Safe Bulkers - Earnings Call - Q2 2025

Transcript

Speaker 1

Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers Conference Call on the second quarter of 2025 financial results. We have with us Mr. Polys Hajioannou, Chairman and Chief Executive Officer, Dr. Loukas Barmparis, President, and Mr. Konstantinos Adamopoulos, Chief Financial Officer of the company. The time will be presented 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 one on your telephone keypad and wait for your name to be announced. Following the 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 this conference call is being recorded today. The outside website of the conference call will soon be made available on the Safe Bulkers website, www.safebulkers.com.

Many of the remarks today contain forward-looking statements based on current expectations. Actual results may differ materially from the results projected from the forward-looking statements. Some information concerning factors that can cause the actual results to differ materially from those in forward-looking statements is contained in the second quarter 2025 earnings release, which is available on the Safe Bulkers website, again, www.safebulkers.com. I would now like to turn the conference call over to one of your speakers, the Chairman and CEO of the company, Mr. Polys Hajioannou. Please go ahead, sir.

Speaker 2

Good morning, Paul. I'm Dr. Loukas Barmparis, President of Safe Bulkers, and I will start the speech today. I'm welcoming you at our quarterly results. During the second quarter of 2025, we'll see a softer market, which impacted our revenues and profitability. We'll remain focused on quick renewal, strong liquidity, comparable leverage, and long-term value creation. We have declared a dividend of $0.05 per share amongst stock, rewarding our shareholders. We took delivery of our product newbie and most recently sold at the targeted price on our oldest letters. Remaining focused on capital allocation towards our renewable program, maintained a strong capital attraction, ample liquidity, and a leverage of about 38%. The selling price of our peddler leader at $12.5 million compared to recent market levels indicates a 10% turnaround of asset value and a positive seat in the drybulk community.

Following a comprehensive review of the forward-looking statements, which are presented in slide two, let's proceed to examine the supply-side dynamics in slide number four. The drybulk fleet is projected to grow by about 2.8% on average in 2025 and in 2026 due to stable new deliveries. The paper book now stands at about 11% of the current fleet. Asset prices are projected to pick up in line with the current fleet market. Recycling volumes are anticipated to rise, though as market conditions prompt the retirement of older vessels, especially in relation to the recent MEPC 83 and the Hong Kong Convention on recycling. Ship recycling doubled to 16,000 ships over the next 10 years, but that is the previous decade after bulk construction.

Only 9% of the ship capacity in the drybulk order book will be fuel ready to use alternative fuels upon delivery, and out of those ships, 37% will be burning LNG, 35% methanol, and 23% ammonia. However, the dual-fuel order book is minimal on drybulk segments. We do have two dual-fuel vessels on order with deliveries in Q1 2027. Currently, about 25% of the global fleet is older than 15 years. Safe Bulkers fleet now counts 12 Phase III vessels in the water, all delivered 2022 onward. On top of that, 24 vessels, which have been upgraded environmentally, we have 11 ships of eco-vessels having superior design efficiencies. 80% of our fleet comprises Japanese-built vessels, surpassing the global average of 40%, while our average fleet age being just 10.3 years versus the global average of 12.6 years.

We believe we will become even more commercially competitive as we have on our order six more Phase III vessels to obtain a dual-fuel methanol, positioning us favorably to compete within the global standard targets recently adopted by MEPC 83 and expected to be ratified this autumn. The global implementation of our GSS as a global fuel standard, if ratified, will penalize the excess fuel carbon intensity compared to specifically determined using limits and broadens the scope of the regional fuel EU regulation, substantially affecting capability. Moving on to slide five represents an overview of the demand and basic commodities trade. The accommodation of a trade war, affected through tariffs and persistent geopolitical tensions, elevate policy uncertainty and pose a considerable downrisk for global growth and against reduced inflation. For our segment, we anticipate an improving trade with markets with an increasing focus on the existing digital and energy-efficient newbies.

The global GDP growth expectations for 2025 and 2026 are reflected in the IMF's July forecast, call for a growth of about 3% in the coming years, accompanied by gradual control of inflationary pressures. According to BIMCO, the forecasted global drybulk demand will be from -0.5% to +0.5% in 2025, followed by growth of 1.5% to 2.5% in 2026, which claims admirer banks being the best performing sectors. China and India are gradually boosting domestic coal production and reducing import demand. China, in particular, has been rapidly phasing out fossil fuels from electricity generation, boosting renewables and reducing impact import dependence. The increase in import tariffs led to a 57% year-on-year drop in U.S. grain volumes to China, as we are expected to continue favoring Brazilian cargos, bolstered by Brazil's growing production.

India continues to perform and is projected to experience a faster growth among major economies with a forecast of 6.4% GDP increase in 2025 and 2026. Its expanding domestic market and manufacturing sector may continue to contribute positively to the drybulk demand, with infrastructure investments playing a vital role. Summing up the supply-demand equilibrium on slide six, the supply growth is expected to continue to outpace demand. The trade market has rebounded recently during the start of the third quarter. Seven of our capesize vessels are presently period-chartered with an average remaining total duration of almost two years and an average daily charter rate of $24,500, providing us with a bigger cash flow, topping $135 million in contracted revenue backlog from capesize vessels alone. Moving to slide eight to present an overview of our quarterly highlights.

