Q2 2024 Earnings Summary
- Selective Vessel Acquisitions: The company is strategically acquiring larger vessels, having already purchased 6 new ships (including Capesize and Ultramax), which were acquired at attractive prices, positioning the fleet for stronger future performance.
- Healthy Containership Charter Rates: The forward-based charters for 7 containerships are executed at healthy rates in the mid-30s, supporting robust contracted revenue growth.
- Proactive Capital Management and Hedging: The firm is actively managing its capital by redeeming expensive preferred stock and using FFAs as hedging tools, which underscores its commitment to optimizing cost and mitigating risks.
- Uncertainty in capital allocation: The executives expressed caution over whether to redeem additional expensive Preferred Stock, leaving future capital allocation decisions unclear and potentially affecting financial flexibility.
- Slowed dry bulk purchase activity: The cautious approach in acquiring vessels, with an emphasis on price sensitivity and waiting for attractive market conditions, may indicate underlying market weakness in the dry bulk segment.
- Increased reliance on hedging: The strategy to secure fixed rate charters and use FFAs for hedging exposes the company to potential risks if market conditions shift unfavorably, limiting upside if rates improve.
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Preferred Redemption
Q: Redeem additional preferred or prepay debt?
A: Management explained that after redeeming their Series E Preferred—yielding annual cash savings of $10.1 million—any further redemptions, including the second most expensive series, will be decided by the Board based on market conditions and available opportunities. -
Dry Bulk Outlook
Q: Why has dry bulk purchasing slowed this year?
A: Management noted that they’ve acquired 6 larger vessels at attractive prices while remaining price sensitive; they plan to dispose of smaller ships when pricing is favorable, keeping a cautious pace in a fluctuating market. -
CBI Strategy
Q: Fixed rate versus index charter strategy?
A: Management indicated that the slight increase in fixed-rate charters was due to attractive individual deals, and they continue to use FFAs for hedging while staying flexible as market conditions evolve. -
Charter Rates
Q: What are current containership charter rates?
A: Management did not detail exact numbers but mentioned that for a 2000-built vessel, charter rates have been set in the mid-30s, reflecting healthy market levels.
Research analysts covering Costamare.