Safe Bulkers Inc (SB) 2018 Q1 法說會逐字稿

Thank you for standing by, ladies and gentlemen. Welcome to the Safe Bulkers conference call to discuss the first quarter 2018 financial results. We have with us from Safe Bulkers, Chairman and Chief Executive Officer, Polys Hajioannou; we have President, Dr. Loukas Barmparis; Chief Financial Officer, Konstantinos Adamopoulos; and Chief Operating Officer, Ioannis Foteinos. (Operator Instructions) Following this conference call, if you need any further information on the conference call or on the presentation, please contact Capital Link at (212) 661-7566. I must advise you that the conference is being recorded today. And 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, 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. And 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 obligation or undertaking to repeat -- 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 changes in events, conditions or circumstances on which any statement is based.

And I now pass the floor to Dr. Barmparis. Please go ahead, sir.

Good morning. I'm Loukas Barmparis, President of Safe Bulkers. Welcome to our conference call and webcast to discuss the financial results for the first quarter of 2018. The first quarter of 2018 was a profitable quarter. We continue our efforts to improve our capital structure. On February 20, we redeemed about 9.5 million of preferred B, reducing preferred dividend outflows. We will be focusing on the following quarters to deleverage, further reduce our financing costs and lower our break-even point.

Let's now continue with the developments in our industry. Turning to Slide 3. We demonstrate the overall improved charter market in 2018 compared to 2017. Charter market for Panamaxes has overperformed throughout 2018 with a year-to-date average improved by about 26%. For Capes, the market has proved to be much more volatile but still is overperforming to 2017. The year-to-date for Capes reflects an increase of about 11%. The improvement in both sectors comes despite the developments in the global trade and the fears of a trade war, which had been a headwind for the market growth. This news for putting tariffs on hold is expected to restore the normal flow of trade.

In the next Slide 4, we present the supply outlook for Panamax, Kamsarmax, and Post-Panamax segments. In this segment, the total fleet consist of about 2,507 vessels with the total current order book is about 246 vessels or 9.7% of the total fleet, evenly spread until 2020. We also note that there are about 468 vessels, which are older than 15 years old.

Despite the notable increase of contracting during Q4 2017 and the beginning of 2018, newbuilding activity has now come to an end. We think that the uncertainty in relation to trade war, increasing newbuild prices, lack of availability in (inaudible) for early years and financial regions will remain -- will maintain a reasonable order book for the near future, giving an opportunity to the market.

Take into account the upcoming regulations for ballast water treatment and NOx and SOx requirements, which are to be enforced until 2020, scrapping activity might accelerate in the years to come.

Let me remind you that recently we have entered an agreement for all our vessels to install ballast water treatment system of full flow electrolysis, which has received the United States Coast Guard approval, unlike several peers who have systems without yet the relevant approval.

In Slide 5, we present a technical analysis with a comparison of the Panamax charter market and the Baltic sales and purchase assessment for 5-year-old Panamax vessels. As shown in the graph, there is a constant differential between the asset values and the moving average of the charter market. This pattern is distorted. Sustainability in the charter market and restoration of the sentiment is expected to push asset values higher. The key takeaways are presented in Slide 6. Charter market, especially for Panamax, is constantly overperformed in 2017. Trade war fears had been a headwind for the market in Q1 2018, although uncertainty helps the rationalization of order. A recent news of putting tariffs on hold is expecting to restore trade flow. Increased newbuilding activities of Q4 2017 and early 2018 has now come to an end.

Single digit order book is evenly spread until 2020. Sustainability in the charter market is expected to gradually push asset values higher. Future additional newbuild orders remain always a risk. New regulations in relation to shipping are expected to slow down the entire fleet and push scrapping higher. We believe that overall the prospects for global growth remain positive.

In Slide 7, we present some financial data on a quarterly basis. Our quarterly revenues and our adjusted EBITDA have been constantly increasing, thus improving our overall financial strength. This fact is also demonstrated in Slide 8, where we present our adjusted EBITDA on a per vessel basis. Our strategy of maintaining low-cost structure provides us with a very distinct advantage of making profits earlier than our peers.

