Safe Bulkers Inc (SB) 2012 Q3 法說會逐字稿

Good afternoon and thank you for standing by ladies and gentlemen. Welcome to the Safe Bulkers Conference Call to Discuss Financial Results for the Third Quarter 2012.

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

At this time all participants are in a listen only mode. There will be a presentation followed by a question-and-answer session.

(Operator Instructions)

Following this conference, 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 the conference is being recorded today, Thursday, November 15, 2012.

Before we begin, please note that this presentation contains forward-looking statements, as defined in Section 27A of the Securities Exchange Act of 1933, as amended, and in Section 21E of the Securities 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 that 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 drybulk 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 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 we now pass the floor to Dr. Barmparis. Please go ahead sir.

Good morning. Welcome to our conference call and webcast. Let's move on to discuss the financial results for the third quarter of 2012 which were announced yesterday after the close of the market in New York.

Slide five will present the average [4TC], both the Cape and Panamax index. Cape and Panamax have been trailing in many cases lower than the operating expenses. The adverse market conditions in the access supply of new big vessels have vessel buyers to considerably lower levels during the recent past. The low asset values have triggered in many occasions the loan covenants, further reducing the liquidity of shipping companies.

On slide 6 there is a substantial order book throughout 2013. The average age of the fleet is reduced due to numerous new building deliveries -- still 7% of the fleet is currently above 20 years old and is expected to be scrapped in the present market conditions. Further to that, even younger vessels are scrapped in the range of over 15 to 20 years old as charter market is very low and still value remains relatively high.

Delayed deliveries and cancellations affect the actual delivery rate as shown in slide seven. Financing of new builds is an additional factor which contributes to cancellations or delays. Furthermore, scrapping activity will contribute in lowering the net fleet increase. During the first nine months of 2012 other scrapping activity exceeded the scrapping activity of the 2011.

Slide eight who will present the real GDP growth of BRIC countries. As the concerns about the global development China and India are playing an important role in dry bulk trade and any adverse development in their GDP can affect the demand for transportation of dry bulk commodities.

In the figure below we see certain estimations for a demand of the dry bulk commodities which is compared we provide the grounds for a new out port shipping cycle.

Slide 10 we present our fleet and order book. Safe Bulkers owns a fleet of 24 high specification vessels with an average age of 4.36 years and the contracted order book of seven vessels from top (inaudible) in Japan and China delivered through 2015.

Slide 11, note we provide information about Safe Bulkers. We would like to reiterate that management is fully aligned new with our public shareholders.

Let's move to slide 12. Through these years and is the shipping market we have navigated through many shipping cycles and gaining experience and proven track record maintaining (inaudible) approach with results and net low in daily operating expenses and high utilization ratios.

We expanded our business sensibly to create value for our shareholders with whom we are fully aligned. In none present prolonged adverse market conditions it is prudent to maintain a strong balance sheet, liquidity, and comfortable deck in compliance with the loan covenants while rewarding our investors with regular payments of dividends.

We have a substantial expansion through 2015 as presented in slide 13. We invest mainly in new builds, shallow drafted economical efficient vessels in the low part of the shipping cycle.

We manage actively our order book by selective reductions of the vessels acquisition costs, the replacement of Cape to serve our clients and delays in the deliveries of two new builds in 2015 which put us the related cash flows through that year.

We have doubled our policies and acquired a second hand Panamax at $14.2 million. This acquisition is opportunistic. The cost is less than half the price we sold a similar Panamax and 2010 at about $33 million.

Going to the next slide 14, we seek to employ our vessels in time charters in order to have the visibility of our future cash flows while and maintain certain vessels in the spot market to have this flexibility that the spot market offers in the low charter market periods and the upside potential when the markets improve.

As presented in slide 15, we evaluate the performance of our chartering policy against the spot market which we outperform most of the time. Over the years we have established long-term relations with some of the most respected sellers in the shipping industry.

Presenting on slide 16, all of our charters are performing. We maintain our cautious approach monitoring closely charter markets which currently is (inaudible) affecting most companies in the industry.

