Safe Bulkers Inc (SB) 2013 Q1 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 first quarter 2013. Today we have with us from Safe Bulkers Chairman and Chief Executive Officer, Polys Hajioannou; President, Dr. Loukas Barmparis; and Chief Financial Officer, Konstantinos Adamopoulos.

(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, on Thursday, May 16, 2013.

Before we begin, please note that this presentation contains forward-looking statements as defined in section 27A of the Securities Act of 1933 as amended and section 21E of the Securities Exchange Act of 1934 as amended concerning future events, the Company's growth strategy and measures to implement such strategy includes the 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 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 undertaken to release publicly any updates or revisions to any forward-looking statements contained herein to effect 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 Dr. Barmparis. Please go ahead, sir.

Good morning. I am Loukas Barmparis, President of Safe Bulkers. Welcome to our conference call and webcast presentation. Let's move on to discuss the financial results for the first quarter of 2013, which were announced yesterday after the close of the market in New York.

In Slide 5 we present the average 4TC by the Capes and by the Panamax Index. Panamax rates were supported by increased exports of grain from South America. On the contrary for Capes, market has been trading at very low levels. For the past period we have seen many cases are lower than operating expenses.

In the lower part we present the values of second-hand Capes and the Panamaxes as published by Baltic Exchange. Despite current market conditions, consensus for the market prospects turning to positive have renewed interest for all the second-hand ships, providing certain support to asked prices. Though regarding lowest prices are causing problems for certain companies in relation to debt covenants and may lead to impairment losses.

In Slide 6 we see that there is still substantial order book for 2013. Going forward to 2014 and onwards, the order book is substantially lower. The average age of the fleet is reduced due to the number of newbuild deliveries in Q2 versus scrapping. Though still some 9% of the total drybulk fleet is currently above 20 years old, and a total of about 8% is above 20 years old.

Average age of our vessels going for scrap is decreasing because of the current adverse market conditions in the form of scrap prices. Therefore there is still a large portion of the total drybulk fleet to be candidates for scrapping. Delayed deliveries and cancellations affect the actual numbers of deliveries, as shown on Slide 7.

The lack of financing is an additional factor contributing to cancellations or delays. We have seen, though, through the past period that ships are canceled or delayed not only because of the inability of buyers to finance their projects, but also from being a lead to shipyards. Shipyards finance with [laricos] actions so to meet their contracted time schedules. For 2012 the number of deliveries late amounted to approximately 1/3 of the contracted order book, and same rate is expected to be continued in 2015.

Furthermore, scrapping activity will lower the net fleet increase. For the first four months of 2013 scripting activity has reached 9.3 million tonnes, which in annualized terms is a touch lower than the record year of 2012, when vessels gone for scrapping amounted to 34 million tonnes. This has resulted to a net fleet increase of about 16.8 million tonnes or 2.5% over the first four months of 2013 in comparison to a net fleet increase overall, 64.9 million tonnes or 10% in 2012.

Slide number 8 will present the real GDP growth as provided by IMF for the BRIC countries, namely Brazil, Russia, India, and China, which have the tonnage for shipping in terms of imports/exports are our key players in terms of seaborne trade. We know that India has been growing faster than currently at the rate of about 5.7%. China, though lower, is growing at a substantial 8%. We expect this to sustain or to increase, especially after the government announced intentions to focus in domestic growth and urbanization, expecting to boost industrial activity -- and hence the demand for drybulk commodities.

In here the world seaborne trade in the bottom figure shows a constant increase for sea transportation as for the commodities by a rate of 45% over the past year. Over the past years. Some trend in sea goods is expected over the coming years, which will have ships set and extend the oversupply.

Slide 9 we present the demand outlook for the major drybulk commodities -- these are iron ore and grains. On the graph on the top we present the value of iron ore exported by Australia and Brazil. Despite the negative trend at the beginning of 2013, you can see that iron ore exports have been growing constantly over the past years, and something is expected to continue, especially on the bulk of the Chinese plants forcing lead in their economy.

Grain exports from Australia and Argentina on the bottom of the slide show the very good grain harvest in South America, which has exported record exports of grain. That provided the good supporting charter rates on the Panamaxes. This impact might be prolonged, even during the summer months; expecting to grain to balance oversupply.

