Genco Shipping & Trading Ltd (GNK) 2007 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Ltd. first-quarter 2007 earnings conference call and presentation. Before we begin, please note that the presentation -- that there will be a slide presentation accompanying today's conference call. The presentation can be obtained from Genco's website at www.gencoshipping.com. To inform everyone, today's conference is being recorded and is now being webcast at the Company's website, www.gencoshipping.com.

We will conduct a question-and-answer session after the opening remarks. Instructions will follow at that time. A replay of the conference will be accessible anytime during the next two weeks through May 17, 2007, by dialing 888-203-1112 for U.S. callers and 719-457-0820 for those outside the United States. To access the replay, please enter the passcode 8452086.

At this time, I will turn the conference over to the Company. Please go ahead.

Good morning. Before we begin our presentation, I note that in this conference call, we will be making certain forward-looking statements that discuss future events and performance. These statements are subject to risk and uncertainties that could cause actual results to differ from the forward-looking statements.

For a discussion of factors that could cause results to differ, please see the Company's press release that was issued yesterday, the materials related to this call posted on the Company's website, and the Company's filings with the Securities and Exchange Commission, including without limitation the Company's Annual Report on Form 10-K for the year ended December 31, 2006, and the Company's subsequent reports filed with the SEC.

At this time, I would like to introduce Mr. Gerry Buchanan, the President of Genco Shipping & Trading.

Thank you. Welcome to Genco's first-quarter 2007 conference call. With me today is Peter Georgiopoulos, our Chairman, and John Wobensmith, our Chief Financial Officer.

As outlined on slide 3 of the presentation, I will begin today's call by discussing the highlights of the quarter, followed by John's review of our financial results for the three-month period ended March 31, 2007. Following this, I will discuss the industry's current fundamentals. John, Peter and I will then be happy to take your questions.

Building on our strong results in 2006 and since going public in July of 2005, Genco continued the successful execution of its operating strategy during the first quarter of 2007, focused on locking away a large portion of its fleet on time charters at attractive rates.

Our considerable success in this important area has resulted in the Company's continuing to meet the three months' noteworthy objectives. First, we have further solidified our strong industry relationships with leading international charterers. Second, we have continued to pay sizable dividends without sacrificing our financial strength for growth. And third, we have demonstrated our ongoing ability to take advantage of a strong rate environment for the benefit of our shareholders.

I will begin my discussion on the quarter on page 5. We recorded net income of $19.8 million or $0.78 basic and diluted earnings per share for the three months ended March 31, 2007. Of note, these results include a one-time gain of $3.6 million due to the sale of the Genco Glory, which John will discuss in more detail later in the call.

For the first quarter, we declared a dividend of $0.66 per share, which represents the second consecutive dividend declared under our increased quarterly target for 2007 and seventh dividend overall since going public. Since the Company's IPO, Genco has declared cumulative dividends of $4.32 per share during a time in which it has further expanded its fleet of quality drybulk vessels.

The combination of actively consolidating the industry and distributing sizable dividends have been core components of our strategy since inception, and we remain dedicated to this approach in an effort to enhance our earnings potential and leadership position while providing value to shareholders in the near term.

I would also like to highlight three additional accomplishments in the quarter which will be addressed later in the call. First, we transferred our common stock listing to the New York Stock Exchange. Second, we completed the closing of a second reoffering by Fleet Acquisition LLC at the market price of $30.73. And third, we completed the sale of the Company's oldest vessel, the Genco Glory.

Moving to slide 6, I will discuss our success at further increasing our time charter coverage. In the first quarter and year to date, we reached agreements to charter a total of 12 vessels. The table illustrates our success in entering into favorable long-term charters at rate equal or above previous levels.

Of particular note, in March, we reached agreements to extend the time charters for the five Handysize vessels -- the 1999-built Genco Reliance, the 1999-built Genco Explorer, the 1999-built Genco Pioneer, and the 1999-built Genco Progress, and the 1998-built Genco Sugar, currently on charter with Lauritzen Bulk Carriers.

The extended time charter will be for an additional 23 to 25 months at a gross rate of $19,500 per day. It is important to note that the daily rate achieved for each of these five vessels represents an increase of more than 44% over the previous daily rate for each vessel. The time charters are scheduled to commence on September 5, 2007, upon expiration of the vessels' current charters.