In slide 17, we show a daily operating expenses and management fees. Compared to the industry average, we reported about 8000 without lean operations contributing to Safe Bulker's net income.

On slide 18, we will present the net debt per vessel together with the fleet expansion. We maintain a low interest expense as evident by our debt per margin levels. We will retain more earnings in the company to further strengthen our balance sheet and our liquidity. We intend to finance our new building programs from equity and debt while we maintain a comfortable debt to asset ratio and comply with our financial covenants.

On slide 19 we present our liquidity and our ability to finance our capital expense requirements. As of November 9, 2012, our liquidity was $180.5 million while our capital expense requirements were $199.5 million. We have not included our operational cash flow which supported up by our contracted inaudible.

We also have the ability to raise additional indebtedness against one existing and seven unencumbered new build vessels upon their delivery, providing us further financial flexibility. The excess cash and low charter markets can be used either for debt repayments in order to deleverage our balance sheet or to be used as equity for further expansion.

On slide 20 we present historically our quarterly and per-share and our quarterly dividends. Our board has declared a dividend in the amount of five cents per share payable on 30 November.

At this point, we would like to point out that as presented on slide 21 do we remain committed to returning cash to our stockholders. We continue to actively manage our order books through selective reductions in new fleet acquisition costs prolonging existing new build deliveries and opportunistically acquiring new builds and secondhand vessels at attractive prices.

We maintained our low financial costs by continuing to make (inaudible) payments to our banks in order to ensure compliance with our financial covenants. We have a lean and efficient cost structure in relation to operating expenses, management fees, and general and administrative expenses.

We believe it is important to preserve liquidity in this environment as we aim to further strengthen our balance sheet and deleverage our company while maintaining the ability to make additional acquisitions in the depressed charter market timely for the next upward shipping cycle.

Our Chief Financial Officer, Konstantinos Adamopoulos, will now present in detail our financial results.

Thank you Loukas and good morning to all of you. Slide 22 illustrates the comparison of the selected three-month financial key points of our performance for the quarter ended September 30, 2012 and the respective figures of last year.

For the third quarter of 2012 net revenues increased by 10.1% to $46.8 million from $42.5 million in the (inaudible) of last year. Net income for the third quarter of 2012 was $20.7 million an increase of 4.5% from net income of $19.8 million in the same period of 2011.

Adjusted net income for the same quarter of 2012 was $22.8 million as opposed to $25.9 million touring the same period of 2011. The increase in net income is a mainly attributed to the following factors. Net revenue of $46.8 million compared to $42.5 million. (Inaudible) expenses of $8.3 million compared to $6.6 million. Loss of derivatives of $2.1 million compared to $6.2 million for the same period in 2011.

Inaudible expenses of (inaudible) dollars compared to $0.2 million. Depreciation of $8.3 million compared to $5.8 million for the relevant orders of 2012 and 2011.

EBITDA was $31.4 million for the second quarter of 2012, an increase of 18% from $26.6 million in the respective period of last year. Adjusted EBITDA was $33.4 million for the third quarter of 2012 an increase of 1.8% from $32.8 million in the same period in 2011.

Earnings-per-share and adjusted earnings per share for the third quarter of 2012 was $.27 and $.30 or speculate. Calculated on the weighted average number of shares of 76.7 million compared to $.28 and $.37 in the third quarter of last year calculated on the weighted average number of 70.9 million shares. For the definition and reconciliation of EBITDA and adjusted net income EPS, and EBITDA please refer to slide 25.

Slide 23 presented a summary of our key financial figures during the third quarter of 2012 as compared to the same period in 2011. Our net revenue increased by 10.1% to $46.8 million from $42.5 million. Our adjusted net income for the third quarter of 2012 decreased by 12% to $22.8 million from $25.9 million during the same period last year.

Our adjusted EBITDA for the third quarter of 2012 increased by 1.8% to $33.4 million from $32.8 million during the same period in 2011.

