They are calling us, they are asking for us to do stuff more directly with them, and I think you've seen us now, this is the third quarter in a row we've been more opportunistic in our chartering strategy, the mix between short, medium and long-term charters. And I think everyone has seen in all its glory to success of our strategy that we've been rolling out for about three quarters now and continued to see us do more of the same going forward.

Okay, perfect. Great. Thank you very much Soph.

Thank you, Doug.

And our next question comes from the line of Urs Dur with Lazard Capital Markets. Please proceed.

Good morning, guys.

Hi Urs, how are you?

Good morning, Urs.

Fine, great. The grain question has been answered and you mentioned it, can you just remind us what the spot/re-charter exposure is for the second half of the year on a percentage basis for your fleet or remainder of the year?

Sure. Yes, for the balance of the year and I will bifurcate it into sort of exposure by indexed-based charters which stands at 20%, and an additional 20% that comes by open capacity, so 20% plus 20%, 40%.

Yes, and then next year?

Next year it goes between 40% to 60%.

Great. And you also...

Depending -- as you look quarter-to-quarter sequentially.

Yes. Okay. You mentioned grain trade possible two year impact from Russia, which is interesting. So, is it of your belief that this is going to be worse than 2008 on the grain trade side?

There is even chatter, and again we are not putting a lot of weight on this in terms of impacting our strategy with our Supramaxes, but there is even chatter that it's such a bad situation in Russia that they might ban -- the government might ban all wheat exports. I think it will definitely effect.

Well, they have. They did this morning.

There you go. So, the other thing is that people are saying this is the biggest drought in 50 years. You are seeing the biggest increase in wheat pricing since 1974.

Yes. Still not as high as it was in 2008 and there were riots in the streets in some countries, but it's going in that direction. But, yes, just -- Putin banned it this morning.

So, my view, Urs, very clearly for this company is again Capes won't benefit from this whole grain story that we are talking about. We do a lot of grain. I will tell you something very interesting, and this is why we are positioning the fleet to be 40% open for Q4 is grain moving out of the Mississippi, going out to Asia has, in the 1980s, 1990s and early 2000s, has been basically a Panamax trade. The Panamaxes which used to be sort of 60,000 to 70,000 tonners as we all know now are like 75,000 to 85,000 tonners, and the Supramaxes, which were Handymaxes, which used to be 45,000 to 50,000 tonners are now bigger. So they've taken the grain trade, that important route out of the US, that used to be a Panamax trade, is now a Supramax trade and we are positioned to be prime beneficiaries of that market, given the macro outlook for grains going into Q4.

It sounds like it's good for the American farmer too, which is good for the American economy, you agree?

Being an American I agree.

Great. Now, a little less positive, but I think you are absolutely going in the right direction. But, can you remind us where you are covenant-wise and any particular bank issues going forward, are others clearing up and what's your view of asset values going forward? How is that progressing?

Sure. We are 100% covenant compliant. We are still operating under the deal we did last year.

Yes.

Asset values have appreciated nicely, but we are still not back to the original 2007 covenants.

Okay. Very helpful, thank you for your time.

Thank you, Urs.

And our next question comes from the line of [Fotis Giannakoulis] with Morgan Stanley. Please proceed.

Yes, good morning gentlemen and congratulations for a great quarter. It's a remarkable turnaround from where the company was a year ago. But, I want to go a little bit forward and what are the next [charter]? You briefly answered to earlier in other question. Given the fact that you have a very large fleet right now, of almost 47 vessels after the delivery, do you think the next step will be buying more ships, expanding further, or going back to the dividend policy that you used to have before the crisis?

Fotis, thank you for that. I think that's a great question and it's something that is very central to us. I mean even though sometimes things seem to happen easily or by coincidence at Eagle, like our great results this quarter, it's all taken lot of hard work and really focused planning. When we were a small company, when we had 10 ships, you buy one or two ships, it actually adds tremendous value because that's a 20% growth on the company. Going forward, as you said, with the 47 ship fleet, buying one or two ships doesn't really add as much value and I want to remind people today that, even if we don't buy a single ship between now and 2011, we are still growing the company a further 24% with the new builds we have coming online between now and the end of the year.

So, what I think we are very focused on is taking this fleet that I was very focused on building this premier brand over five years, which we've now done and using that brand, leveraging that brand to create value for shareholders vis-a-vis getting closer to industrial end users and being more opportunistic with our chartering. We didn't do a scattergun approach. We didn't do sort of a couple Capes, a couple Panamaxes, a couple Supramaxes, a couple Handys. We are very focused. We built the big branded fleet in what I think has proven to be the strongest asset class on a relative basis to the other ships. We didn't go into non-drybulk investments. We stayed true to our story and the story is playing out very nicely now.

So, shall I think the answer that the priority will not be so much on expanding further with new acquisitions, but probably considering giving dividends?