In Slide 11 we present our fleet and order book. Safe Bulkers owns a fleet of 26 high-specification vessels with an average age of 5.1 years, and they contract an order book of eight newbuild vessels from top-quality shipyards in Japan delivered through 2016.

In slide 12 we provide certain information about Safe Bulkers. We would like to reiterate that management is fully aligned with our public shareholders.

In slide 13, through these years in the shipping market we have navigated through many shipping cycles, gaining experience and a proven track record, maintaining hands-on approach, which have resulted in low day operation expenses and high utilization ratios. We expanded our business entity to create value for our shareholders, with whom we are fully aligned.

In the present prolonged [divest having] market conditions, it is prudent to maintain a strong balance sheet, liquidity, and comfortable debt in compliance with loan covenants, while rewarding our investors with regular payments of dividends. We have substantial expansions through 2015, as presented in Slide number 15. We invest mainly in newbuild, shallow-drafted, economical efficient vessels in the low part of the shipping cycle.

We manage actively our order book. In this low-price environment, we acquired one 2008 Japanese-built Kamsarmax class vessel at $19.4 million. Let me remind you, also, that we bought recently -- last year -- two 2003 Japanese big Panamax vessels, which have already been delivered to us, at $14.2 million and $13.8 million.

In addition, we entered into two shipbuilding contracts with the Japanese shipyards for the construction of two eco-design 77,000 deadweight tonnes Panamax-class vessels, each with a purchase price of $28 million. The first vessel is scheduled to be delivered to us on the second half of 2014 and the second in the first half of 2015.

Going to slide [5], we seek to employ our vessels in period time charters in order to have visibility of our future cash flows, while we maintain certain vessels in the spot market to have the flexibility that the spot market operating allows in the periods and the upside potential when the market improves.

We have reduced our counterparty risk by agreeing to delay the delivery of four vessels for which we received a cash compensation of $20.8 million in total. We reemployed all the redelivered vessels in spot or period time charter markets.

As presented in Slide 16, good (inaudible) the performance of the chartering policy against the spot market, which we outperform most of the times. Over the years we have established long-term relationships with some of the most respected charters in the shipping industry, as presented in Slide 17. All of our charters are performing; we proceed to selective early redeliveries and receiving significant cash compensations to reduce third-party risk.

On Slide 18 we show our daily operating expenses and daily administrative expenses, which include management fees and public Company expenses, demonstrating our lean operational structure.

On Slide 19 we present the net debt per vessel together with the fleet expansion. We maintain low interest expense, as evidenced by our debt per margin levels. We retain earnings in the Company to further strengthen our balance sheet and our liquidity. We intend to finance our newbuildings from equity and debt, while we maintain a comfortable debt-to-asset ratio and comply with our financial covenants.

In Slide 20 we present our liquidity and our ability to finance our capital expenditure requirements. As of March 31, 2013, our liquidity was at $162.5 million, while our capital expense requirements were $171.5 million. We have also included our operational cash flows, which is supported by our contracted period time charters.

We also have the ability to raise additional indebtedness against unintended contracted newbuild vessels upon delivery to us, and which will provide us with further financial flexibility. The excess cash in 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 21 we present the historical quarterly EPS and our quarterly dividends. Our Board has declared a dividend in the amount of $0.05 a share, payable on June 7.

At this point, we would like to point out that as presented in Slide 22, we remain committed to returning cash to our stockholders. We continue to actively manage our order book through selective reductions in newbuild acquisition costs, increasing newbuild deliveries, and opportunistically acquiring newbuilds and second-hand vessels at attractive prices.

We maintain our low financial cost base, continuing to make pre-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, (inaudible) that reduces the 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 asset market timely for the next outward shipping cycle.

Our Chief Financial Officer, Konstantinos Adamopoulos, will now present the details of our financial results.

Thank you, Loukas, and good morning to all. Moving on to Slide 23, we present the operating highlights for the first quarter of 2013 and 2012. As of March 31, 2013, we owned and operated 26 vessels, and we have fleet utilization rate of 98.5% compared to 20 vessels and a utilization rate of 19.8% during the same period of last year.