Turning to slide 7, we provide an overview of our current fleet. Of note, on February 21, 2007, we completed the sale of the oldest vessel in our fleet, the Genco Glory, a 1984-built Handymax vessel, for $13.15 million to Cloud Maritime. We believe this transaction further demonstrates management's ability to act opportunistically in the best interest of shareholders.

Currently, Genco owns a total of 19 drybulk vessels of consisting of seven Panamax, seven Handymax and five Handysize vessels, with a carrying capacity of approximately 988,000 deadweight. The average age of our fleet is 9.1 years, which remains well below the industry average of approximately 15.56 years.

All of the vessels in our fleet are currently on long-term charter, with average duration of approximately 60 months as of April 30, 2007. The considerable success we've had in the first quarter into the second quarter securing our vessels on charters has resulted in the Company having approximately 92% of its fleet's available days secured on contracts for the remainder of 2007 and 50% for 2008.

Going forward, we seek to continue to maintain a large portion of our fleet secured on time charters at favorable rates and provide leading charterers with service that meets the high standards.

At this time, I would like to turn the call over to John.

Thank you, Gerry. I will begin my remarks by directing you to slide 9, which present our first-quarter 2007 financial results.

For the three-month period ended March 31, 2007, we recorded revenues of $37.2 million, which compares to revenues for the three-month period ended March 31, 2006, of $32.6 million. This increase was due to the operation of a larger fleet.

Excluding the gain on the sale of the Genco Glory, operating income for the first quarter was $18.7 million. This compares with operating income for the first quarter ended March 31, 2006, of $17.7 million. The increase in operating income is attributable to higher revenues, which was partially offset by higher operating expenses as well as higher general and administrative expenses associated with the Fleet Acquisition secondary offering, which I will discuss in more detail later on the call.

Our interest expense for the first quarter of 2007 was $3.5 million, which compares to $2.2 million for the first quarter of 2006. Interest expense for the first quarter of 2007 as compared to same period last year is primarily due to the $81.25 million debt drawdown related to the acquisition of the three vessels from Franco Compania Naviera, which was completed in the fourth quarter of 2006.

For the three months ended March 31, 2007, and excluding the gain on the sale of the Genco Glory, net income was $16.3 million or $0.64 basic and diluted earnings per share, which compares to net income of $16.6 million or $0.66 basic and diluted earnings per share for the three months ended March 31, 2006.

Including the net gain of $3.6 million in the first quarter of 2007 following the sale of the Genco Glory, net income for the three months ended March 31, 2007, was $19.8 million or $0.78 basic and diluted earnings per share. Return on capital on a rolling 12 months ended March 31, 2007, was 14.8%.

Moving to slide 10, you will see that we continue to maintain a strong balance sheet as we distributed sizable dividends. Our cash position grew to $87.2 million as of March 31, 2007, and our net debt to capital ratio was 25%.

Our total assets as of March 31, 2007, were $577.3 million, consisting primarily of our current fleet and cash. Our EBITDA for the three-month period ended March 31, 2007, was $30.5 million, representing an EBITDA margin of 81.9% of revenues.

Moving to slide 11, our utilization rate was 98.3% for the first quarter of 2007. During the first quarter, we recorded 10 unscheduled off-hire days for the Genco Trader, a 1990-built Panamax vessel, due to repairs and preventative maintenance work. We expect this vessel to record an additional 27 unscheduled off-hire days for the second quarter for a total of 37 days.

We believe that any off-hire of more than 14 days will be reimbursed by insurance coverage, but revenue is not recognized until the insurance claim has been realized. Our utilization rate for the first quarter of 2007 was also affected by delays associated with the delivery of the Genco Glory on February 21, 2007, to Cloud Maritime.

Our time charter equivalent rate for the first quarter of 2007 was $20,683 per day versus $20,687 per day recorded in the first quarter of 2006. The slight decrease was due mostly to higher charter rates achieved in 2006 with five Handysize vessels on charter with Lauritzen Bulkers.

As discussed by Gerry earlier on the call, we recently extended charters for the five Handysize vessels at a gross daily rate of more than 45% higher than the previous daily rate for each vessel, which will take effect September 5, 2007.