We present in Slide 9, our daily free cash flow waterfall for the first quarter of 2018. During 2018, we continue to be profitable, maintaining one of the most competitive break-even points in the industry. We earn about $12,000 and spend about $9,500 per day per vessel for all our outflows, including operating, G&A, interest, preferred dividend and principal repayments. Our daily free cash flow stood over $2,600 per day per vessel. In June 2018, we will take delivery of MV Pedhoulas (inaudible) our last Kamsarmax class Japanese deep vessel, which are shown in Slide 10, will be financed from cash on hand and mainly from issuance of preferred equity to an affiliated investor as we have already disclosed previously.

Moving on to Slide 11, we focus on increasing our liquidity and use it to leverage our company. In terms of use of liquidity during 2018, we have redeemed all the remaining outstanding Series B preferred shares on February 20, 2018, and thus reduced our -- sorry, preferred by about $9.5 million and the related outflow on an annual basis of about $0.8 million. We will continue to use our cash from operations to further improve our capital structure, deleverage and create increased value for our common shareholders.

Now our CFO, Konstantinos Adamopoulos, will present our quarterly financials.

Thank you, Loukas, and good morning to all. Let's now move to Slide 12 with our quarterly financial highlights for the first quarter of 2018 compared to the same period of 2017.

Net revenue increased by 31% to $43.5 million from $33.3 million, reflecting the increase in charter rates. Our time charter equivalent per vessel increased by 27% to $11,999 per day from $9,417 per day during the same period in 2017.

Daily vessel running expenses increased by 15% to $4,132 compared to $3,596 for the same period in 2017.

Daily general and administrative expenses, which include daily management fees payable to our managers and daily administration costs increased by 2% to $1,184 for the first quarter of 2018 compared to $1,056 (sic) [$1,156]. Our adjusted EBITDA for the first quarter of 2018 was $23.2 million compared to $15.2 million last year. Adjusted earnings per share for the first quarter of 2018 was $0.03, calculated on a weighted average number of 101.5 million shares as compared to adjusted loss per share of $0.07 during the same period in 2017, calculated on a weighted average number of 99.3 million shares.

In Slide 13, we present our quarterly fleet data and average daily indicators compared to the same periods of last year. Liquidity in a cyclical industry like ours is key and in the next slide, I will show you what we have achieved in this respect.

In Slide 14, the dark blue bars show that the effect we have achieved by our cost-cutting efforts were sustainable during the last 2 years. The light blue bars represent our time charter equivalent and show our constant improvement from the lows of early 2016. We note that our OpEx numbers include all items like dry-docking and initial supplies. At this point, we would like to emphasize that we have positive operational cash flows of $20 million for the first quarter of 2018 as compared to $10.2 million for the same period in 2017.

Overall, we believe that the company with ample liquidity, positive cash operations and controlled outflows for investing in financing activities is well positioned to take advantage of improved target market conditions. Thank you very much. And now we're ready to take your questions.

(Operator Instructions) So your first question from Evercore comes from the line of Jon Chappell.

Two questions for you today, Loukas. First, on the theme of deleveraging, which you mentioned in your comments a couple of times and in the press release. Just as we think of prioritization, you were able to redeem all the Series B shares, which obviously helped your cost to capital. When you think of deleveraging, are the Series C and Series D preferred high on your list? Or are you just thinking about repayment of bank debt?

Okay. Look, we -- what we -- we have an order and we follow this order from expensive -- from the most expensive financial outflows. So I think that at this stage we have other financial outflows, still which need to be refinanced before the preferreds.

Okay, understood. And then second question, multiparts, but hopefully quick. The ballast water treatment that you mentioned and the coast guard approval, I think, which is very important. Can you give us a feeling for the timing? So what's the schedule as far as number of ships per year? What's the off-hire time associated with each ship in the fitting of its ballast water treatment system, the cost per ship and then will that cost be expensed or amortized?