The average daily time charter equivalent per vessel for the first quarter of 2013 was $18,113 compared to $24,890 for the same period of last year. For the first quarter of 2013, daily operating expenses decreased by 6% to $4,412 compared to $4,713 in the same period of last year.

Slide 24 illustrates the comparison of selected three-month financial key points of our performance for the quarter ended March 31, 2013, and their respective figures of last year. For the quarter of 2013, the first quarter of 2013, net revenues remained almost unchanged to $44.2 million from $44.1 million in this respective quarter of last year.

Net income for the first quarter of 2013 was $16.1 million, a decrease of 25% from net income of $21.6 million in the same period last year. Adjusted net income for the same quarter of 2013 was $16 million compared to $22.9 million during the same period in 2012.

The decrease in net income is mainly attributed to the net effect of the following factors. Net revenue, $44.2 million compared to $44.1 million; vessel running expenses of $9.9 million compared to $8.1 million; depreciation of $8.8 million compared to $7.3 million; EBIT expense of $2.6 million compared to $1.8 million; and gain on derivatives of $0.1 million compared to a loss of $1.2 million for the relevant quarters in 2013 and 2012, respectively.

EBITDA was $27.5 million for the first quarter of 2013, a decrease of 10% from $30.7 million respectively over 2012. Adjusted EBITDA was $27.4 million for the first quarter 2013 from $31.9 million in the same period of 2012.

Earnings per share and adjusted earnings per share for the first quarter of 2013 were $0.21 and $0.21, respectively, calculated on the weighted average number of 76.7 million shares compared to $0.30 and $0.32 in the first quarter of 2012, calculated in the weighted average number of 71.9 million shares. For the definition and reconciliation of EBITDA and adjusted net income, EPS, and EBITDA, please refer to Slide 26.

Slide 25 presents a summary of our key financial figures during the first quarter of 2013 as compared to the same period in 2012. Our net revenue remains almost unchanged, up to $44.2 million from $44.1 million.

Our adjusted net income for the first quarter of 2013 decreased by 30% to $16 million from $22.9 million during the same period of last year. Our adjusted EBITDA for the first quarter of 2013 decreased by 14% to $27.4 million from $31.9 million during the same period in 2012.

Adjusted EPS for the first quarter of 2012 was $0.21 compared to $0.32 in the first quarter of 2012, calculated respectively on the weighted average number of shares of 76.7 million and 71.9 million, respectively.

In the second table in the bottom of Slide 25, we see that the total debt as of March 31, 2013, decreased by 11%, amounting to $550.5 million as compared to $615.7 million as of December 31 of last year. The results of our financial performance is clearly demonstrated by the Company's consistency in its dividend policy, maintaining a prudent and meaningful dividend throughout the last crisis and contrary to the vast majority of our industry peers.

On Slide 26 we present a reconciliation of adjusted net income, EPS, and EBITDA from net income. Turning to slide 27, the Company has declared for the first quarter of 2013 a cash dividend of $0.05 per common share, payable at June 7, 2013, to shareholders of record at the close of trading on May 27. This is the 20th consecutive quarterly cash dividend since our Company's IPO five years ago.

Summing up our presentation is Slide 28. Although market conditions at the moment are still challenging, we are prepared as a long-term-oriented Company. We have been shipping for more than 50 years; we know the industry, and 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 some long-term relationships with key shipyards and charters and banks in Japan, Europe, and China. We have a history and a reputation of operating excellence, as reflected in our utilization rates and operating expenses.

We maintain low financial costs as a result of our low spends and our prudent leverage, in compliance with our financial covenants. We actively manage our young, shallow-drafted fleet of 26 drybulk vessels, all of which are built post-2003. Our substantial charter coverage with established performing customers supports our strong balance sheet and liquidity, providing financial flexibility.

We remain committed to a prudent dividend policy that rewards shareholders through payment of dividends and ensures future expansion and deleveraging. Our contact names can be seen on Slide 29.

Thank you for listening, and we are ready to answer questions.

(Operator Instructions). Christian Wetherbee, Citi.