Adjusted EPS for the third quarter of 2012 was $0.30 compared to $.37 in the third quarter of 2011 calculated respectively on a weighted average number of 76.7 and 70.9 million shares. In the second table on bottom slide 23 received that the total debt as of the end of September 2012 increased by 27% amounting to $617 million compared to $484.3 million as of end of it December of last year. The result of our financial performance is demonstrated by the company's dividend policy, maintaining prudent and meaningful dividends.

Moving onto slide 24, we present the operating highlights for the third quarter of 2012 and 2011. As of September 30, 2012 we owned and operated 23 vessels and we achieved a utilization rate of 99.2% compared to 17 vessels in the utilization rate of 99.8% during the same period of last year.

The average daily time charter equivalent per vessel for the third quarter of 2012 was $22,554 compared to $28,312 for the same period of last year. For the third quarter of 2012 the daily operating expenses decreased by 5.4% to $4185 compared to $4426 in the same period of last year.

On slide 25 we presented the reconciliation of our adjusted net income, EPS, and EBITDA from net income.

Turning now to slide 26 the company has declared for the third quarter of 2012 cash dividends of five cents per common share payable on November 30, 2012. The shareholders of record at the close of trading on November 26, 2012. This is the 18th consecutive quarterly cash dividend since our company IPO more than four years ago.

Summing up our presentation is Slide 27. Although market conditions at the moment are not rosy, we stand prepared as a long-term oriented company. We have been in shipping for more than 50 years. We know the industry. We believe in this industry. We actively manage our order book and fleet. As a result of our track record and reputation in the industry we have developed from strong and long-term relationships with shipyards, charters, and banks in Japan and China.

We have a history and a reputation of operating excellence as reflected in our utilization rate and operating expenses. We maintain a low financial cost as a result of our low spread and our prudent levels in compliance with our financial inaudible.

We actively monitor young shallow drafted fleet of 24 dry bulk vessels all of which are built post 2003. Our extensive charter coverage with established performing customers supports our strong balance sheet liquidity providing financial flexibility. We remain committed to a prudent dividend policy to reward shareholders through payment of dividends and at the same time ensure future expansions and deleveraging.

Our contact details can be seen on slide 28. Thank you all for listening. We are now ready to accept questions.

Thank you and as a reminder to ask a question please press star one on your telephone keypad. Your first question from Citi comes from Christian Wetherbee. Please ask your questions, sir.

Good morning this is Seth Lowry in for Chris. If I could touch first on the dividend cut, I guess there are a lot of reasons why you reduce the dividend but can you just give us more of a sense of the changing strategy here? Was it your observation that the market wasn't rewarding you at the prior dividend level? Or should we expect to come to get more acquisitive or deliver more aggressively? Can you give us more of a sense of what the driving force of the cut was?

Good morning. Polys Hajioannou speaking now. The decision to cut the dividend was not taken lightly. It was taken out after a long discussion with the board and during our recent board meeting in Monaco where it was decided that the prevailing and persevering low charter market data we have three continuous quarters below $10,000 on the BPI and the expectation that we will have a low 2013 spot market coupled with the fact that this low market is heavily affecting now the value of second hand prices and hence the value of the assets of the company, we needed to bear in mind also the fact that the company considers what most important the fact to maintain its financial covenants so considering that the last three quarters we have seen in the five-year-old Panamax has dropped by a $7 million.

With a company like ours controlling 25, 24 ships list total cost of more than $150 million. We thought that this was a time to act and bring the dividend to a more reasonable level so the company could at the same time deleverage to keep always in line with the lower asset prices, the low freight market which is not expected to turn by anytime soon.

It definitely looks like 2013 could well be another lost year, and the fact that we are not convinced at all about the world economic conditions. So all these factors made the Board to decide that it was time to act now proactively and not to leave it in a subsequent date in 2013 to reduce the dividend.

Okay, so it's fair to say that it's more of a preemptive cut. There wasn't any pressure from your lenders or anything to cut the dividend due to financial covenants. Could you also remind us what is the covenant that you are most concerned with you are most concerned at this point and how close are we to potentially breaching that level?

we have not factored in any kind of distress. We complied fully with her covenants and have substantial room to move ahead. As you know, many of you check our quarterly results you know that we have done the prepayments regularly and we have the financial strength to do prepayments in order to comply and we comply fully with our covenants.

