Safe Bulkers Inc (SB) 2011 Q2 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers conference call to discuss financial results for the second quarter 2011.

Today, we have with us from Safe Bulkers Chairman and Chief Executive Officer Mr. Polys Hajioannou; President Dr. Loukas Barmparis; Chief Financial Officer Mr. Konstantinos Adamopoulos; and Chief Operating Officer Mr. Ioannis Foteinos.

(Operator Instructions). Following this conference call, if you need any further information on the conference call or on the presentation, please contact Matthew Abenante at Capital Link at 212-661-7566. I must advise you that this conference is being recorded today, Friday, July 22, 2011.

Before we begin, please note that this presentation contains forward-looking statements as defined in Section 27-A of the Securities Act of 1933, as amended, and Section 21-E of the Securities Exchange Act of 1934, as amended, concerning future events, the Company's growth strategy, and measures to implement such strategy, including expected vessel acquisitions and entering into further time charters.

Words such as expects, intends, plans, believes, anticipates, hopes, estimates, and variations of such words and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks, and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company.

Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in the demand for dry bulk vessels, competitive factors in the market in which the Company operates, risks associated with operations outside the United States, and other factors listed from time to time in the Company's filings with the Securities and Exchange Commission. The Company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with respect thereto or any change in events, conditions, or circumstances on which any statement is based.

And now, we pass the floor to Mr. Polys Hajioannou. Please go ahead, sir.

Good morning, everyone, and welcome to our conference call and webcast to discuss the financial results for second quarter of 2011.

Yesterday, after the close of the market in New York, we announced our financial results. Before we present them, we will discuss certain information in relation to our industry.

In slide number four, we present the Baltic Exchange average 4TC for capes and Panamaxes. It is clear that the chartering market has entered into a period of weak freight rates, mainly due to oversupply of vessels.

For Panamax, since the beginning of 2011, the market has been between about $10,000 and $16,000 a day with a year-to-date average of about $14,000. For capes, market has underperformed in comparison to Panamaxes, and during 2011 has traded down to very low levels. The year-to-date other expense of about $9,000 a day.

Noting the importance of China and India in dry bulk transportation services such as iron ore, coking coal, and thermal coal, we present then slide five, the GDP growth of the BRIC countries, which shows a downturn but still remains higher than global GDP growth rate.

There are concerns about China and other BRIC countries, as PMI index in the top graph is moving lower for the past quarter. Especially for China, the PMI index is close to 50 points as the Chinese government is trying to control inflation by tightening its monetary policy and draining liquidity from the market.

We want to observe the performance of the U.S. economy in the next few months, which, if [placed] into a development track, it could put global economy into a faster growth.

Slide number six, on the figure on the top, we see that during 2009 about 153 Panamaxes and Post-Panamax vessels were to be delivered, but finally only 86 vessels entered the market, indicating a slippage or cancellation rate of 44%. Same for 2010, the non-deliveries amounted to 36% of the total 291 vessels expected as of previous year-end.

Going forward, we expect deliveries according to the market data of approximately 400 vessels for the full year of 2011, but up to date -- we have the half-year figures, only about 133 vessels have hit the water, indicating an -- on nonrealized terms that non-deliveries for [current] 2011 may remain at similar levels as for 2010.

The total number of fleet is also determined by the demolition of overaged vessels. Panamax and post-Panamax fleet consists of about 20% with vessels aged more than 20 years old. Our market has remained subdued for a long period during 2011, and scrap values are considered to be favorable. Scrapping activity has been accelerated, and up to date, about 30 ships have been scrapped, in contrast to the full year of 2010 when only eight -- seven vessels were scrapped in the Panamax and post-Panamax fleet.

Slide number seven, which is then the same analysis for Capesize vessels. The nondelivery for Capesize vessels amounted to [28%] and 32% for 2009 and 2010, respectively. The order book for 2011 is 351 vessels, and up to date, approximately 127 vessels have been delivered. In annualized terms, this implies the nondelivery trend may continue in 2011.

