Costamare - Q1 2024

Transcript

Operator (participant)

Welcome to the Costamare Inc. conference call on the first quarter 2024 financial results. We have with us Mr. Gregory Zikos, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session, at which time if you wish to ask a question please press star star on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today, Friday, May 10th, 2024. We would like to remind you that this conference call contains forward-looking statements. Please take a moment to read slide two of the presentation which contains the forward-looking statements. I will now pass the floor to your speaker today, Mr. Zikos. Please go ahead, sir.

Gregory Zikos (CFO)

Thank you, and good morning, ladies and gentlemen. During the first quarter of the year, the company generated net income of about $94 million. As of quarter end, liquidity was close to $1.1 billion. In the containership sector, charter rates have seen significant improvement from the end of last year. Demolition has fallen to levels below what was experienced during the first quarter of 2023. Although cargo volumes have generally improved, the disruption in Red Sea is the main reason for the improved charter market. We have proactively secured employment for 97% and 80% of our containership fleet for 2024 and 2025, respectively, generating contracted revenues of $2.3 billion with a remaining time charter duration of 3.4 years.

On the dry bulk side, as part of our strategy to renew the fleet and increase its average size, we have agreed to acquire two more Capesize vessels and accepted delivery of one similar-size ship. In total, we have acquired five Capesize vessels with an average age of about 12.5 years and disposed of a total of 10 smaller-size ships with an average age of 14 years. Our own dry bulk vessels continue to trade on a spot basis while the trading platform is commercially managing a fleet of 54 ships. As mentioned in the past, we have a long-term commitment to the dry bulk sector, which has been a strategic decision for us. Regarding Neptune Maritime Leasing, the platform has been steadily growing, having concluded leasing transactions for 24 ships in total on the back of a healthy pipeline extending over the coming quarters.

Moving now to the slide presentation. On slide three, you can see our first quarter results. Net income for the quarter was roughly $94 million or $0.79 per share. Adjusted net income was about $75 million or $0.63 per share. Our liquidity stands at about $1.1 billion. Slide four. On the containership side, our revenue days are fixed 97% for 2024 and 80% for 2025, while our contracted revenues are $2.3 billion with a TEU-weighted remaining duration of 3.4 years. In parallel, we continue to charter all our dry bulk vessels in the spot market, having entered into more than 30 chartering agreements since our last earnings release. Slide five. We do execute on our strategy to renew our fleet and increase its size.

During the last quarters, we have acquired five Capesize and one Ultramax ship with an average age of 12 years, and we also have disposed of 10 smaller vessels with an average age of 14 years. Slide 6 shows in more detail the S&P activity since our last earnings release. Slide five regarding CBI. We have chartered in for 54 period vessels, with the majority of the fleet being on index-linked agreements. On our leasing platform, we have already invested around $120 million. Since inception, NML has financed 24 assets through sale and leaseback transactions and has a very healthy pipeline going forward. Moving to slide eight. We do have roughly available $116 million for financing of vessel acquisitions through hunting licenses. In addition, we continue to have a long, uninterrupted dividend track record boosted by strong sponsor support. Moving to slide nine. Our liquidity stands at about $1.1 billion.

This liquidity gives us the ability to look for opportunities to grow the company on a healthy basis. Moving to slide 10. Charter rates in the containership market have been rising lately across all segments, having benefited from the Red Sea disruption. The idle capacity remains at low levels at 0.6%. Moving to slide 11, the final slide, you can see the recent dry bulk market trends in the spot and forward market. Charter rates remain volatile, however, trading higher than the first quarter of last year. The order book is at about 9% of the total fleet. With that, we conclude our presentation, and we can now take questions. Thank you. Operator, we can take questions now.

Operator (participant)

Thank you, sir. As a reminder, if you would like to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star two. Again, that's star one to ask a question. Your first question comes from the line of Ben Nolan with Stifel. Please go ahead.

Speaker 3

Hi, guys. It's actually Pranella, on for Ben, but thanks for taking my question.

Hi, hi.

I wanted to ask what the expectation is going forward for putting additional capital into Neptune Leasing?