We have declared our 15th consecutive quarterly dividend of $0.05, representing a 4.7% dividend yield. At the same time, our pre-cash flow finances our renewal program. We maintain ample liquidity, profitability, and capital resources of $313 million at the comparable leverage of 38%. We achieved zero vessels in D and E carbon intensity CII rating for 2024, as described in our 2024 sustainability report. Lastly, we took delivery of our 12th Phase III vessel, a motivation to reserve one of our oldest vessels in our fleet in line with our fleet renewal strategy. In slide nine, we present our returns to shareholders of $17.7 million, holding common dividends and $74.9 million paid in common share repurchases since 2022. We have been consistent in generating sustainable returns across market fluctuations as a result of our track record, hands-on management, and our overall business model.

Concluding the company update in slide 10, we present our strong fundamentals. Safe Bulkers is a drybulk company with $430 million market cap, 47 vessels in the water, having $312 million scrap value. We maintain significant firepower with $125 million cash and $188 million in undrawn RCF and $176 million borrowing capacity against our significant order book of six newbuilds, mainly in Japanese shipyards. We focus on our majority Japanese-built fleet advantage, on energy efficiency, and lower CO2 taxation reflected in our CII rating of zero vessels on the bottom rating of D and E for 2024. We maintain a young, technologically advanced fleet, strong balance, comfortable leverage, and low net debt per vessel of $9.1 million for a 10-year-old fleet.

We have built a resilient business model with cash flow visibility of $159 million in revenue backlog, healthy expansion for sizable fleet that achieves scale, and a meaningful 4.7% annualized dividend yield, positioned to leverage on the environmental regulatory landscape. I now pass the floor to our CFO, Konstantinos Adamopoulos, for our quarterly financial overview. Konstantinos, the floor is yours.

Speaker 0

Thank you, Loukas, and good morning to everyone. During the second quarter of 2025, we were operating in a weaker charter market environment compared to the same period in 2024, with decreased revenues due to lower charter hires, decreased earnings from scrap and traded vessels, and increased operating expenses. Slide 12 will show our quarterly financial highlights for the second quarter of 2025 and compare them to the same period of 2024. Our adjusted EBITDA for the second quarter of 2025 is still about $25.5 million compared to $41.8 million for the same period in 2024. Our adjusted earnings per share for the second quarter of 2025 was $0.01, calculated on a weighted average number of 102.5 million shares compared to $0.17 during the same period of 2024, calculated on a weighted average number of 106.8 million shares.

On the top graph, during the second quarter of 2025, we operated an average of 46.75 vessels, earning an average time charter equivalent rate of $40,857 compared to 45.43 vessels, earning an average time charter equivalent rate of $18,650 during the same period in 2024. Our daily vessel operating expenses increased by 6% to $6,607 for the second quarter of 2025, compared to $6,254 for the same period in 2024. Daily vessel operating expenses, excluding dry docking and ship delivery expenses, increased by 10% to $5,304 for the second quarter of 2025, compared to $5,089 for the same period in 2024. In conclusion of our presentation, we show in slide two a quick overview of our quarterly operational highlights for the second quarter of 2025. We would like to highlight that based on financial performance, the company's board of directors declared a $0.05 dividend per common share.

Emphasis is placed on maintaining a credit card position of about $104 million as of July in 2025, another $240 million in available revolving credit facilities, giving us a combined liquidity and capital resources of $343 million. Furthermore, we have contracted revenue for non-capsize floating bidders' dry charter contracts of $171 million, net of commissions and default scrubber revenue, and also additional borrowing capacity in relation to six newbuilds upon the delivery, as well as one existing unencumbered vessel. We believe our strong liquidity and our comparable leverage provide liquid flexibility to our management and capital allocation, and this will enable us to further expand the fleet, build a resilient company, and create long-term prosperity for our shareholders. This concludes our presentation. We are now ready for the Q&A session.

Speaker 1

Thank you. We'll now be conducting the Q&A question-and-answer session. If you would like to ask a question at this time, please press star one from your telephone keypad and a confirmation tone to indicate your line is in the question queue. You may put star two if you'd like to withdraw your question from the queue. For participants in speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please, we will be pulled for questions, and once again, that's star one. Thank you. Once again, if you have a question at this time, you may press star one from your telephone keypad. Just another reminder, if you'd like to ask a question, please press star one at this time. Thank you. At this time, I'd like to turn the floor back to management for closing remarks.

Speaker 2

Thank you for attending this quarterly documentation of our financial results for the second quarter of 2025. We're looking forward to discussing again with you in the next quarter. Thank you very much and have a nice day.

Speaker 1

This will conclude today's conference. We'll disconnect your lines at this time. Thank you for your participation.