The aforementioned decrease was partially offset by higher charter rates achieved in the first quarter of 2007 versus the same period in 2006 for the Genco Leader and the Genco Trader, the two vessels which operated in the Baumarine Pool during the first quarter of 2006 and were subject to fluctuations of the spot market.

For the first quarter of 2007, our daily vessel operating expenses were $3627 per day versus $2980 per day for the first quarter of 2006. As we have indicated in the past, we believe that vessel operating expenses should be measured on a 12-month basis and compared to our 12-month budget. As we've mentioned on our previous conference call, our budget figures for 2007 indicate that the major operational categories of crewing, [moves] and insurance costs have risen compared to the prior year, as expected.

While our focus on cost-effective operation remains a top priority, we have established budgeted daily vessel operating expenses for 2007 of $3682 per day per vessel.

On slide 12, we present a pro forma balance sheet that reflects the Company's payment of its first-quarter 2007 dividend of $0.66 per share, but does not include the Company's acquisition of capital stock of Jinhui Shipping and Transportation Ltd., which we will discuss later in the call.

As you can see, our pro forma cash position for the quarter is $70.3 million. In addition, our undrawn component of $443.8 million remaining on our revolving credit facility includes an option to expand the credit facility by $100 million to $650 million.

As of March 31, 2007 our pro forma liquidity totaled $514.1 million and our net debt to total capital ratio was 29%, positioning the Company well to further pursue its growth strategy.

Moving to slide 13, we have provided estimated quarterly breakeven levels for 2007. We continue to have a low free cash flow breakeven rate at $7635 per day per vessel. Our quarterly net income breakeven is $11,757 per day per vessel. We remain comfortable in achieving a low net income breakeven level for 2007 based on our cost-efficient operating platform.

For the purposes of calculating breakeven levels for the second quarter of 2007 on a per-ship per-day basis, the Company used an average number of vessels of 19 over 91 days, as explained in Footnote 1 of page 13 of the presentation.

Next I will briefly discuss our dividend policy provided on slide 14. As Gerry stated earlier, we declared a first-quarter dividend of $0.66 per share, our second consecutive dividend under our new quarterly target rate for 2007. Genco's increased quarterly target dividend is based on the Company's long-term time charter coverage and strong liquidity position.

Genco's Board also declared and paid an increased dividend of $0.66 per share based on our fourth-quarter 2006 results, bringing cumulative declared dividends of $4.32 per share for the seven eligible quarters since our IPO.

Based on our closing price yesterday of $34.50 plus the dividends that we have paid to date, we have provided shareholders who invested in our IPO in July of 2005 a total return of approximately 82%.

Our dividend policy, which is determined by our Board of Directors and is calculated based on free cash flow less cash reserves for fleet maintenance, renewal and growth, and debt amortization, provide significant benefits to shareholders.

Complementing our approach to rewarding shareholders in the near term through sizable dividends, we intend to maintain our unrelenting focus on seeking accretive acquisitions that create long-term value for the Company and its shareholders. Building upon our considerable success in 2006 with the acquisition of three drybulk vessels, one Handymax and two Panamax, we seek to capitalize on future growth opportunities that meet strict earnings and cash flow accretion criteria, as well as return on capital hurdles.

Our solid balance sheet, combined with a unique dividend policy that includes a reserve for growth, as well as management's proven track record in consolidation, bodes well for Genco to meet this critical growth objective without having to rely on the equity markets, a key differentiator of our Company.

I will now discuss the secondary offering completed during the first quarter. Fleet Acquisition LLC, which is 99% owned by Oaktree Funds, sold a total of 4,830,000 Genco shares. This offering reflects Genco's ongoing support from the capital markets and was noteworthy for a couple of reasons -- first, the offering was priced at market, without any discount; and second, the shareownership of management and Genco's Chairman did not change, which underscores our confidence in the Company's long-term prospects.

Additionally, I am pleased that Genco's common stock has begun trading on the New York Stock Exchange effective April 11 under the new symbol GNK. With a business at the center of global trade and a focus on growth, we believe Genco is well suited to be listed on the New York Stock Exchange and expect this move to further increase our visibility in the global financial markets.