Yes, of course, the cost will be amortized. I think this is a suitable treatment for accounting when you do an upgrade of a vessel. The second point is that I need to draw a line and put to you -- to what -- to see a little bit (inaudible) most of the companies which have already installed in their newbuildings, ballast water treatment plants, and as we know most of the ships are produced in China or Japan, yet the manufacturers of these systems and sometimes they're quite far away, they have not get the approval of the U.S. Coast Guard. So to claim that you have just installed ballast water treatment in your newbuilds doesn't say anything. The issue is that whether this system is approved not only by IMO because most of the systems have been approved by IMO, but also from U.S. Coast Guard, in which case if you don't have such approval, you will not be able to visit the United States from certain period and onwards. Now let me tell you couple of things about timing. The timing from U.S. Coast Guard was September 2016, if I recall well. And in the next dry-docking, all ships should -- they should install ballast water treatment. Presently -- at the initial stage, 2016, 2017, U.S. Coast Guard gave deferrals to many ships for future years, including -- the reason basically was that the -- at that stage, they hadn't approved a substantial number of systems to be installed. These have stopped last year and from that point and on all the vessels that do dry-docking need to do -- to get -- to install the ballast water treatment. So we believe that ships that are dry-docked in 2019, they need to install such system because we have not seen too many deferrals for 2019. This would cause a problem in the market because in the shipyards because there will be so many ships to be -- so many systems to be installed. The second point is that the downtime will be substantial as vessels need to install these systems. The cost -- okay, if you ask me about the cost, I tend to believe that a normal duration, depending on the system, is between 2 and 4 weeks' time in total, including the dry-docking, based on the shipyard, based on the work that the vessel needs to do. The last question about the cost. This should be between -- this should be about $500,000 to $700,000 for most of the systems, depending also on the technology. So I think that I answered most of the questions. If there is anything else?

Most of them. Very thorough. And just the final thing was just your schedule on the 40 ships in your fleet. How should we think about '19, '20, '21 dry-docks associated with this?

What was the question?

For your fleet, the Safe Bulkers fleet, how many ships will be undergoing this ballast water treatment in 2018, how many in 2019, '20, '21?

Look, already, we, I mean, now in -- beginning of June, we finished with installation of 3 ships, and I think this year we have something like 4 to go. So you may assume that about 7 to 8 ships annually will be installing ballast water treatment as we move from 2018 until 2023.

Now your next question from Citi comes from the line of Chris Wetherbee.

I wanted to start on the cost side. So specifically around daily OpEx, which was up 15% in the quarter. I see the run rate from last year, I guess, 1Q was probably the low watermark. So is this type of increase indicative more of the tougher comps that you see in the first quarter and then we'd expect a year-over-year growth rate and some of the cost line items to sort of normalize or at least slow down? Or we -- are we sort of in a process of a step up? What's causing the inflation there? I just want to make sure I understand what the go-forward sort of view is for daily OpEx?

Yes. Look, there are several parameters that play a role in the costs. First off -- one is the number of dry dockings per quarter or if there are certain spares that have been ordered that quarter. So we need to see, let's say, the annualized figure more in order to understand the level of inflation. I think that there is a level of inflation in the costs, which I don't believe -- I mean, it will -- our expectation is that our cost will be at that rate that we see today.

Okay. So $5,300 on an all-in, including OpEx and G&A, is probably the right number to be thinking about as we move forward through '18?

Yes. It should be about the right number. Of course, it also -- it's an issue of dollar to euro exchange where we do -- from where do we buy certain spares, what are our costs. But I mean, this is a reasonable figure to consider.

Okay. And just again I apologize, I want to make sure I just completely understand, a lot of moving parts in there, but it sounds like there's some inflationary aspect. Is that on the crewing side or is it some other part where we're seeing inflation on the cost side?

Yes. Look, Chris, the cost is affected to a certain extent from the increase of oil prices because you see cost of lubricants, cost of paints, cost of certain supplies going higher. In 2016 and 2017, we enjoyed the benefit of -- as far as the OpEx were concerned, the benefit of the low oil price, which of course was $30, $40, and now it's almost $80. So a good element is coming from there. We don't see yet inflation on crew wages, a big inflation. It's only a minor one. So mostly, it's associated with new regulations. It's associated with spare parts for dry-dockings. It's associated with increased cost of loops and paints and other things that contain oil.

Okay. Okay, that's helpful. I appreciate that color. And then I just wanted to follow up. I'm looking at Slide 5 in your deck, where you run through the 5-year asset values versus I guess, short-term and charter rates for Panamaxes. And I guess, two questions. Number one, should the relationship be -- is it -- you're suggesting the relationship is with the shorter rates or the time charter rates and asset values? And then the second question would be, assuming that there will be a gradual uplift in prices, asset prices, how are you guys going to leverage that? How do you prioritize potentially getting in the market whether it be on the secondhand side or newbuilding side to kind of take advantage of potential asset price increases and how do you balance that versus deleveraging?