Okay, and my last question is bearing all that you have said, I guess I understand the need to preserve capital but how does acquiring the 2003 Panamax during the quarter factor into this new thinking of capital preservation and deleveraging especially considering it's a bit of a break from the strategy of buying a new or Japanese built vessel. Was it just simply that the price was too good?

Yes, this is on a completely different note. As you have seen we have postponed the delivery of two of our new buildings by one year from 2014 to 2015 and this and giving us more room to invest on secondhand prices which have dropped faster than new building prices.

We believe that new building prices have another 15% room to drop into next year while we feel that this secondhand prices have dropped much faster and also the risk associated with secondhand ships of these prices may 10-year-old ship is much less then the new buildings. If the prevailing low market is maintained for longer than what we anticipate.

So this secondhand vessel and maybe further additions next year fill in the gap for the two ships we pushed back they will deliver us into 2015 into the second half of 2015. Believing is that should the market tell us that certain point most likely in 2014 and the ship will appreciate it very fast and has their price would climb 50%, 60% quite easily and new building prices are not going to change anytime soon even if the trade market improves.

It will take a time lag of six to nine or 12 months due to the yard's overcapacity before they increase prices. This is completely different from the dividend cut or whatever else is internal change or pushing back the more expensive ships to have them available in a better market and in between fitting up to the stage one of the secondhand ship and maybe one or two more in the next quarters.

Okay, thank you. I will turn it over.

Thank you, sir. Now from Credit Suisse, you have a question from the line of Greg Lewis. Please go ahead.

Yes, thank you and good afternoon. Polys, Just to follow-up on the 2003 build the [Coliza] so when thinking about that vessel, when we think about next year and beyond that vessel is going to be 10 years old. It's a little bit older than your traditional fleet, can we walk away from not with that acquisition thinking that you are not necessarily a believer in the new eco-vessels? Because I have to imagine that that vessel being 10 years old is probably going to be less fuel-efficient than the new vessels coming out of the shipyards.

Yes, we still believe in the eco-vessels and we will invest in those in the future but we don't believe that it makes it a hell of a difference in the low freight market. Whether you are in 8000 or 8500 with an eco-of 9000, with an eco-ship it doesn't make a great difference in the accounts. So we thought to push out these more expensive and more ships near to what we expect to be a good market and sitting between low-cost still good vessels and not all around are the ones we have already in the fleet to work in the lower market.

So in case we are wrong and the marketing proves faster still you will have the ships. The ships will be appreciated by hopefully as soon as the market turns, the secondhand prices will pick up. The ship is short-term investment for the company. I don't expect that we will keep secondhand acquisitions for more than three or four years in the fleet.

Okay, great. And then just looking at your balance sheet it looks like you drew down debt to build your cash position. Is that a timing issue or is there a reason for doing that? Could you walk us through that?

We wanted to have the ability of meeting all of the covenants with all of the parts. We don't know which bank will be needed more cash and more securities for the covenants. As I told you once the prices have dropped $7 million per vessel this year. Our charters are eroding so another words as time passes and their our remaining priorities reducing less and less.

So there will come a point that we will have to give some money back to the banks as we have done in the third quarter we have some money to the banks so because we don't have a revolving facilities on all the loans we have only on our six or seven of them, there were ships that they have the (inaudible) debt and they had the revolving facility of 20 million for example so we draw those facilities not to the maximum extent.

we can still draw some more to have the flexibility to see which bank we have to give what to which bank, and as soon as we clear all our debt requirements, we'll give them back. The excess money will go back into the revolvers and so we could reduce the spreads again. So it's very important for a company like ours to maintain it through the low freight market the low-cost base of our finance because I think that this is a cost base that we should keep as low as possible.

Okay and then just shifting gears a little bit to the Cape Hull 131. It looks like if that is not delivered by the end of the year you can walk away from that vessel. Is that correct? It's a nonperformance by the shipyard. If that indeed happens how much, what is your deposit and how much of that deposit will you be able to call back from the shipyard?