In contrast to Panamax size, Cape fleet is relatively younger, with -- and only 12% is over 20 years old. Despite that, [house freight] rates remain in some cases below OpEx during 2011. About 48 overage vessels have been scrapped up to date, in contrast to full year of 2010 where market was more favorable and only 20 vessels were scrapped at that time.

As market remains at [subcute] level and scrap values are favorable for owners, we expect scrapping activity to continue minimizing the total number of vessels using the [more normal], partly allaying the concerns of oversupply. At this point, we remind you that all our Company's Capesize vessels are on long-term charters.

On slide number eight, we present a graph with the price of newbuilding and secondhand vessels. The prolonged period of depressed charter market and the excess capacity in shipyards have pushed the asset prices considerably lower. Based on the graph on the top, the price of a newbuilding vessel has dropped about 9% for Panamaxes and about 5% for the Capesize in comparison to 2010.

The drop in asset values is more significant in the secondhand market where prices have dropped by about 13% for Panamaxes and about 18% for Capes. The down trend in values is expected to continue as freight rates remain lower, and is expected to trigger a certain issue in terms of financing and complying with loan covenants.

In our Company's case, we have sufficient liquidity and cash flow visibility, therefore we feel comfortable with our capital expenditures. We are monitoring closely the sale and purchase market, and we're ready to take advantage of the drop in asset prices in order to proceed in selective acquisitions to expand and renew even further our fleets with more efficient latest-design vessels.

In slide number nine, which will summarize certain information about our Company, we are active in this industry for almost half a century. During the extensive period -- this extensive period, we've built up relations with key market players, charters, shipyards, banks, and insurers. We have been trading since our IPO in 2008 in the New York Stock Exchange, and since then, we have considerably increased our public float. We have accessed the equity markets for additional public offerings in March of 2010 and April 2011.

Through sustainable charter asset management and financial policies, we have declared and paid 12 consecutive quarterly dividends since our IPO of $124 million, and our 13th consecutive dividend is payable on August 31, 2011.

Our management is active in shipping only through Safe Bulkers, maintaining approximately 6% of Company stock, thus ensuring alignment of management to public shareholders' interests. We have gained experience through our fleet managers, safety managers, obviously, which have accumulated extensive operational and technical experience.

Since our IPO, consecutive payment of dividends throughout the recent financial crisis has been an important element to sustain credibility among our public investors. At this point, we need to remind that dividend declaration is always subject to our Board approval based on our dividend policy.

We own and operate one of the world's youngest fleets. The 10-year exclusive management agreement not only provides transparency, but at the same time safeguards Company's interest. Operational risks are reduced through our young fleet and efficient technical supervision. At the same time, minimization of third-party risk is achieved through employment with major, well-established commodity transporters. We would like to remind you that all our charters performed during the last crisis.

We maintain a strong balance sheet and cash position, further expanded by our follow-on offering in April, which provides us with financial flexibility. We believe we monitor market cycle efficiently, investing at the right moment, attempting to achieve higher returns on equity, thus utilizing an efficient asset management.

Our president, Loukas Barmparis, will present certain elements of our attempt to differentiate our strategy.

Good morning. I said earlier we attempt to charter our vessels with premier counterparties in order to reduce third-party risk.

Slide 10, we present our charter coverage as of July 20, 2011, including existing fleet and newbuild order book, currently consisting of 11 vessels. The total number of ownership days is increasing year to year as our fleet expands. The green bars represent contractor days, providing visibility for our future cash flows. The blue bars represent open days, which we expect to fix closer to their respective periods.

For the full year of 2011, our charter coverage is 89%. 59% is for the year 2012 and 53% is for 2013. For the remainder of 2011, our charter coverage is 77%.

Over the years, we have long-term relationships with well-established companies of long histories in the markets, some of which are presented in slide 11. Our charterers that come during the last crisis [first hashing reliability] for [all] future cash flow.