This is actually Seth Lowry in for Chris. If I could start off, you guys have been pretty active in the first half of the year in restructuring charters. And I guess you still have a decent portion of your fleet that is on longer-term charters. I guess just simply, are all of those potentially fair game to restructure? Do you see it as advantageous to potentially go out and seek the arrangements that you have been getting in the first half of the year with the rest of them? And in particular, the two Capesize vessels on the longer-term charters.

Yes, good morning to you. We are not going out seeking to get compensated for finalizing charters earlier than scheduled. But when we have a request from a charter because it makes sense for them to compensate us with a good part, 80%, 90% of the outstanding amount cash up front.

And given the environment that we are working under, and what we are hearing from -- happening with other charters or other people in our market, when we have such approach, we should always sit down and consider and listen according to the situation of the market. It is a lot easier for a charterer to do this arrangement when there is 6 or 12 months remaining on the long-term charter. And of course it's much easier for somebody to do when there are eight or nine years remaining on a charter.

So the Company listened to proposals, negotiated. I think we are in the top, handsomely collecting this year -- or about to collect -- $20.8 million, and adding the $12 million of the end of last year, a total of $32.8 million of cash. I think it is a prudent strategy to this environment to support the decision to collect almost $33 million dollars out of cutting a little bit shorter these charters.

Sure, definitely. And I would imagine it becomes a bit more attractive, too, when you are willing to be a bit more opportunistic in the market. And based on that, can you just give us some general commentary and color on your M&A appetite?

I know you've been out in the second-hand market and also the newbuild market now. How much more do you think you can do with your current financing structure? And do you think it makes sense now to go out and tap additional external financing -- whatever form that may be -- equity, debt; in order to go out into the market and keep building your fleet?

I don't think we will rush to do many more things than what we have already done. Because as you see on Page 14, we have built-in growth in the fleet. So currently we will end up with 27 vessels. And already we have a step-up of the fleet to 31 vessels in next year and 34 vessels in 2015. So we are very nicely positioned with really attractively priced, modern eco newbuildings joining the fleet in what we expect to be a recovery of the market.

So we were working a real need to do something. In the second half of last year we found very attractive -- the second-hand prices. So we decided to move at that time. I think it was a good decision, because right now we are hearing a lot of competition for second-hand ships. And we are hearing prices generally $2 million per vessel higher than what we paid in the end of last year.

And right now we've found opportunistically in Japan from a friendly shipyard. In order to sell two builds of their new design of very eco consumption, they gave us a very, very low price, including our high specs built in this cost. So we couldn't really refuse this price. But we are not hungry, let's put it that way; we're not hungry for more.

So fair to say, you positioned your fleet for the recovery and any incremental uptick in fundamentals may then shift your focus from fleet growth to maybe potentially returning capital to shareholders? Is that the next focus point of the Company now that you've positioned yourself in the right way?

I think we are very well positioned and our debt is under control. And the net debt of this is steady, as you see, despite the growing of the fleet. And works with Vorini being more than 60% shareholder of the Company. There comes a point that you should expect something more if the market, of course, recovers.

Okay. And then lastly, really quick, daily OpEx per vessel has been trending down. This quarter it was down 6% or 7%. Is that a function of just crewing costs and the slack in the market helping you on the cost side? And is that a fair run rate to project with for the rest of the year, that mid-$4,400 level?

Yes. If you see this graph on page 18, we are becoming very focused on our cost. Especially in the low market, it is really important to focus and try and sharpen the spend sheets, and try to do the operation a lot more economically, as you can see.

I'm pleased to say that we are managing to run the ships at about the same cost as we did five years ago. So that shows a very healthy organization and a very hands-on approach on how we have done our ships.

You know, suppliers and other people who are in the market, they are impressed with this. They like to do business with people who pay on 30 days on their invoices. They settle invoices promptly, without delay, and if you are in this position, you can negotiate much, much better terms and conditions for various invoices. And clearly this is demonstrated by our results on the OpEx and on the management fees, of course.

So in this figure that we have, we have included all the cost except the financial costs. So we have operating expenses and on top we have the G&A expenses. We have two parts. One is the public Company expenses and the other is the management fee, showing -- we do that so you can monitor more closely all our expenses except the financials. And you can realize how competitive we are and how can we create value for our shareholders.

Okay. Thank you very much. I will turn it over.

Greg Lewis, Credit Suisse.