Yes, the deposit to the shipyard is $51.8 million. So if the ship is not delivered, there is no chance that it would be delivered. It is months behind schedule. At this deposit is covered by refund guarantee to with 5% interest rates so it would be returned back with interest rate. We don't expect any problem.

If the company decides to cancel which is the way the market prices are, this is the obvious thing to do unless of course they have got things differently and wants to say very, very low price, we expect that this ship is so late that we cannot possibly keep it. That's why the company worked wildly with the charters.

We have a very good charter of this ship. We have a very friendly relationship with our charters. We offer them a replacement vessel from better yard with better consumption and better characteristics at lower price. We secure the vessel at those lower price of the figures 1 and we gave part of that benefit also to the charter with a small reduction of around $2 million and the charter rate. So I think it's a win-win situation.

Okay and then just finally, there has been a lot of, clearly Safe Bulkers has a lot of above market contracts on long-term charters, I think you mentioned a couple times on the call that all of the charters are up to date with their payments but just in thinking about that and thinking about some of these long-term charters where they are inaudible, have there been any discussions related to maybe blending and extending farther out some of those contracts so that that counterparty can maybe receive a lower charter rate? Is that something that is being talked about Western Mark has there been any sort of color you can write on may be what is happening or is nothing happening?

All of the payments are up to date. We cannot know in the future the low freight market and we know about next year will be tough and everybody says that. We do not know how much charter can afforded this a low market so we have to be prepared for all events. I am optimistic that nothing will happen or even if something happens it will be within a fair number and fair proposals, et cetera and et cetera.

So we are cautious but to this point everybody pays and we cannot complain. Now how much each charter can take and how much room they have and things like that, this only the future will show that the company is a well-prepared and anyway the balances of our charters are reducing so in a way the risk is reducing us as time goes by. So I mean, every month that goes by and everybody pays as per contract, that's good news.

Okay, perfect. Thank you for the time.

Thank you sir. Now from Global Hunter, you have a question from Natasha Boyden. Please go ahead Ms. Boyden.

Thank you operator. Good morning gentlemen. Just to follow-up on Greg's question about counterparties, I realize I think Polys, you said what you want to say, but is there any of your counterparties at this point in time is that you might or that you could classify as a being in some distess or do you think they are all holding up pretty well under this market?

Look, it has been widely reported, but Daiichi is a company that has been supported by their major shareholders recently with capital injection, so that is no secret this. We know it, and they have the support until the end of March of 2013 by some $200 million that they were (inaudible) to them. You know, we don't know what exactly will happen after that.

We monitor all situations. We know that people pay on time, and -- but after that date, nobody knows what will happen. We're optimistic because it's a 120 years company, always performing correctly and always being fair to their counterparties. But you know, what more can we say than what the market knows. I think they should be okay in the long run but this depends of course on know what their banks and their shareholders say in the end.

Fair enough. And then just jumping back to the question of the dividend cut, is there a chance, again given this environment and given sort of Safe Bulkers' desire to preserve capital at this point, that Safe Bulkers could cut the dividend completely?

The decision for the dividend cut was taken based on various risks and areas and as you well know our intention is to maintain dividend policy as much as possible if not to a second point of time to increase that when the market conditions permit it.

The important thing is that all the shareholders -- you know, the Hajioannou family and specifically Mr. Polys Hajioannou is a major shareholder, and I think he puts his-the company's interest above his own. The important thing is that the company to have the liquidity and the flexibility to make all the necessary moves under any specific scenario.

So right now, our Board has made the decision to do this dividend cut to $0.05 and to maintain the policy as is for, let's say, for the future which is to pay out meaningful dividend out of free cash flows. I think also one point that we need to make is that the company's value is not only related to dividends. The dividend is also one portion, but the earned income per build is another. The retained earnings that are -- we hold in the company are substantial.

It might be that let's say per year you couldn't and may be by one additional secondhand vessel which sold later on could maybe have a substantial increase in benefit on sale of these assets. So I think that we should always a look at the broader picture which is the dividend from the one hand side and also the company's strength and the money are not going away from the company. They are staying in the company for future development and deleveraging. This is a very important thing for all of our investors to understand.