And finally, on May 2, 2007, Genco Shipping & Trading Ltd. acquired 4,440,900 shares of the capital stock of Jinhui Shipping and Transportation Ltd. Jinhui Shipping and Transportation is a drybulk shipping owner and operator focused on the Supermax segment of drybulk shipping.

Following the acquisition, Genco has a total holding of 8,571,900 shares, equaling 10.2% of the outstanding shares and votes of Jinhui's capital stock. Genco may purchase additional shares of Jinhui's capital stock or dispose of any and all shares of Jinhui's capital stock that Genco holds, whether through open market transactions, privately negotiated transactions or otherwise.

I would now like to turn the call back to Gerry.

Thank you, John. I will now take this opportunity to spend a few moments discussing the industry fundamentals. I will start on slide 16, which points to the drybulk indices.

Represented on this slide are the overall Dry Bulk -- DRY Index and the Baltic Panamax Index. As can be seen when looking at the first quarter of 2007, the rate environment has displayed a significant increase since the beginning of the year, reaching 5500 points for the first time since December 2004.

Of note, although the Dry Index movement was led by record levels in Capesize spot rates, the correlation between the aforementioned and the Panamax rates is evidenced by the almost parallel increase on the Panamax Index.

Moving to slide 17, we will discuss the drivers of this robust market. As indicated on the graph at the bottom left, Chinese steel production grew to 114 million tons for the quarter ending March 31, 2007, while a record 100 million tons or one-third of last year's total iron ore imports of 325 million tons were imported into China for the same period. For the first quarter, Chinese steel production grew and iron ore imports grew by 24% year over year.

One of the factors currently driving the rate market was the early conclusion of the 2007 year iron ore price negotiations, which usually leads to iron ore overstocking in Chinese ports. Despite such anticipations, recent data shows approximately 42 million tons of inventory, well within the 40 to 44 million ton range displayed throughout the 2006 calendar year.

Once again, Australian port congestion has been the other major factor in the high rate environment. Factors including seasonal maintenance work, new infrastructure projects and weather have pushed up estimated combined port delays, coal and iron ore ports, at over 13 days. While we're seeing some easing of congestion at the iron ore ports in Western Australia, the waiting time at the coal ports in Eastern Australia remains above 20 days.

We continue to believe that India will become a significant growth area for the dry bulk market. This is due in part to the country's large population of 1.2 billion. While India is already an importer of coal, the country's full potential as it relates to the overall dry market is yet to be realized.

While infrastructure issues continue to be the main limiting factor in India, investment therein calls for increased domestic demand of iron ore and coking coal to boost domestic steel production. The demand for energy in India is also increasing, and coal competes favorably with oil in this sector. This, coupled with the fact that domestic coal is of a lower quality, has resulted in India increasing its imports of high-quality steaming coal, which has added to the ton miles.

Looking at the graph in the bottom right-hand side, we can see the dry bulk order book by quarter through 2011. As of March 31, 2007, the dry bulk fleet grew by approximately 1%. Firm rates through the first quarter have helped maintain scrapping levels at minimum, with only five Handysize vessels reported as scrap for the first quarter of 2007.

On slide 18, we detailed the long-term dry bulk demand fundamentals, which we believe remain strong, for the following reasons. Increases in China's GDP continued at strong rates, reaching an annual growth rate of 11.1% for the first quarter of 2007, almost 1% higher than the same period of last year.

India's GDP growth for 2006 is estimated at 9.2% higher than previously revised estimates of 9% and beating last year's growth rate of 8.5%. Driven by economic growth, private as well as public investment in infrastructure is starting to take place, with increased spending reported in both the energy and the transportation sectors.

World GDP growth estimate stands at 5.4% for 2006, while growth is forecasted at 4.9% for 2007. A major driver of this growth is the Asian economies.

If we look at the graph on this slide, we can see that China has recently overtaken Europe and Japan as the largest importer of major bulks, accounting for approximately 21% of the world's imports. When looking at the same data for 1998, Chinese imports accounted for only 6% of the world trade. As China continues to rely on long-haul trades and routes from Brazil and Australia, its iron ore needs -- ton-mile demand is expected to grow at 3.5% for 2007.