I don't know who to direct this question to -- maybe Polys, maybe Loukas, maybe Konstantinos. When I think about Slide 20, and you outline your total liquidity -- it looks like there is around $54 million in cash. I guess about $4 million of that is restricted. When we think about a minimum cash balance per vessel, as your fleet grows, is there a number that we should think about for every vessel in the fleet? There is a minimum cash balance requirement for each of those vessels?

Look, if we have low running expenses, and if we have low financing expenses, as we demonstrate on the presentation on Page 19, and you calculate that our loans are mostly below [1.35%] spread. And our debt covenants are very comfortable and have been changed last year, when there was a collapse of asset prices, without cost to the Company, just by doing the various prepayments.

I think that we are very comfortable on the amount of money that we need to keep on the side vessel to meet our obligations. And you will see also that because we have new type of vessels, even in today's spot market, which is maybe around $7,500, $8,000 a day or thereabouts. We are still fixing our ships at $9,500 to $10,000 per day in the spot market. So we are doing a little bit better than -- around 16% better than the BPI on what we are doing. So I think this amount to keep on the side investing is not so huge.

Okay. And then I know previously you guys talked about newbuilding prices in Japan coming down and potentially providing more opportunities on the newbuilding side. Have we seen any deterioration in newbuild prices at Japanese yards just given the strength in the yen lately?

I don't think that they are going to do any lower than this price. And to be honest with you, I don't think they would really pick this price.

On the other hand, I don't expect them to be able to raise their prices in the market because of the general lower capacity of the excess capacity of the shipbuilding market. So yes, if you are an existing client, you can order at attractive prices, but I would be very, very much surprised if high-spec Japanese Panamaxes order below this price. I would be very much surprised.

Okay, guys. Thank you very much for the time.

Thank you.

Fotis Giannakoulis, Morgan Stanley.

I would like to ask about -- also about the three Capes. And it seems they have very long-term charters at very, very high rates compared to where the spot market is. Can you please explain to us about the counterparty risk on these charters? How solid do you think that these charters are?

Well, the one counterparty with the -- on the one Cape is bigger still, [a million to one]. If it stops performing, then it will be a big story in the news.

The other one, the other charter is bigger coal power -- one of the biggest coal power producers of India, who just constructed a $5 billion ultra-mega-power plant in India, and who fixed a ship for 20 years to carry coal into that installation. So we don't expect either from him any bad news.

The third is a big shipping company which owns ships as well of more than 100 years tradition, based in France. And they are performing very, very correctly over the decades, without any hint of any problems, etc.

So we are feeling very comfortable with all these three charters. And I mean, they are performing in this market, so we expect them to be correct on their obligations.

Thank you for the good answer. I also want to ask about the farming of the two new buildings. First of all, what are the payment terms that you have managed to get for these newbuildings? What is the percent of the payment costs will be at the end, upon delivery? And how are you planning to finance these two vessels?

I think they are very soft terms. On delivery I think it is around 70%. And financing, more than likely we will do some financing, but after delivery. Before delivery we don't want to raise any finance on these vessels. I think the Company will have sufficient cash from operations in the system.

Even the $33 million we have been collecting in the last months out of the early deliveries pays for a good portion for these two orders. I don't think that we will have any problem to raise after delivery around $[60] million debt on those vessels.

You know, it is something that is still far away, and its delivery is towards the end of 2014, beginning of 2015. So there is plenty of time to deal with them in the future.

And on the prepayment of the charters that you have agreed, what is the amount that you are expecting to get right now?

We will get $7.7 million; we will receive the $10 million, the $10.1 million in the first quarter. So including the vessels we agreed to be delivered now in the second quarter, we will receive another $7.7 million.

So it will be a total of -- on top of this figure that you see here, the $162.5 million of liquidity, you should be adding the $7.7 million to be received in the second quarter. Again, remember that these are compensation for charters that they would anyway end by the end of this year. So they did have that long remaining of the charter left.

Yes.

So this $7.7 million is not included in this figure. So if you put it there it goes on part with the CapEx of the existing six ships we had as of the end of last quarter.

And going a little bit deeper on your liquidity, you mentioned earlier that you do not -- you're not hungry to buy many more vessels. But given the current delivery schedule for your newbuildings and the remaining CapEx, how much do you think of this liquidity is left for additional acquisitions?