Okay, great. Thank you. Then just lastly, just jumping back to the new Capesize that you ordered and the one that you delayed, did you consider chartering in a modern Capesize to meet the charter requirements until the new order is delivered in 2014 at all?

Can you repeat Natasha. I didn't get the question.

Sorry. I asked if whether or not you had considered chartering in a modern cape size to meet the charter requirements until your new order is delivered and 2014.

The 2014 vessel has already got the business of the one that is late, so this 2014 Capesize will perform the 10-year charter that will be around $24,300.

This charter will commence and delivery of a new bid.

So this charter was supposed to commence in 2012 with the other ship that is not going to be delivered on time will be performed oh with 2014 cape so that's why I called it before a win-win situation because also the charter gets a better cape, more economic vessel from a Japanese yard that will be delivered also a year later and that should be seen near to the better market and things like that so we will all benefit out of this arrangement.

I understand that. I guess what I am trying to get at is if the original cape was due to be delivered this year and 2012 and now the new cape isn't going to be delivered until 2014, what are you going to do for 2013 to breach the That is there?

We are not going to put another cape and to bridge the gap because our expectation for that cape market is to be around $10,000 a day for next year. This is also the FFA (inaudible) showing. Capsize having expense of $6,500 a day so as the gap is at best is minimal that will be in that year.

For us, 2013 will be a low freight environment here because we are very, very concerned about world economies and the order book which still it is a big enough in 2013, the order book gets better on the in 2014 onwards. Hopefully economies will start recovering in 2014.

Hopefully Europe solves some of its problems in 2014 onwards because four 2013 I am very pessimistic about the European economy and to the recession could hit even the big companies and not only the South countries but the North countries so would there be any possibility to employee in a spot market such a vessel at a meaningful rate.

Okay, great. Thank you very much. Good time.

Thank you man. Now for Morgan Stanley you have a question from Fotis Giannakoulis. Please ask your questions served.

Hi gentlemen. I would like to ask regarding your charters, you mentioned that they all perform right now and the (inaudible) is known that has some problems. Have you had any approach by Daiichi or any other customer for potential restructuring any of your charters?

As of this stage we didn't have any approach whatsoever. Has this thing is that seeing that the freight market is hovering around $7000 a day for Panamax and around 15,000, 16,000 on the Cape and the expectation for next year as the market seems to be around 74 Panamax and around 10 for capes, we expect that to this charter, there's not only them but other charters as well are not going to have profitable year next year. So we don't exclude some of them or one of them.

They will, and they will want to discuss possible cooperation and summary arrangements and some discussion. But having said that, our risk is diminishing because these people have support until next March by their $200 million injection and by that time or in March of next year our risk with them is reducing a lot so whatever we need to do if we need to do something it will be within affordable levels. But I am more worried, I am not worried about them. I am more worried about the situation of the wealth economies.

We are not optimistic the way things are turning four 2013 and it's not only Europe, it's also the US and the fiscal issue there and how much of the GDP we will take off from the US if they find that they have to somehow start dealing with the fiscal problem. We don't know certainly in China what the new policymakers decide to do and how this will be implemented into the market.

As I told you Europe cannot solve its problem with the austerity, that continued austerity which is just killing the economies and I think that 2013 that looks like it will be a lost here. That's why the company wants to be cautious because as I told you before we don't want to touch issues like spreads and the low cost base of the company which as you know is still at very, very low margins from that existed before Lehman Brothers.

Can you give us a snapshot of your chart or portfolio in particularly exposed to Daiichi, how many vessels that you have with them and you say that you believe is that until March they have sufficient cash and you do not expect anything to happen but what is your exposure today and what will be by March these exposures? How much it reduces?

I think this exposure also now mostly there were five year charters we have done with them and the average remaining period as of March of 2013 will be less than one year. So as you understand, the exposure is a very much reduced.

How many vessels are these?

We don't declare exactly the number of the vessels but if you go back filings you will find that is something more than five vessels.