Slide 12, we compare our time charter equivalent rate with the average over the expected quarter of Baltic Panamax average 4tc in order to [by doing] the results of our chartering policy against this other market. It is evident that in most cases -- see the first quarter of 2009, we have outperformed the index.

On slide 13, we present our fleet profile. Currently, we own a fleet of 16 dry bulk vessels with an aggregate carrier capacity of 1.4 million deadweight tonnage at an average age of 4.4 years, as of July 20, 2011, making us one of the world's youngest fleets.

Our fleet is expected to grow through 2014 as a result of the delivery of 11 further expected newbuilds, comprised of four Panamax, three Kamsamax, two post-Panamax, and two Capesize class vessels. Upon delivery of the last of our contracted newbuilds, our fleet will be comprised of 27 vessels having an aggregate carrying capacity of approximately 2.5 million deadweight tons.

As a result, we have locked in a substantial growth of more than 76% compared to our current fleet by 2014. We believe that there will be opportunities for the additional acquisitions in the future from well-established yards for substitution of existing vessels and for further expansion.

In slide 14, there is a [mode of dictateology) about fleet employment, and contracted fleet expansion is presented. We are working to secure additional charters for our vessels. Please note that all our three Capesize class vessels, the one delivered and the two expected, are chartered under long-period time charters is presented in blue color in this table.

Slide 15, we present how the net debt per vessel was developed since the first quarter of 2009. The deleveraging is considerable, from $20.3 million of net debt per vessel in first quarter of 2009 to $10.6 million in the second quarter of 2011. At the same time, we grew our fleet from 13 to 16 vessels, including one Cape.

Slide 16, we present a graph as of June 30, 2011, of our liquidity against capital expense requirements through 2014, demonstrating our financial flexibility for the coming period. On the left in the blue bars, we represent our remaining capital expense requirements, net of commissions, for delivery of our 11 newbuilds, amounted to $304.5 million. $140.3 million of that is scheduled to be paid in 2011, $83.9 million in 2012, $34.2 million in 2013, and $46.1 million in 2014.

We anticipated [scoring] this capital expense requirements from existing cash and time deposits, operating cash surplus, and existing term loan facilities (technical difficulty) by our liquidity, on the right in the yellow bars.

As of June 30, the Company has [$25.9] million in cash and short-term time deposits, $5.4 million in long-term restricted cash, $50 million in a long-term floating rate note from which we may borrow up to 80% under certain conditions, and $55.1 million available under existing revolving reducing credit facilities. In addition, the Company had $199.2 million in total undrawn loan and credit facilities for two existing and three newbuild vessels.

Apart from these contracted loan and credit facilities, the Company remains with eight debt-free newbuilds on which additional financing may be contracted to us and if required. [Please build macked out] liquidity is further supported by our contracted net revenue, visible through our charter covenants, presented on slide 16, which has not been included in this liquidity calculation.

[As since] after all our policies, we managed to maintain a stable dividend policy by paying out a portion of our free cash flows, while [issuing into] additional [thirty] expected not to be dilutive as the Company expands and our EBITDA is supported by a larger number of vessels.

Slide 17, we present a comparison of the quarterly dividend with respect to earnings per share. Our Chief Financial Officer, Konstantinos Adamopoulos, will now present in detail our financial results.

Thank you, Loukas, and good morning to all.

Slide 18 illustrates the summary of our results [in comparison to the same] for the quarter ended June 30, 2011, and the respective period of last year. For the second quarter of 2011, net revenues increased marginally by 1% to $41.2 million from $40.6 million in the respective period in 2010.

Net income for the second quarter of 2011 was $19.1 million, a decrease of 22% from net income of $24.4 million during the same period in 2010. The decrease in net income is mainly attributed to the following factors. Net revenue of $41.2 million compared to $40.6 million, vessel operating expenses of $6.5 million compared to $5.9 million, loss of derivatives of $6.1 million compared to $4.1 million last year, depreciation of $5.6 million compared to $5.1 million, early delivery income of zero compared to $1.8 million, and interest income of $0.2 million compared to $1.3 million for the relevant quarters in 2011 and 2010, respectively.