So what will drive the market going forward? On slide 19, we point out what we believe to be favorable fundamentals for the industry. Although iron ore imports into China reached record levels during the first quarter of 2007, strong steel production, combined with the fact that iron ore inventories at Chinese ports are reported to be at levels similar to those of the entire year of 2006, bodes well for a sustained strong rate environment.

As previously mentioned Australia's failure to satisfy demand growth has caused record levels of delays in both the iron ore and coal ports. In an effort to mitigate the congestion, the Australian government has enforced quota systems aimed to reduce the number of vessels waiting to load. Although this is expected to ease congestion, we believe that it will happen gradually over the course of the next couple of months.

Moreover, along with China's developing economy comes increasing energy needs. In effort to satisfy demand, the country is leaning towards becoming an importer of coal, while indicative is the fact that combined thermal and coking coal imports were 60% up for the first quarter as compared to the previous quarter.

India's economic growth is also serving the dry bulk industry well. With increased demand of iron ore domestically, the Indian government is reported to have established an export tax on iron ore with the intent of reducing its exports to China. That should result in increased ton miles as the incremental iron ore will most probably be sourced from Brazil, considering the looming bottlenecks in Australia.

Approximately 30% of the world's fleet is 20 years or older. As we have indicated on past calls, unlike tankers, bulk carrier scrapping is not mandated. It is more of an economical equation, and the cost of repair to comply with requirements of a fifth or sixth special survey. However, charterers do become more selective in less robust markets, and many of them will not take vessels which are in excess of 20 years old for long-term time charter. Therefore, we believe that scrapping will become an increasing factor in the future.

And last, although we have seen an increase in newbuilding activity over the past couple of months, freight rates remained strong through the quarter, driven by increased ton-mile demand and port congestion. Furthermore, albeit the scheduled deliveries for 2009 and 2010 seem to have increased over the past quarter, we believe that projected continuous growth in demand, as well as the age of the dry bulk fleet and potential scrapping, bode well for the dry bulk industry.

This concludes our presentation. I will now be happy to take your questions.

(OPERATOR INSTRUCTIONS). Doug Mavrinac, Jefferies & Co.

Congratulations on a great quarter. Just had a few questions for you guys, with the first one related to your Jinhui investment and the next couple on the market in general. First, when you're looking to make a major investment in another company, are potential fleet operational synergies a consideration, or do you just say, hey, these shares are very attractively valued and will make a good investment for us?

I think we look at both things. Number one, you look at the value of the shares, but number two, you look at the company. And Jinhui has an excellent reputation, excellent operation and very strong management. So we look at both things.

Thank you, Peter. And then in your comments, Gerry, when you were talking about the market in general, you touched on the fact that there is talk and there is a quota system being reinstituted at certain coal ports in Australia.

Would you say or would you think that that would just temporarily potentially resolve the congestions, or do you think that the congestion -- we have seen them come and go over the last several years -- or do you think that the congestions are just part of a bigger lack of infrastructure that is insufficient to handle the type of demand that we're seeing these days?

It is a combination of all of that. There is overproduction of coal, for example, coming out of Australia. And one of the things we are trying to do is cut back on the production. It's not just a case of overproduction -- that coal that is overproduced is actually sold in the market. So the ships are queuing up waiting to take it away.

The figure that I have seen is approximately 20% overproduction. They are trying to cut that back. And the Australians are very confident that that will ease off the congestion in the eastern ports.

Then just one final question, and it has to do with China's increasing demand for coal and the developing coastal trade that we are seeing there. Can you talk about how your ships are suited to satisfy the demand within that Chinese coastal trade?

Well, they're not really engaged on the domestic coastal trade. That is a cabotage trade for Chinese light vessels. We are not engaged in that at all. But what it does do is it sucks a lot of vessels out of the market, the international market, and concentrates them in the domestic trade.

So you see an indirect benefit by having, say, less competitors out there?

Yes.

Perfect. That's all I had. Thank you.

Omar Nokta, Dahlman Rose.

Just back to Jinhui for a second, it might be tough to answer this, but have you had an open dialogue with the company at all?

No.

And just with respect to fleet growth, how do you see this happening going forward? Would you favor more on the M&A side, or sale and purchase transactions?