Yes. We think that asset prices in general, they're under -- still undervalued -- price of ships are undervalued. You can clearly see that in 2014, beginning of 2014, we had about the same 1-year period rates, thus the prices of 5-year-old Panamaxes were around $7 million higher. Of course, at that time, there was a lot of confidence in the market and a lot of expectations, but as oil prices were heading to new highs, also ship values will follow, freight market will follow and asset values will continue to rise. At the moment, the market, due to various external factors, is not having the same confidence yet. When this confidence is built over the next few quarters, we believe that asset prices will start rising at least by another 20% to 25%.

Okay. And how are you guys going to get involved in that? How do you want to take advantage of that? Is there other purchases that will be made?

Look, we monitor secondhand opportunities. We are not going to do newbuildings, as we said. We need to see huge increase in the profit, big increase in the profits before we consider newbuilds, and also newbuilds, we don't find yet the yards in a mood that they are very cooperative with -- as far as the new regulations are concerned. So we are not going to bother with ordering ships that are out of date. Most of the ships ordered in 2017 were with the past regulation, so the Tier 2 engines and not compatible with certain regulations. So we believe that our company will focus when we feel that there is a good opportunistic acquisition in the modern secondhand market.

Your next question from Stifel comes from the line of Ben Nolan.

And just -- first, I wanted to start with a little bit of market-related color. And I appreciate that you guys are really in the time charter market. But we'd begun to see some signs of strength even a month ago, and then lately it's kind of cooled off, and that's been the trend as of late, is the market rises a bit and then it kind of loses some steam. Just curious, what's -- if you can sort of -- if there is anything that you can identify what's causing this sort of latest round of softness? And ultimately, how close do you think we are from breaking out from that sort of up and down trend to get to something that's a little bit more sustainably higher?

Yes. Despite the first quarter and the fourth quarter of '17, first quarter of '18 were profitable quarters. Overall, the development in the world trade was a disappointment and the tariffs that were imposed by the U.S. and the threat of an escalation had a heavy toll in this confidence about world trade and economic activity. We believe that as the risk of a trade war subsides, we will see the prospects of second half improve. And considering that second half, usually 9 times out of 10, is a strong half of the year when all the biggest move on the imports are done by the major economies, we believe that the market should start outperforming in the next few months, maybe starting from June or July or at the latest, August or September. And there is a prospect that the market develops into very positive territory in 2019 and 2020. As Loukas mentioned before, new regulations that are coming in 2020 are going to slow down the entire fleet because the entire fleet has to shift into low-sulfur MGO, which is costing -- will be costing $600, $700 a tonne. Whilst the very few owners that would opt for the installation of scrubbers, they will be out of hire for a long period of time competing to install the scrubbers in yards, mainly in China. So we're becoming more optimistic for '19 and '20.

Okay. Well, to that end, since you brought it up, I know that you guys have -- I believe that you haven't really taken any steps with respect to scrubbers thus far. Has there been any developments there so far as you're concerned or any thoughts about actually retrofitting any of your assets?

Yes. We are examining all our options, and we are trying to see where the best options are. As you remember, our type of vessels are not the biggest ones, are not the Capesize. We have very few Capesize in the fleet where it's more attractive to install scrubbers, but we're in line with the developments with know-how of what needs to be done if the Board takes a decision to go ahead with a project. And we follow the developments that -- we may move at a later stage. At this point, we just monitor the technology development.

Okay. And I suppose that if you were to do something, it would be around special survey dates, theoretically. Any color or sort of what -- as to sort of what that -- your schedule or special surveys and dry-docking looks like over the next 18 months or so?

Look, it's evenly spread, it's 40 ships. The cycle is 5 years. So we'll use the average of 8 ships a year. You're about right, in 1 year maybe 9 and the next 7, but not huge difference from this.

Okay. No, that's helpful. I appreciate it.

If I may add something, it's not straightforward such a decision for a Panamax or Kamsarmax special. And each company will do its own assessment. It's not straightforward because you have, let's say, the downtime, you have, let's say, substantial cost and you take the risk of investment in the hope that the margin will be substantially larger. On the other hand, the (inaudible) which is just the usual, it's a low-sulfur fuel oil, which we believe it will exist and it will be widespread, will be also solution for most of the vessels. And what is our first assessment is that this margin will quickly deteriorate. So mainly, the MGO and the low-sulfur fuels will substitute HFO in the use. And only a few vessels will be installed with scrubber, especially the larger vessels, like let's say, tankers and containers and only a few drybulk vessels. But this is a question which is -- each company will do on its own merits and on its own assessment.

Now your next question from Maxim Group comes from the line of James Jang.