EBITDA was $25.5 million for the second quarter of 2011, a decrease of 14% from $29.8 million in the same period of last year. Adjusted EBITDA was $31.9 million for the second quarter of 2011, a decrease of 3% from $32.9 million during the same period in 2010.

Earnings per share were $0.27 in the second quarter of this year compared to $0.37 in the second quarter of last year, calculated based (multiple speakers) million shares and 65.9 million shares -- weighted average number of shares, respectively. Adjusted earnings per share were $0.36 in the second quarter of 2011 compared to $0.42 in the second quarter of 2010, calculated based on 70.1 million and 65.9 million weighted average number of shares, respectively.

For the definition and reconciliation of EBITDA [and] adjusted net income, adjusted EPS, and adjusted EBITDA, please refer to slide 21.

The second table in the bottom of slide 18, we see that total debt as of June 30, 2011, decreased by 14%, amounting to $426.2 million as compared to $494.7 million as of December of last year.

Slide 19 presents a comparison of selected three-month financial key points of our performance. During the second quarter of 2011, as compared to the same period in 2010, our net revenue increased by 1% to $41.2 million.

Our adjusted net income for the second quarter of 2011 decreased by 7% to $25.5 million from $27.4 million during the same period in 2010. Our adjusted EBITDA for the second quarter of 2011 decreased by 3% to $31.9 million from $52.9 million during the same period in 2010. Our daily operating expenses increased by 3% to $4,479 from $4,362. Adjusted EPS for the second quarter of 2011 of $0.36 compared to $0.42 in the second quarter of 2010, compared -- calculated respectively on the weighted average number of shares of 70.1 million and 65.9 million.

Moving to slide 20, we present the operating highlights for the second quarter of 2011 and 2010. As of June 30, 2011, we owned and operated 16 vessels and we achieved a utilization rate of 99.1%, compared to 15 vessels and 99.2% utilization rate during the same period of last year. The average daily time charter equivalent per vessel for 2011 was $27,921 compared to $29,706 for last year -- the same period of last year.

For the quarter ended June 30, 2011, daily vessel operating expenses increased by 3% to $4,479 compared to $4,362 in the same period of last year. The increase in operating expenses is mainly due to the performance of one drydocking during the second quarter of 2011, compared to none during the same period of last year.

Slide 21 shows the reconciliation of adjusted net income, EPS, and EBITDA from net income.

Let's now move to slide 22, where we present our -- as of July 20, 2011, the Company's contracted expected growth until 2014, as of year-end in this case, for the respective years, as well as our future charter coverage by year until 2015.

Turning to slide 23, the Company has declared for the second quarter of 2011 a cash dividend of $0.15 per common share, payable on or above August 31, 2011, to shareholders of record at the close of trading at the New York Stock Exchange on August 24, 2011. This is the 13th consecutive quarterly cash dividend since our Company's IPO more than three years ago.

Let's now move to slide 24 and summarize our presentation. As management, we actively manage our business and establish -- and have established long-term relationships with leading yards, banks, and charterers, resulting in insight to the underlying demand for commodities and achieving repeat business.

We have a long history and reputation of operating excellence, as reflected in our consistently high utilization rates. We maintain a young, modern, shallow-drafted fleet of 16 drybulk vessels, all built after 2003, and we have contracted for a significant growth with 11 additional newbuild vessels.

We carefully monitor market conditions, seeking to optimize our charter coverage with blue-chip customers and efficiently manage upside potential.

Our liquidity and strong balance sheet provide us with financial flexibility. At the same time, we follow a prudent dividend policy for the long-term benefit of all our stockholders and our Company. Our proactive management team is fully aligned with public shareholders, implementing and optimizing strategic planning.

Now, we're ready to accept questions, and as always, you are welcome to contact us directly and you can find the details on slide 27 -- 25. Thank you very much.