Gregory Zikos (CFO)

Yeah. I mean, for Neptune Leasing, we have, we have announced that we're going to be investing up to $200 million of equity. The figure we have in our press release of around $120 million of equity already invested excludes back leverage, which, like, we're going to be receiving over the next months. So the net amount, actually invested after the back leverage, is going to be committed, it's actually lower. So from an equity perspective, I can say that, we could definitely, invest $150 million more, of equity. And subject to our back leverage, strategy and commitments, this amount could even go higher. Now, in case there are deals that, we feel that make sense, from a risk and returns perspective, also considering our liquidity, we wouldn't have, a problem, revisiting this figure in case we would like to go north of that.

However, this is a bit premature now. As of today, I think we have more than enough capacity to grow further this platform, which provide returns that make sense, also considering the risk involved.

Speaker 3

Great. Thank you so much.

Gregory Zikos (CFO)

Thank you.

Operator (participant)

Thank you. As a reminder, to ask a question, you may press star, then one. The next question is from Climent Molins with Value Investor's Edge. Please go ahead.

Yeah. Go ahead, go ahead.

Climent Molins (Head of Shipping Research)

Good afternoon. Thank you for taking my questions. I wanted to start by asking about the dry bulk fleet. Over the past year, you focused on expanding your Capesize exposure while divesting some smaller vessels. Asset values have increased significantly lately, but should we expect additional acquisitions going forward?

Gregory Zikos (CFO)

Look, we have bought up to now five Capesize vessels and one Ultramax. We haven't bought more vessels exactly for the reason you rightly mentioned, that asset values have been going up, and the same applies for new buildings. So we are very sensitive regarding the acquisition price. If there is a correction in the market, most probably you're going to see us entering into more S&P transactions. Otherwise, we will sit and wait. We don't have to hurry, and there is no reason for us to grow based on deals that cannot be justified on the numbers. So it depends on market conditions, but there is no predetermined growth rate that we need to meet, quite the opposite. Our goal is to enter into transactions that do make sense and that they do cover our downside, of course, leaving some upside for our shareholders as well.

Climent Molins (Head of Shipping Research)

Thanks for the color. Is it fair to assume that most of the dry vessels are currently operated in the spot market?

Gregory Zikos (CFO)

For the time being, yes. You talk about our dry bulk ships. I mean, up to now, we have been operating them in the spot market. However, again, this is subject to market conditions. If we take the view for, like, a period, it could make sense to lock some of them in like fixed rates. Then, this is something we could consider. There is no predetermined rule. We are flexible, and this is subject to market circumstances. Also, those vessels were bought, most of them or the majority of the dry bulk fleet was bought in the summer of 2021, where prices were much lower. So by default, those ships, they have low leverage, and their breakeven levels are quite low.

So, there are no restrictions, and there are no requirements from our lenders or, like, from a cash breakeven perspective, to charter the ships at a minimum rate. We have the flexibility. As you've seen, we also have the liquidity. So there we're going to be opportunistic, and if it makes sense, yes, some of the ships in the future might be chartered out for a period. It remains to be seen, but I'm afraid that at this point, I cannot forecast how the market is going to go and what our decision is going to be.

Climent Molins (Head of Shipping Research)

Thanks for the caller. Final question from me. On the container ship side, are you currently seeing any opportunities, or do you believe asset values still remain somewhat elevated relative to underlying fundamentals?

Gregory Zikos (CFO)

I think that for the container ships, if you look at the new building prices, I think they are still at high levels, looking at it historically, also comparing those prices to the prices we had ordered new buildings some years ago. Also for second-hand ships, yes, we don't see a lot of opportunities, considering where asset values are. I think it may take some time until after rates and values, which are correlated, see some correction. So we don't see something that does make sense right now for us, considering our risk-reward approach. So there we sit and wait.

What we have been doing, as already mentioned, we have proactively chartered on a forward basis most of our fleet with very solid charter coverage for, like, 2024, where literally all our fleet is chartered close to 97%, which is actually close to 100%, and at 80% for next year, which provides us with great visibility going forward.

Climent Molins (Head of Shipping Research)

Makes sense. That's all from me. Thank you for taking my questions.

Operator (participant)

Thank you. Again, to ask a question, you may press star, then one. Seeing no further questions at this time, I would like to pass the call back over to Mr. Zikos for his closing remarks.

Gregory Zikos (CFO)

Thank you very much for your interest in Costamare and for dialing in today. I hope we're going to speak again soon during our next conference results call. Thank you very much.

Operator (participant)

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