We have the goals. We are not going to overdo it, because we prefer to wait to see the real recovery, and then be moving more aggressively when we know about the recovery has started. So we don't plan to do many more things.

Now if over the summer we see that there's another drop in the market, and by September time, which traditionally we believe is the best time to get second-hand ships, September; or after the holidays, when people -- they are not so eager, and the competition is much less. If the trade market is not good in August or September, and prices are relaxed a little bit from the current levels, maybe we will step in for one or two more ships.

But it won't be something big. We have the growth, and we have -- from 26 vessels now will be 34. So we are not under pressure that we have to grow the Company that fast.

Also, as you have noticed, until now we are not trying to advertise our moves first. We prefer to move and then to share what we did. So let's say the last period -- in total we contracted and took delivery of, let's say, five vessels, which is an important figure from, let's say, the previous period. Quietly. And so we are doing always whatever we have to do very quietly and when we feel that it is the right moment. So you should not expect from us any plan of what we will do in the future.

Yes, I fully understand. I'm just trying to understand on a theoretical basis compared to -- you have a total liquidity of $162.5 million. A big part of that will go to fund your newbuildings. You already ordered two newbuildings since the end of the last quarter. Is there any of liquidity left for more vessels apart from what you already have?

Look, the important thing to notice is that, for example, for each vessel we acquire, we always have the ability to take a debt on it. So we can do -- I mean, we have the flexibility to do whatever we want. So this one, $162.5 million, which is our liquidity status right now, does not include our cash flow from operations.

And you know we are a profitable Company. We create substantial profits. Most of the other companies are not in our -- in red. We have substantial profits. We don't have problems with covenants.

And this $162.5 million, although we are sure that it can be used for -- to cover capital expenses requirements, it can be used for any purpose, including the acquisitions. But the question to ask is whether we need to do any? What is the timing to do something additional? And as Polys said before, it requires, let's say, a focus on where and what we do in the future.

Yes, but give me the opportunity to ask my next question. But before that, can you remind us how many vessels right now you have debt-free? And how many vessels with your current liquidity you are expecting to have debt-free that could be levered up?

We don't have vessels that -- we have some vessels that are debt-free, but we use them sometimes as collaterals for other loans we have. So what we have, what we will have debt-free, what we have demonstrated on Page 20 is that the six newbuildings -- okay, before 2012 to now -- of the six new buildings, that they are coming, and we need $171 million to pay to the yards, and then CapEx.

$171 million are already available in the Company. So these six new buildings will be debt-free, can remain debt-free, and be used for extra raising of debt for whatever it is the Company may require. So if we assume that of these six newbuildings, five are Panamaxes and one is a long-term charter Capesize, this could easily lift around $100 million of debt [coproductive].

So the liquidity from debt on those six vessels alone could be $100 million, just by putting $50 million debt on the newbuilding Panamaxes and maybe $25 million, or $30 million, $35 million, let's say, debt on the long-term charter Capesize. So we are clearly leveraging the Company. We'll have another $100 million there to be used as equity for new acquisitions.

But again, we say that we don't want to overdo it. We have the ships; we have the open days to take -- let the market recover, and we know what we will do. Let it recover first.

Thank you for your answer. And regarding the market, when do you see them in the market recovering? Can you give us your outlook for 2014? And perhaps 2015, if that's possible.

Yes, I think that the supply story -- that was a problem. The worst part, it was last year. This year it's getting a lot better, and 2014 will be very good. So together with the slow streaming that every charter is insisting upon, I think that the recovery could be as early as the first half of next year.

But could be second half of next year. Nobody knows if it would happen immediately; the supply will stop or coming into the market. The good thing is that we don't see activity on our sector. We see activity on Ultramaxes; we see activity on Capes. But on our sector we don't see activity. The Chinese yards, they are not keen on Kamsarmax or Panamax newbuildings.

So this is good thing. The bigger yards, they want Capes. And the smaller ones, they want Ultramaxes. So I am optimistic for next year that we will start seeing a recovery.

Now if it is a full-fledged recovery will depend also on the economies, when Europe will start coming out of recession and negative growth. And some time next year, let's say, middle of next year -- probably a little bit later -- between middle and second half of next year, we will see that will be a meaningful recovery.