(Operator Instructions). Greg Lewis, Credit Suisse.

Yes, thank you, and good afternoon. Polys, you have made some comments recently about potential acquisitions into next year. Could you provide a little bit more color on the thought process behind those potential acquisitions, and maybe what those acquisitions could indeed look like?

Yes, what I said in an interview was that this is the firepower of the Company. I didn't say that the Company would invest as such, but the firepower from what we have seen and we have demonstrated on slide number 16, it's at least -- we have eight newbuild vessels at the end of the current program that will be remaining debt-free.

So we would take conservative leverage on both ships of 50%. It's a good, let's say, $160 million of capacity there based on conservative $20 million debt per vessel.

So this capacity that bases 50% finance, you could throw another 160 million from finance. It could be anything up to 10 ships. This is what basically I said in an interview.

Now, we expect that the low point on asset prices will be next year, and the reason we say that is that the capacity of the shipyards is there at the same time when freight rates are weak. So there's not a lot of demand from owners at the moment to place newbuilding orders, and shipyards are feeling the pressure and they will -- they are reducing -- as we talk, they are reducing prices.

So, we would expect a Company like ours to be able to invest at that moment. I mean, when you invest in assets at the low prices, you will always make good returns, whatever happens, because shipping is a cyclical market. It may not perform well in 2011 or in 2012. It will perform well in 2013 or in 2014, you know. So if the Company invests at that time and near the bottom of prices we'll do well for many years to come. So basically this is the philosophy here.

Now if this philosophy will be exactly done in that way or will be adjustments, I mean, we'll see how things develop and adjust our position.

Okay, sure, and just to follow up on that question. To that point, are you seeing opportunities at this point from shipyards willing to sell you existing newbuilding resales?

Yes, there are some resales in the market. The problem is quality. The quality is not what we expect to be, especially from ships that they have been either repossessed by the yards or abandoned by the owners.

You know, if an owner was not planning to take delivery of a ship, he has long before relaxed his supervision, if any was carried out, so these are not really the type of ships we will be looking for.

Also, I think that many shipyards, especially in Japan now, are working very hard within their design departments to develop the next technology and the next efficient vessels for the next 10 years, and I think a modern company would always look to get in these higher-efficiency ships into the fleet, you know, in 2013 or 2014. So, you shouldn't be ordering or taking ships now that would be of lower efficiency and then non-competitive now for the next 10 years.

So, we are patient and we are waiting to evaluate the designs as they come out from the top shipyards, and we will be ready to move in for the best of those designs in the near future.

Okay, great, and just from that, just from your comments, so is it safe to say that there are rebuilding -- there are newbuilding, sorry, resales, but there's most likely not coming from Japanese yards?

Correctly, yes. They're coming mainly from Chinese yards, and there -- you have issues with quality there. I mean, you haven't supervised a ship from the start, you will have issues with quality.

Okay, great, and then just one final question and then I'll turn it over. As we look at the remainder of 2011, you have four remaining newbuilds with -- one of those, I believe, is a Cape that comes online in the third quarter, and then you have two vessels that are going to be delivered in the fourth quarter.

I mean, you -- I would imagine you have people on the ground at these yards. Are you hearing anything about potential delays with any of these four vessels? Would you maybe take the option of pushing back those vessels that are scheduled for delivery in the fourth quarter into 2012? Are those things that you're thinking about that you have the possibility to do, or if I look at slide 14 where those delivery dates are posted, are those dates going to be pretty static?

There are delays. Yes, in China, there are delays. Two-, three-month delays are quite normal.

So with the market as it is, we are not in a rush, as well, to take them earlier, so I mean, it's well -- could well be delivered in early 2012 a couple of those four ships. The other one is, of course, a Japanese ship coming in September. We know from now the delivery date will be September 9; we knew it since (multiple speakers)

Okay, that's great. I like that. Okay, so -- okay, guys. Thanks and have a good summer. (Multiple speakers)

We booked the tickets since last year for that one.