(technical difficulty) I think, either way, wherever we found the best value and the best quality ships, we would look at both scenarios, as we've -- if you look at us, we've bought ships -- when we've bought the initial company, we've bought a whole company in an M&A transaction. We have then since bought ships, single ships or fleets of ships in [S&P] transactions. And now this is something a little bit different. We have invested in a company that has good ships and good management.

Natasha Boyden, Cantor Fitzgerald.

Just getting in a little more on Omar's question, Peter, you have always said you have a pretty high return criteria. And with the asset prices rising steeply along with rates, are you still seeing potential acquisitions that fit your return criteria?

Yes, as opposed to the tanker market, where we don't see that, we do see that, even despite the high prices of dry cargo ships. I think the rates have gone up in lockstep, and so you can still make good returns in the dry cargo market.

Then last quarter, it appeared that you were budgeting around 200 drydocking days for '07 and about 120 for '08. In this quarter, you have said significantly less, about 100 for '07 and 100 for '08. Can you just explain what happened there? Obviously, it is a good thing.

It is John. We actually have elected to perform underwater in lieu of drydocking on several of the vessels. So that is the reason for the cutback on both CapEx as well as days.

So the underwater is a lot cheaper because you don't have to take it out? Is that how it works?

Exactly.

Urs Dur, Lazard Capital Markets.

Excuse me, I lost my voice at Robin Hood last night, screaming at Aerosmith.

That is well worth it.

It was. It was a good event. I think most of the questions have been asked, but I have really three small ones. Can you reveal how long you have had a position in Jinhui?

It has only been a couple of weeks.

Okay, so from zero to $8 million in a couple of weeks?

Right.

The other two are more on the broad market, which may be better for Gerry. But in regards to the nice little Bloomberg piece we saw earlier this week, which shook things up, I think, a little bit, Chinese capacity for shipbuilding and shipbuilding going forward -- how do you see the years stacking up, from your view, 2010 and '11 for ship ordering, drybulk side, and how do you think that is going to affect the market?

Well, we are seeing orders being placed now for delivery in 2011 and beyond. Those order books are not completely filled up yet, but obviously it's going to have an impact on the market going forward.

I think it has been particularly aggressive, and it is going to be an interesting one to follow and see how demand flows. And the next thing, also more generally, have you guys seen any data or do you have any empirical or anecdotal evidence in regards to ton-miles development, ton-mile advancement, growth, so on?

As we talked earlier in the call, what is happening in Australia at the moment with the cutbacks and what is happening in India should all affect ton-mile demand positively, because if the Indian route to China is taken away because of the taxes that's being placed by the India government, the iron ore has got to come from somewhere, and the obvious place is Brazil. It's going to add to the ton-mile growth.

Further to that, and obviously it is the iron ore and coal story these days, but I am interested still in grain, even though it is a small portion of what everyone does on the dry side. Are you seeing developments there on the ton-mile side, especially in regards to domestic ethanol programs, the price of grain and commodities surrounding grain?

If you look at the two main exporters of grain, the USA and South America, a lot of the grain has been harvested in the U.S., has been sold, but it hasn't been shipped. There is still a lot of grain to come out of the Gulf ports, etc. And if you look at South America, there's bumper crops reported in both Argentina and in Brazil -- grain, soybean, etc., etc. So yes, I see a big demand for the shipment of these products over the coming months.

Thank you very much and congratulations. Great quarter.

Scott Burke, Bear, Stearns.

Just a couple questions about the Jinhui transaction. First of all, what is your plan for Jinhui going forward? Do you just plan to maintain a minority ownership or do you actually look to buy out the entire company?

Right now, it is just an investment. And that is sort of where we're leaving it for the time being.

If you were to buy out the company, how would you look to fund the newbuilding programs those guys have?

I think at this point, we want to just keep the conversation to the investment. And if there are further developments, we will obviously let people know.

Then just kind of going back to the congestion question, appreciate your comments so far on that. In the event -- first of all, how likely do you think that the Australian queue reduction system will actually work in terms of reducing the queue? They instituted it April 1. So far we haven't seen any impact. When do you expect to see an impact from that?

I don't know how quickly it is going to happen, to be honest. But people are saying that when we go through the summer months we should start to see the queues easing off. But that is a target that remains to be seen, Scott.

And what is the difference between what is going on at the coal ports versus the iron ports? As you mentioned, we have seen a reduction in congestion at the iron ports, but not at the coal ports. What is going on or what is the difference there?