Okay and just to clarify, these contracts, they are quite strict I assume that any change will have to be with your consent. Is that correct?

I guess in my experience is the Japanese charter is when they want to discuss things that they approach the customers and they try to have amicable discussions. So I don't think if they want us to do something they will do it abruptly. They will do it with mutual consent and over discussions etc. But as I tell you the risk is decreasing simply because the charter rates the vast majority of those charters have been already inaudible.

You mentioned about your expectation for next year of around $7000 for Panamax this and $10,000 for capes. I saw that your newest acquisition find a charter of a higher level around $9000. Is there a reason why you manage to get a higher rate or the market right now is that $9000 and not seven.

The $7000 a day is the expectation of the FFA market and I use this rate from what the foreword (inaudible) space of four Panamax for 2013. So this is the average of the four routes so it includes the Pacific route, the Atlantic, the inaudible.

So the vessel we took delivery the (inaudible) will switch with the Japanese charter in the spot market in the far east which happened to be the best market at that point so she was fixed at $9000 per day.

And the (inaudible) Panamax around seven, but in the far east you can do around and nine, in the Atlantic around five so that's why she got the better rate because she was delivered in let's say in the and audible area of the market at that point. Of course 9000 and not a hold to market but she was delivered in the (inaudible) area of that particular model.

That's a spot picture of 30 or 40 day duration. So the expectation for the whole year, I don't say the market will be seven. I don't expect to be that low but I say is that the numbers of people are paying in the market and paste with major charters are planning there and are now doing their fixing is perceived to be around 7000 level for next year for Panamax.

Okay, thank you very much for your time.

Thank you, Sir. Now from Credit Suisse, we appear to have another question from Greg Lewis. Please ask your question. I'm going to release that line. Sorry. Your next question from Iberia comes from David Beard. Please ask your questions are.

Good morning and good evening. My question related to how much cash you would like to build in the company when you look at the dividend saving you $30 million a year and you were going to generate operating cash flow from your charters through 2013 and 2014, just to reconcile that with the fact that you said that ship values have dropped by $150 million, do you need to build is a whole hundred and $50 million in cash back or a fraction of that? How should we think about the cash level you are comfortable in?

First of all you see that we have a liquidity in the company but we have also a CapEx and order book which we have spread it out over three years. So there is liquidity there. The other thing is we have to monitor is the drop of asset prices. There is no guarantee that it will stop in this quarter.

We believe that this will continue for the next two or three quarters. So we never expected five-year Panamax to be sold at $18 million, $19 million in this year. It happened and since it happened we consider it also that it was a good entry point for our company in the secondhand market. So some of this cash will be used for chief acquisitions.

Some of the cash will be used to keep the banks happy because we want to be correct with all of our counterparties and especially the banks which you know we have a very good financing arrangements and we will pay some dividends as we have the declare to the shareholders.

My family is also complaining about the reduction of the dividend and as a company we want to keep the family happy as well, but because of the uncertainty of the economic environment we want to be always on top of our game.

And to be on top of the game, you have to have the the liquidity. You do not know exactly where you will use that liquidity. I want a company and that the board wants the company to be able to be moved on their own circumstances and to be able to do things, so to generate more opportunity and more benefit to the shareholders in the long run.

For one or two or three quarters it's not the matter to generate the extra dividend and expense of the health of the company. So because we don't know when the economy will recover it's not good to calculate always on the past charter rates and on previous good business. We have to see where the future is and we have to see that the future is on low assets. These opportunities appear in first time in the last six years or seven years.

Low assets in the company should be able to participate on secondhand acquisitions at the low cost vessels could easily be sold even when the market changes could be easily sold 56% premium toward the company will be paying for these vessels. So it's a combination of these factors that requires us to have the liquidity. Because the secondhand acquisitions will be done on cash basis, it will not be done on financing basis.

Thank you that's helpful. And just when we look at your CapEx schedule, do you have any additional flexibility to push deliveries out or are we really talking a few months here or there but nothing significant?