Ken Hoexster, Merrill Lynch.

Hi, good morning. It's Scott Weber in for Ken. Just to follow on the last question on newbuilds, how far do you think we are on a percentage basis from the floor level at this point for a newbuild cost?

The floor level -- you mean that the market will lose or the floor level where the yards are making profits?

The floor level from what you can buy a newbuild or order a newbuild?

The floor level, you know, I mean, we don't know. I mean, it all depends on the market. I mean, I still believe the yards are making profits at today's prices, and -- especially Chinese yards; they are making acceptable profits.

I think there is a longer downside because they have this huge capacity at the time that there is very weak interest from owners. So, I would not be surprised if, by this time next year, we have a good 15% lower price from shipyards.

That's helpful, and then, just given how pressured rate levels are in certain vessel classes, are you still seeing Kamsarmax and Post-Panamax vessels at 6.5% and 11% premium, approximately, to Panamax rates, or are those vessel types now trading differently in the current market?

They are getting their premium, maybe not on every voyage, but when the charterer has a cargo and he has an available stem, they will get the premium. Around that level of 6%, 7% premium, you should be able to get it. You have to be patient and try to -- on a case by case, try to find the proper business for the vessel so you're getting the benefit on each occasion.

Okay, and I mean, just to follow that and to get a sense for your view of the market short term, are you expecting a pick-up in rates during the back half of the year now?

Look, we are cautiously optimistic for a small improvement in the Panamax rates in the fourth quarter. Maybe we'll start in the third quarter. We want to believe that there are signs that things could be a little bit better.

Of course, we have this supply of tonnage which is [held], but on the other hand we see that coal movement is happening both into India, and we see Indian coal track as a driver of demand. Coal into India is expected to increase this year by 28%, the thermal coal imports into India, which almost all of it is carried on Panamaxes or Post-Panamaxes. And this will be followed next year by another 20% increase of [weather] coal into India. So we expect a good sign from there.

And also, we expect that we will see Japan increasing its imports in the fourth quarter and into 2012. You know, when the effects of the big earthquake starts and the reconstruction starts taking place, you have to bear in mind also that, you know, two-thirds of Japan's 54 nuclear reactors are shut down since March 11. There are some units that they just closed down for checks or maintenance, but the authorities prevented them from coming back on production. So only one-third of Japan's reactors are working at the moment.

So this will help coal imports in the latter part of this year, fourth quarter and into 2012 for Japan. So maybe we see a small bounce, nothing impressive, but a small bounce, and of course, this is helpful after a difficult time of oversupply.

Sure, okay, great. Thanks for all the color.

Thank you.

Chris Wetherbee, Citi.

Good morning. It's [Will Thompson] sitting in for Chris.

I guess you guys noted that asset prices have declined more in the secondhand market. Has this altered your strategy of primarily pursuing newbuild acquisitions? And given what has been a protracted period of depressed rates with no real visibility for recovery, do you see the opportunities open up to acquire vessels from distressed owners?

Yes, it is correct that asset [several have] have dropped more than newbuildings, but I think now is the turn of newbuildings to drop because the yards have been patient and the yards in Japan have been -- have not shown the full flexibility yen because of the exchange rate. I think this will change in the latter part of this year and into 2012.

We expect softer Japanese yen. If the U.S. dollar interest rates start picking up, we expect the Japanese yen to be used of -- as a current-trade currency and -- as in the past. We should expect that there should be softening of the yen, and this will help the shipyards to move.

So we will keep our business model, without excluding one or two ship acquisitions from the secondhand market, but our main focus and our business model is based on going after the fuel-efficient new generation of ships, and this only comes from new designs that will be offered by the yards in the next few months. So, we don't want to lose our focus there.

Distressed sales, again it will involve inferior ships than the ones we want to operate, so we are -- we could see what is going on around, but we are not [part a keen] for distressed sales.