So for the rest of the year, do you expect to see any sizable premiums for the Post-Panamax and the Kamsarmax versus the Panamax vessels?

The Post-Panamax are greatly affected by the move of the Capesize. When Capesize market is performing, which at the moment it is not, Post-Panamaxes are getting a premium. Now if in the second half of the year, we additionally have a push of Capesize rates. If this happens this year as well, we expect Post-Panamax rates to perform in a similar fashion. So it's all down to the Capesize market what the Post-Panamax can achieve better than the Panamaxes. Generally, the Kamsarmaxes, they earn a premium over the Panamax in the tune of 5% on the charter rate.

Okay. And going on to the macro side, it seems there's a low demand for thermal coal in India right now and there's also high stockpiles of coal in Southern China and Eastern China. How do you see the coal market playing out in terms of rates for the rest of the year? Do you think there's going to be a drag on the sector?

We see enough movement for -- to India. We are not disappointed by the movement into India. What we are disappointed in the last 2 month is the development of the east coast South America market, which is affected by certain strikes in Brazil and also a big problem with the rains in Argentina. So together with the ban of the sorghum cargoes from U.S. Gulf that we had in April, all this resulted in a very low Atlantic market. So at the moment, I mean, the ships are performing reasonably well in the Pacific and terribly in the Atlantic. And this was not in the scenario at the start of the year. Usually, Atlantic is very strong at this time of the year, between April and June, when is the export season of the east coast of South America. We are not seeing it at the moment. We're seeing problems there, and this is keeping a -- you need both bases to perform in order for the market to move higher.

So do you have any more insights into the Brazilian truckers strike? I mean, have you heard any news of that being resolved shortly?

It's still going on from what we know. We're expecting that it will take a few more days or a week or 2 weeks to be clear when this will end. It's a fact that is really beyond shipowner's visibility, what's happening in Brazil.

Okay. Got you. So my next question is, asset prices, it was on Slide 8, I believe, Slide 5, you show that the asset prices were lagging behind '14. Pretty much '14, we had the same sentiment, positive growth outlook for the drybulk sector. So do you have an appetite for the vessel acquisition and would you look for larger en bloc fleet purchases?

Look, I have been -- the bigger acquisitions and large acquisitions, you need to have more meaningful profits. We don't want to increase debt and buy ships from increased debt. So it will all depend in the market. If we start seeing that we have start fixing ships for 1 or 2 years at more profitable rates, this will give us a visibility of earnings and maybe we'll go and buy some more ships. So I think that prices overall are at attractive levels at the moment, at attractive levels. You need as a company to see the whole -- the big picture and not to add leverage before you get good rates in the freight market. At the moment, the rates in the freight market are profitable, but not enough to generate surplus liquidity for further expansion. Maybe we won't see it, but I say 1 or 2 ships here and there, but that's the best policy for the time being.

Okay. And my final question is on the capes that you have. What is the long-term plan for those? Do you plan to keep them once they come off charter? Or would you market them and focus purely on the Panamax sector?

No, we will keep them. Of course, we will keep them. But if they have around 4 years on the earliest one and the 6 -- the other one, and 14 years the last one. So it's a very long period of time to discuss what we do with those. But I think that the target is to keep those ships and at a certain point, possibly to replace them. But so long their charters are going, we stay there. And -- to say what we will do in 2022 or 2025 or 2031, it's too early.

2031, that's too early? Okay. I just have -- yes, one last question. And so the Koulitsa was on charter until April 2019 previously, correct?

Correct. Yes, yes.

So what happened? Is that off charter now?

Yes, one spot, it is well spotted; there are 3 ships you don't see the charter rates. They are -- it's the ships that they're in dry dock and they're parsing their (inaudible) right now. And they're installing also this system that Loukas just mentioned, the ballast water treatment. So what we...

Okay. And then once they come out, they'll be rechartered, right?

Yes, of course, they will be rechartered as they came down. What we did on the Koulitsa -- with the Koulitsa, we had the year of -- an extra year to perform on -- with the charterer. We substitute this vessel with another vessel we have, the Katerina, you may see that was opening up in order not to disrupt charterer service because we mind a lot the relationship we have with our charterers. And because the ship was going in dry-docking, we couldn't say if she will spend in dry-dock 1 week, 2 weeks, or 3 weeks or 4 weeks. We couldn't be precise with the new installation of equipment on board, we decided with this charters to switch their charter to the Katerina, the sister ship, and have the Koulitsa open. So rightly you spotted that she was fixed before -- until 2019 and this charter was transferred to another ship, and naturally this is the beauty of having close relations and the beauty of having sister ships.

