Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Safe Bulkers Inc (SB, Financial) operated within a more robust market in Q1 2024 compared to the previous year.
- The company ordered one additional Phase 3 new build and divested three older vessels, modernizing its fleet.
- Executed the prepurchase of 4.9 million shares of common stock and declared a dividend of $0.05 per share.
- Maintained a comfortable leverage of 34% and strong liquidity and capital resources of approximately $215 million.
- Secured long-term charters at favorable rates, providing cash flow visibility and stability.
Negative Points
- Increased operating expenses and higher interest expenses due to rising interest rates.
- Global economic uncertainties, including geopolitical tensions and inflation, pose risks to market stability.
- The dry bulk order book remains at single-digit percentages, indicating limited fleet expansion opportunities.
- Challenges in securing newbuild vessels due to shipyard schedules extending to 2027-2028.
- Operating expenses increased in Q1 2024 due to substantial supplies of spares for dry dockings.
Q & A Highlights
Q: Could you elaborate on the high rate achieved for the Maria's four- to five-year charter?
A: (Polys Hajioannou, CEO) The Maria was initially on an index-linked charter, and as the market rose in Q1, the charterer opted for a long-term fixed rate. The vessel's Japanese build and environmental upgrades contributed to securing a rate of $25,950 per day for four years, which is above the current market rate.
Q: Is there sufficient liquidity in the term market to secure similar long-term charters?
A: (Polys Hajioannou, CEO) Such opportunities arise in a hot market. If the spot market is high, charters can cover their exposure in the futures market, allowing for long-term deals. Most of our Capesizes are on period charters, and we remain vigilant to capitalize on such opportunities.
Q: What are your thoughts on the buyback program and future capital allocation?
A: (Loukas Barmparis, President) We prioritize fleet renewal to stay competitive under new regulations. Although the buyback program is nearly exhausted, we believe our stock is undervalued. Future buybacks or new programs will depend on capital allocation decisions, including potential newbuild acquisitions.
Q: Can you provide details on the average price paid per share in the buyback and post-quarter spending?
A: (Loukas Barmparis, President) We don't disclose exact prices, but the buyback was within the market range of $4 to $5 per share. We balance share repurchases with opportunities for fleet renewal, especially given rising secondhand vessel prices and limited newbuild slots.
Q: What is your forecast for operating expenses for the remainder of the year?
A: (Loukas Barmparis, President) Operating expenses typically increase in Q1 due to substantial supplies for dry dockings. However, we do not expect a significant annual increase in operating expenses.
Q: How do you view the current market conditions and their impact on your strategy?
A: (Polys Hajioannou, CEO) We see rising secondhand vessel prices and a tighter market due to geopolitical tensions and regulatory changes. Our strategy includes maintaining liquidity for opportunistic fleet renewal and ensuring our vessels meet new environmental standards.
Q: What is the company's approach to managing leverage and liquidity?
A: (Konstantinos Adamopoulos, CFO) We maintain a comfortable leverage of 34% and strong liquidity of approximately $215 million. This, along with contracted revenues, provides flexibility for capital allocation, including potential newbuild acquisitions and shareholder rewards.
Q: Can you comment on the dividend policy and its sustainability?
A: (Loukas Barmparis, President) We aim to reward shareholders with a steady dividend, currently at $0.05 per share. We believe our stock price will increase as new regulations impact the market, supporting our dividend policy.
Q: How does the company plan to navigate the challenges posed by new environmental regulations?
A: (Loukas Barmparis, President) We focus on fleet renewal and environmental upgrades to ensure compliance with new regulations. Our strategy includes acquiring newbuilds and divesting older vessels to maintain a competitive and efficient fleet.
Q: What are the key factors driving your optimistic outlook for the dry bulk market?
A: (Loukas Barmparis, President) We expect a strong dry bulk market in 2024 due to increased cargo volumes, particularly in the Capesize segment, and a tightening supply-demand balance. Geopolitical tensions and rerouting away from conflict zones also bolster demand.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