Okay, that's helpful, and then, I guess, what do you see as the next catalyst for drybulk rates? It seems like, obviously, Australia export coal has been slow to come back online following the floodings earlier this year. How quickly could we see Cape rates return to the premiums in the smaller class vessels?

I'm not sure on the Cape rates how fast, despite what we've seen, but still demand isn't at an okay level since -- overall, you know, still consumption is going up 6% of this year. Of course, you know, what the Capesizes are experiencing this year is out of a heavy delivery order book. 2010 and 2011 as well, because 2010 has been very heavy on the Cape deliveries if you compare them with the Panamaxes, and the same in 2011.

So I'm not very optimistic for the Capes for another year and a half. I'm a little bit more optimistic on the Panamaxes from the point of view of the coal movement, and you know, as I said in the fourth quarter, we expect some small improvement.

And I guess, you obviously mentioned you financed your 13th consecutive dividend. I guess conceptually, with your fleet fairly contracted over the next couple of years and having substantial fleet growth over the same period, how do you think about your ability to raise your dividend in the current rate environment? Or would you have to see rates bounce back from these levels before you think about increasing the dividend?

Yes, I think that it is fair to say that we want to see improvement in the freight market before we start improving on the dividend. We don't want to improve for a couple of quarters, and then we see that the freight market has slowed for another year and we have change and take it back to the original level.

So, we want to see the dividend. We want to see a dividend that could be sustainable. So unless the freight market improves, I don't want to misguide the investors, you know.

At the moment, we have a sustainable dividend. I think we have demonstrated this to our investors. It's a good 8% yield, which I mean we -- it's not a bad yield at all on today's share price. So I prefer to, you know -- not to surprise people positively one day and then negatively the next day. I prefer more of a sustainable environment because this is to the long-term benefit of this Company.

And then, I guess, one last quick one, just interest expense came in a little lighter than we were targeting. What is this accounted for?

Can you repeat?

Interest expense came in a little bit lighter than we were expecting. Just seeing what is a good run rate going forward.

Yes, we [wanted] all the interest -- the interest situation, and we are working on it, on -- to see how we may hedge our future requirements. At the moment, I think the Company is -- we have two- to 2.5-year swaps built in in our system, which is at okay levels of 1% to 3%. And you know, I mean, it's one of the things we closely monitor now. If we will book something more now, I think we are near the bottom of the cycle now and maybe we should do something more as well for future -- for our future -- for our future debt.

Okay, that's helpful. Thanks. That's it for me. Thank you.

Natasha Boyden, Cantor Fitzgerald.

Thank you, operator. Good morning, gentlemen. Just -- I think most of my questions have been answered, but just a couple. You still have a few ships coming off charter this year, and just wondering if you could provide some color as your operating strategy, given market conditions for rechartering your open fleet in 2011?

Yes, look, I believe that we have one ship at the moment which was opening this week, and we just fixed [for] trading in the Atlantic for a good almost three months at $16,250, which is a good rate.

We have one newbuilding that will come in September, which is [unfixed]. I think that we should try and work those ships on the spot market, preferably in the Atlantic basin where we can see better returns than Pacific because of all the newbuilding deliveries. So we will try to place these vessels back in the Atlantic, and try and keep them there for a few months, the next six months.

And you know, we will wait the right moment and the right opportunity, if there is any pickup in the rates of the fourth quarter, to fix them possibly for short periods like four to six months. We are not going to fix now. Don't expect from us any fixtures of one year at levels of $12,000 or $13,000 a day like other people may be doing because I don't think this is fair for the Company to -- I mean, you are trying to limit your downside on what? I mean, it's not making any sense to us to do this thing.

So as I told you, we fixed a ship in the Atlantic yesterday at $16,250 for 80-, 90-days duration. It's an okay rate. We can live with that, and we'll see what happens when she opens again in October. (Multiple speakers). This is a policy, you know. Try to work a little bit harder and not take the easy avenue, you know?