Well, it is possibly related to infrastructure. The West Coast may be better suited than the East Coast. And also, there is a seasonal issue comes in there as well.

What is the seasonal issue?

At the iron ore ports?

Can you describe what the seasonality is? So more imports generally in the first quarter, or what--?

Mainly weather-related issues.

Oh, I see, with cyclones.

Yes.

So if the queue reduction system works, do you expect the ton-mile demand increases as those ships instead go to South Africa or Brazil or whatever -- do those completely offset the amount of ships that are currently stacked up around Australia?

What we have been told about the 20% overproduction, this figure that has been given out, and what they're trying to reduce is that it won't reduce the demand for the product. It will reduce the queues at the ports. But if there is any product to be taken in from other places, yes, I see it coming from South Africa, for example, and from possibly even further afield.

So ton-mile demand could actually offset some of the reduction in congestion.

Yes.

[Mike McCarton], Cross River Partners.

It sounds pretty clear that you don't want to talk too much about this transaction. But as an investor, can you walk me through the right way to be thinking about it? Is this something that has been in the business plan all along -- if you see undervalued shipping companies that you may sort of look to make an investment as a portfolio type thing? Or is that not the right way to be thinking about it?

I don't know that it has been in our business plan. Our business plan has been pretty clear to date. I think this is probably something a little bit different. We just think it was an interesting opportunity at a good valuation and an interesting company that could potentially present us with a lot of options in the future. And I think that is the best way to look at it.

As an investor, should we expect that similar transactions to this would happen in the future or not?

I don't think you are going to see us build up a portfolio of shipping stocks, if that is the question. I think this is one situation we are in. And I think we wouldn't go into something else similar to this until this situation resolved itself one way or another, whether we sold the shares, came to some kind of -- made a deal with management, had some kind of joint venture. You never know what can come out of these things. But I think you're not going to see us now go buy 10% of another publicly traded shipping company.

Hardin Bethea, DePrince, Race & Zollo.

A couple of questions. What was the average price paid for the 8.57 million shares?

Around approximately 40 kroner.

On a separate note, this morning it looks like the Indian government is reducing the export tariffs to basically change according to grade for iron ore. I don't know if you guys have seen that or not, but instead of 300 rupees per ton, it is something maybe like 50. So it seems to me that some of the increased ton-mile demand by sourcing from further away could be alleviating somewhat. Do you have any comments on that?

I don't think we have seen those figures yet. So we will have a look at that when the call is finished.

And then you mentioned, and it is a good slide, I think on -- let me find -- the industry overview section, slide 17, bottom right. Do you have -- clearly, '09 and '10 deliveries have picked up a little bit. Do you have an updated percent growth in the fleet for '07, '08, '09 and '10?

Yes, we do.

Can you share those numbers?

So 7.3% for 2007, 6.3% for 2008. The graph that you're looking at on the lower right, the data came from [Clarkson], so that is published data that is out there.

What have been the changes over the last quarter in '09 and 2010 -- where do those stand now?

Well, first of all, I think what you have seen is you have seen some of the orders pushed a quarter out, so you've seen a little more growth on 2009. And then you have obviously seen definitely some ordering, particularly in the Capesize sector, for 2010. So we have seen, obviously, growth for both 2009, but more importantly 2010.

What are those percent growth numbers?

I don't have that right in front of me. I can definitely give that to you offline.

Will Nasgovitz, Heartland Funds.

Does Jinhui pay a dividend?

No.

And that will conclude today's question-and-answer session. I will turn the call back over to the Company for closing remarks.

Thank you.

Thank you, everyone, for attending our first-quarter 2007 conference call. We will end with some closing remarks on page 21.

A strong time charter coverage for the remainder of 2007 and into 2008 mitigates possible market volatility. Our unique dividend policy provides sizable dividends to shareholders while maintaining reserve for growth. A strong balance sheet with low leverage positions the Company well to further consolidate the industry.

We have $514.1 million in total pro forma liquidity and a pro forma net debt to capital ratio of 29%. And we continue to see attractive long-term fundamentals in the drybulk industry. Thank you.

Thanks.

And that will conclude your call for today. We do thank you for your participation. Have a wonderful day.