No, I will answer that in the reverse order. Our number one focus I think right now with this excess cash flow that we are generating is paying down our debt. I think that's the way we want to do that especially from now through the end of '11. So that's our focus. We've got a 24% growth in the books already if we don't do anything. However, I think having built this brand, we see deals first before others and growth beyond that is very much a possibility. Capital is always available to us, again not to everyone in this market, but available to Eagle. So I think that's a possibility too. But, again I would say use excess cash flow to fund the growth, pay down the debt, and then we will look at the dividend beyond that.

And the second question is, can you also give us your view about the steel trade. You answered earlier to Doug how you view the movements of commodities. But, have you seen any improvement in the steel trade during the last few weeks vis-a-vis for what the situation was about a month ago?

Well, you've seen a tick up in iron ore pricing recently and the steel and iron ore has been volatile. I partly blame that to the quarterly pricing on iron ore that we all know kicked in this year. Now, we like to make bets on longer term trades. We think long-term the steel market has great prospects and there is certain things going on that people don't really focus on as much. The industrialized mining companies are doing joint ventures with China, Inc. So, for example, West Africa, which isn't normally touted as a huge iron ore exporting region, there is a joint venture that's coming online within the next five years of the big mining plan with Rio Tinto in China. That's going to add 95 million tonnes, projected, of additional iron ore being shipped from the Atlantic into the Pacific for China's needs. And lastly, remember, China is just kicking off its 12th new five-year plan which usually is sort of the lead indicator of continued growth. So, we think the long-term trend for steel, and for the drybulk market, is healthy although you may have volatility, partly to be blamed by things like the quarterly pricing.

I want to ask you also about the more short term because a lot of people they are viewing this uptick in steel prices and iron ore prices as a sign of recovery. Do you have any facts that support this view or it's still very early?

I think it's a little too early. I have seen it in the pricing though, Fotis. I have definitely have seen, call it, the early shoots or whatever you want to call it, the early indicators that it's around the corner. But the big movers for the Supramaxes in terms of our charter rates being $6,000 over Capes has been mostly in the grains and the coal.

Thank you, gentlemen, and thank you, Soph.

Thank you, Fotis.

Thanks.

And our next question comes from the line of Martin Korsvold with Pareto.

Hi guys.

Yes. Hi Martin.

Hi Martin.

Hi. I was just wondering on your remaining CapEx. How much debt do you have attached there and how much leverage do you expect to take on for that CapEx?

The CapEx is attached to the slide show in the appendix. It's approximately $257 million and we have roughly $70-odd million available under the revolver at this time.

Okay. And how much debt you expect you will have on that CapEx in the end?

We expect that we will be fully drawn on the revolver some time by the end of third quarter.

Okay. So, no debt on top of the $70 million which you have (inaudible -- multiple speakers)?

That is correct, that is correct.

Okay. And in terms of the new debt, what kind of terms are you looking at in terms of interest rate if you had to go out and get bank debt today?

We don't need any additional debt to complete the new building program. So we are not presently looking at any new facilities.

Okay. And also on the asset values, I mean, it seems that like the asset values have softened a little bit or at least tapered off over the summer. What is your view there going forward on Supras in particular?

Well, I think most ship owners view sort of what's happened in Q3, with the fall off, as more short-term than long term. I think people in the near term future, as we look to the end of the year, are looking for an improvement by Q4. I think I called Q3 I thought would be sloppy, which it is, and Q4 people are expecting to be better in terms of grains, coal and iron ore, probably in that order. So, ship owners who are thinking of selling I think are holding back to sell on the back of anticipated strength by the end of the year.

Okay. So you expect the values to hold up at least at current levels for this year?

Yes, yes.

Okay. Lastly, it was touched upon, but this potential ban of iron ore export from India, do you think that it will happen?

I think it's a possibility but I don't see it as impactful on the Supramaxes.

Okay, thanks very much.

Thank you, Martin.

And our next question comes from the line of Chris Wetherbee with FBR Capital. Please proceed.

Hi, this is [Will Thompson]. I am sitting in for Chris.

Yes, hi Will.

Hi Will.

Just one quick question and sorry if you've already addressed this. I jumped in a little late. But with seven new builds scheduled to deliver in the latter half of 2011, can you comment on whether your growth focus will be more oriented on new builds versus the -- or the secondhand market?

Well we, as people may remember from sort of those of us who have been following us from 2007 and 2008, we have built what I think is a world class second to none new building supervision team in Asia in-house. So, in terms of capabilities, we have huge capabilities to do more new builds, probably more than most people. And that might be in the terms of new contracts or taking over contracts of people who are struggling but we also have huge capabilities with secondhand ships. We bought about 45 ships since 2005 in the second hand market. So, I would say, we are looking at both and people usually show us deals in Supramaxes before others because of our brand. So, I would say, look to Eagle to be looking at secondhand and new builds going forward.

Great. Thank you for your time.

Thank you.

(Operator Instructions). And there being no further questions, this concludes today's question and answer session. I would now like to turn the call back over to Sophocles Zoullas for closing remarks.

I would like to thank everyone again for joining us for our second quarter 2010 earnings call and we look forward to keeping you updated on new developments in the future. Thank you again.

Ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a wonderful day.