Okay, great, thank you. And then, just more of a macro question. You know, we've seen the beginning of the operations of [Vlos] start in this year, and really just want to get your thoughts on what effect do you think this will have on the traditional Capesize market?

The [Vlosses]?

Yes.

I better make no comment again on that one. We said in the last results what we believed about the v losses. It is -- it will affect -- the ships will affect the Capesize market.

Okay, all right. Thank you very much for your time.

Fotis Giannakoulis, Morgan Stanley.

Yes, hi, gentlemen. I want to ask you about the situation in the financing market, and if you see that the banks are becoming increasingly less patient with owners that do not meet the covenants?

Yes, I don't expect they will become impatient now in the summer. But coming back in September or October, unfortunately asset prices are dropping and banks will start the calculations. And this may end up in a little bit of arguments like before.

I don't say that banks will take drastic steps against companies, and listed companies are much, much -- in much better position to see out any downtime -- down trend of the market than private companies, as we have experienced in the past. So, there will be discussions. There may be some pressure on the spreads again, on margins, and things like that to change the margins.

The owners are putting some restriction on dividend payments. You know, as you know, in our Company we are well positioned to -- we don't have such an issue. But generally there will be discussions, which is not good for the market in general.

Do you see any particular asset class that might be creating a greater problem for the owners in relationships -- that are [added] to the banks?

I think there will be discussions in the [time capsule portion] and the drybulk sector.

I mean, in the drybulk sector, do you see it more in the Capesizes or smaller vessels or Panamaxes?

I think that asset prices have dropped 10%, 15% the last six months, you know, and I don't -- I expect this will continue in the second half of the year, so it will be mostly on Capes but also in other classes as well. Depends on the leverage of each individual shipowner and every ship in particular.

You spoke earlier about the coal trade and how you expect that it will strengthen by the end of the year. Can you give us your view about steel demand in Japan and regarding the reconstruction after the earthquake? When do you position that, and do think the current weakness is the result of the earthquake or is more of a macro issue?

I think that Japan in 2011 will import about the same amount of iron ore like 2010. But I think as from next year, in 2012, which is around $130 million, if my figures are correct, next year we expect that there could be a growth of 10% to 12% on the imports of -- [wider] iron ore imports of Japan, possibly 250 million tons. And this will be a positive change. So we see it in 2012, the reconstruction of Japan, to help the iron ore movement into the country.

Can I ask again on iron ore? We have seen that the last few months China is running at quite high inventories. At the same time, there are a lot of people that they are expecting that imports, Chinese imports, will even increase based on lower iron ore production, domestic iron ore production. Do you have a view on these two, on the high inventories in China and what is the situation with the local iron ore production?

Yes, I'm more optimistic on the coal into China around the iron ore. I don't know if the inventories are high, and also you can never be sure with the data the Chinese are releasing. And we have seen contradicting numbers in the last few months and people are criticizing this approach.

A lot has to do, also, with the price of the iron ore and things like that. We cannot -- it's a market, really, that you must have, you know, magician capabilities to understand how it's going to develop into next year, you know.

Thank you. One last technical question. I see that you reduced your debt by $60 million this quarter. This, I guess, is part of the proceeds from your recent offering. Can you tell us at which facility -- which facilities you reduced?

Yes, it is a big part of it. You know, we used the proceeds of the additional offering, together with severances from the operation and, you know, also cash balances. We did that on a couple of facilities that we have. You know, they have this revolving feature, and as we said in our press release and in the presentation, we have about $55 million available to draw again under this facility. And the reasoning was to try and reduce the interest expense.

So I guess, from what I understand, the majority of the $60 million reduction can be withdrawn without any new credit agreement?

Yes, that's correct. There is an availability and it's fairly quick. We can do it with a few days' notice.

Okay, thank you very much.

(Operator Instructions). There are no further questions at this time. I would now like to hand back for closing comments.

Thank you very much, and I'm looking forward to see you again to talk to you again in the next quarter. Have a nice summer.

Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.