And given the fact that the current order book for Panamaxes is quite heavy, and most of the analysts are viewing as a main driver for the recovery the iron ore market, do you fear that the recovery for the Panamax vessels might take longer compared to other sectors?

No, I don't think that the order book is anywhere near what the data shows. This last year it was only 65% delivered of what they were expecting to be delivered. And if you follow the sequence of this -- of the first four months of this year's delivery, I think it is at similar levels.

There is a lot of ships that have been canceled, or they have never moved further than the [LOI] stage. So I don't think that the order book is that much as -- [someone says] why put in their midst? They have many orders that have been struck out of those orders.

As I said, we expect that our market, also -- the demand is steady and the [tomine] is increasing. And we think that sometime, around this time next year, we should see a meaningful recovery. It may not be to $20,000 a day, but your market goes to $12,000 or $14,000 a day, people will start being more optimistic.

One important feature of our position policy -- actually, two features is that the vessels which were bought recently from the second-hand market at very low prices, there is always an opportunity to be sold later on when the market improves.

And the second part is that the newbuild vessels, which are eco-type vessels, and these vessels are very efficient and shallow-drafted, can replace, let's say, our older vessels in our fleet when they come to our books. Which means that basically we are working very consciously, first of all, as to opportunistically tap the second-hand market whenever we feel it is necessary, and also to have a very good fleet for the years after 2015.

The Company traditionally has been -- while the prices recover -- has been trying to sell the ships over 10 years old in order to keep low operation, low running costs. So it is to be expected.

If all three built ships which are worth today around $16 million, which we bought at $10.8 million to $14.2 million in the second half of last year, if this $16 million -- the market recovers next year, and it could easily go back over $20 million. Because you should remember that this time last year, before the summer of last year, they were worth $20 million.

So if the market recovers to point of $10,000 a day, easily the ships will go to $20 million. So a private company could well move to sell those vessels.

And already we will have in the replacement for those vessels joining the fleet at the cost of $28 million. And will be brand-news ships or new technology. So with $8 million you will be replacing ships of 10, 11 years old with old designs, and more consumption, and things like that. So part of the growth strategy is also to be used as a replacement for our fleet that is around 10 years old -- some of the fleet that is around 10 years old at the moment.

Thank you very much for your time.

(Operator Instructions). David Beard, IBERIA.

Good morning.

Can you repeat your name? Because I didn't catch it.

Sure. This is David Beard with IBERIA. Maybe you could talk in general about how charter negotiations are progressing with eco-ships. My question specifically is what percent of fuel savings can accrue to the shipowners versus having to entice charterers to, quote/unquote, bet on a new technology?

Look, the eco-ships is ships that they will give you the maximum benefit in a good market, not in a low market. Because in the low market is everybody's asking for that slow speeds. And even the old ships can do reasonable consumptions at low speeds.

So of course, some of the owners of the older ships, they take also some risk in doing even lower speeds than recommended by the engine manufacturers in their effort to keep their ships and the charterers happy in order to find employment, sometimes risking integral safety of the engine and risking also more breakdowns. But people, they tend to on old ships take this risk, because this gives them substantial savings.

So the eco-ship is not really -- is not going to give you the big benefit in the low market. But it will give you a benefit, a very big benefit when the market starts recovering, because it will be the ship that on better speed could be operated very, very economically.

So while the speed is reducing in the low market, also the benefit of the eco-design is reducing. Of course, it is there, but it is not as big as it is on 13 or 14 knots when you run them down to 11 knots, because as I said, the old ships as well really reduce their consumption as well on those rpm.

That is why there is this confusion in the market -- I mean, who is in favor of the eco-ship; who is in favor of the old type. In today's market the difference is -- there is some difference, but it's not huge.

Okay, great. That's very helpful. Thank you.

(Operator Instructions). Thank you. I'd now like to hand the conference back to the speakers today for any closing comments. Thank you.

So, thank you very much for attending this conference call, and we are looking forward to have the same call in the next quarter. Thank you to all.

Thank you, ladies and gentlemen. That does conclude our conference for today. Thank you all for participating. You may all disconnect.