I think what we did was significant and maybe it's not rightly shown on the graph. I think it's significant because we don't have any new build to be delivered before the second half of 2014 and then we have two ships in 2014 and two ships in the second half of 2015. So we started out almost 3 years from now, six ships on three years over the next three years.

So I think it's very well and finally spread out and do you see on page 19 of the presentation that the remaining CapEx is $200 million. Of course you know some of it is on the Cape that the company has the option to cancel it because she is delayed but you could see that this CapEx is evenly spread out over the next three years.

Now we don't really have more flexibility there because of the 2013 ships at certain point early next year will start construction. The 2014 ships before next summer they will start construction so it's not much more we can do there but I think what we have done is very comfortable and we already took our measure there.

If the market picks up earlier it comes back up strong in 2014 the easiest part is to find a shipyard and to do additional ships. The difficult part is to make the rearrangement at a later state. Now it is an early state. We could do this rearrangement.

Great, that's helpful. Appreciate the time.

Thank you, Sir. Now from Merrill Lynch you have a question from Wilson Chen.

Hey Polys, it's Ken Hoexter, actually. Good evening. Just two things. I wanted to follow up on that. You mentioned the dividend cut. Was that something you did on your own, or were you mentioning that the banks had discussions with you about it and you got more comfort by cutting it, or was it your own decision?

Can you repeat, Ken? What did you ask?

It was our own decision completely. It's our -

What was the question?

If the dividend cut was asked by banks.

It was on our own, and no bank, I think, expected this and no bank even dared to suggest this to us. You know, we have a truly working Board and three independent Board members, and even admit that I have a big interest to keep the dividend higher.

I follow the recommendation and the proposal of the other Board members because I saw also that in uncertain times, and we see around what is happening with the other listed companies, you know, one after the other, we have to be cautious.

I mean, we don't want our company to be -- if the market doesn't recover in 2014 and it recovers in 2015, to be in any sort of difficulty. So I thought that this move is prudent.

There is the thing the market to prove us wrong and recover faster and I'll be the first to propose an increase of the dividend. So be rest assured about that, and I'm there to constantly remind them of that, but we want to see real change of conditions.

You have seen all the time all these years from Safe Bulkers is consistency, and through shipping cycles we managed to make a lot of money by not only through operations but also by acquiring assets when the market is low and selling them when the market is high.

So I think it's a game that we know very well. We have maintained all our strategies intact, so we have not changed any strategy. We did what we always did to invest and to maintain money in the company when we did invest, and to give the dividend when the charter market is high.

So I don't think that someone should expect that when the charter market is prolonged --the charter market, let's say, the pressure is prolonged for so long, to maintain a dividend and not to prepare the company to invest and to deleverage in order to be ready for the next upward shipping cycle.

And this decision is only ours. I mean, we are responsible for the company. We have said clearly from the beginning -- I mean, since our IPO strategies and I think that we have received a certain comfort from all our investors about that.

Wonderful. And then just on the cost side, are there further -- given the lower rates, are there options for cutting costs further, or with the aging of your vessels and second-hand vessels, should we see internal operating costs start to continue to climb upward?

Yes, if you see Slide No. 17, over the last five years we have more or less kept the cost -- you know, running cost management fee around the 5,400 level, give and take. So the average age of the fleet is 4.3 years after the second-hand acquisition, and even if we add two or three more second-hand vessels in the low part of the market next year, still the average age of the fleet will be around 5.5 years old.

I think we are in a position to maintain the low cost base. Over the years, we are known, but we are the experts in running ships at low cost. I believe it's one of the secretes of this company to keep all the costs low, including the management fees and the G&A, and the shareholders get this benefit year-in, year-out from this company. So I'm confident that we will keep a low cost operation.

Wonderful. Appreciate the time.

Thank you very much. As there are no further questions at this time we now pass the floor back for closing remarks to Dr. Barmparis. Please go ahead, sir.

Thank you very much for being with us and discussing with us our financial results, and we are looking forward to seeing you on our next quarterly results. Thank you very much.

Thank you, sir, and with many thanks to all our speakers today, that does conclude our conference. Thank you for participating. You may now all disconnect. Thank you, gentlemen.