Okay. One last question. So you had a number of charters roll off and you were able to recharter at higher rates. Are you looking -- like what are you looking at in terms of rate increases for this year because there's a number that are up significantly and there are some that are pretty much the same. Should we be looking at $11,000, $12,000 for recharters for the year or do you think that number could go higher as we move into the second half of the year?

Yes. The second half of the year, we expect to go higher. You see, sometimes, we have ships that we're able to charter them as high as $14,000 a day for a period of 6 months or for a year. It all depends when -- if the ship is very modern and when does the ship open, if it's a good period of time in the chartering market. I mean, in March, we would be able to fix ships at $14,500 for 1 year. In April, we could hardly find $12,500 for 1 year. So the market is very volatile. So when we are in about, let's say, a month or about 2 weeks' spell, we keep the ships in the spot market. We employ them at lower rates, maybe $12,000 or $12,500. When we have the opportunity and we have a good delivery position and the market is running, we may go for 1 year at $14,500 or 6 months at $14,000 plus, which are clearly profitable rates, and we've pursued this policy. We are very adaptable to what we fix with the ships, where we send the ships and how we play the commercial game. And it's my area, let's say, I wouldn't say of expertise, my area of interest. I'm doing this for 30 years, so we're playing out with positions and it is the only source of revenue. And you have many sources of spending the money and expenditure, but only one source of revenue. If the shipowner himself is not spending his time on that one, you cannot outperform the market.

Now your next question from Jefferies comes from the line of Randy Giveans.

A few quick questions. So given your stated strategy of kind of using cash from operations to delever the balance sheet. Are there some specific milestones you're hoping to reach with that, like specifically a goal net debt to cap or leverage ratio that you're pursuing to kind of be successful in delevering?

Look, what we want to achieve gradually is our leverage should be below 50%, this is the initial target. And the reason we are doing these moves is that we believe that when you work with your capital structure in a good market -- I mean, in a fairly good market, this is an investment for the future. The reason is that we have already done a number of actions, including acquisition of sale and leaseback vessels last year and preferreds, which helped the reduction -- the substantial reduction of cash breakeven. This is -- nobody pays attention to the good market -- when the market is good to such moves. But the return is very good and when the market is bad, this helps the company to be prepared in any type of charter market. So we're doing our homework now that the market is good to achieve the -- to bring the balance sheet in such a position that we would be able to withstand any future crisis. So we don't want to negotiate with banks. We don't want to do reverse fleets. We don't want to go to bankruptcy. We want to have the best balance sheet and this is our target, and we will continue to pursue it throughout this year. Of course, should the market continues to grow as we hope, the policy could change next year.

Okay. And then just noticing, so there was a pretty big impairment, $91 million in 4Q '17, nothing in 1Q '18. Do you think that 4Q '17 number kind of sets you kind of with current market prices and no more impairments expected the rest of this year?

Yes. I think this -- we are done with this aspect.

Okay. And then last question. So looking at your fleet charter coverage, you have then 58% of days chartered for the remainder of 2018. So is this a good mix for you? Or are you planning on increasing that and putting more of those spot vessels on charter here in the coming months?

Look, I mean, it's not a particular policy. It all depends on the charter rates. If the charter rates move to $16,000 or $17,000 a day, of course, we will charter out more percentages. But if the percentage -- if the market stays at $10,000 or $11,000, which is roughly around our breakeven levels, we will go on the spot -- we will stay in the spot market before we commit higher value. But we believe that second half of this year will be better than -- a lot better than the first half, and '19 will be better than '18 and '20 better than '19. This is our view of the market. This is how we read it. The fact that we have the trade war or the assumption we make, of course, is

(technical difficulty)

on this assumption, we expect that the next -- each of the next 2 or 3 years will be better than the previous one. This is our expectation. (inaudible) new regulations are in favor of this analysis.

Now your final question from Morgan Stanley comes from the line of Fotis Giannakoulis. Fotis, your line is open. Gentlemen, I think Fotis may have disconnected, I'm afraid. So if that's the case, there are no further questions.

(inaudible) Loukas will close.

So thank you very much for attending this conference call. And we'll be (inaudible) with you in the next quarter. Thank you to all, and have a nice day.

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