United Maritime - Q2 2024

Transcript

Operator (participant)

Thank you for standing by, ladies and gentlemen, and welcome to the United Maritime Corporation Conference Call on the second quarter and six months ended June 30, 2024 financial results. We have with us Mr. Stamatios Tsantanis, Chairman and CEO, and Mr. Stavros Gyftakis, Chief Financial Officer of United Maritime Corporation. At this time, all participants are in listen-only mode. There will be the question-and-answer session, at which time, if you would like to ask a question, please press star one one on your telephone keypad. You will then hear an automatic message advising your hand is raised. Please be advised that this conference call is being recorded today, Tuesday, August 6, 2024. The archived webcast of the conference call will be soon made available on the United Maritime website, www.unitedmaritime.gr, under the investor section.

Many of the remarks today contain forward-looking statements based on the current expectations. Actual results may differ materially from the results projected from those forward-looking statements. Additional information concerning factors that can cause the actual results to differ materially from those in forward-looking statements is contained in the second quarter and six months ended the thirtieth of June 2024 earnings release, which is available on the United Maritime website, again, www.unitedmaritime.gr. I would now like to turn the conference over to one of your speakers today, the Chairman and CEO of the company, Mr. Stamatios Tsantanis. Please go ahead, sir.

Stamatios Tsantanis (Chairman and CEO)

Good afternoon. Welcome to United Maritime's conference call to discuss our Q2 and first half of 2024 financial results and recent corporate developments. United Maritime returned to profitability in Q2 with a net income of $0.7 million and net revenues of $12.4 million. The fleet's average time charter equivalent rate was $17,143, thanks to a strong Capesize market. For the first six months, net revenues were $23 million, but we had a net loss of $0.8 million due to Q1 hedging activities. Stavros will provide more details on this. The strong dry bulk market since Q4 2023 validates our sector investment, and we are optimistic about higher returns.

We are declaring a dividend of $0.075 per share cash dividend for Q2, yielding about 13%, and have paid over $1.50 in dividends, cash dividends since January 2023. Fleet updates. We delivered the Oasi, a 2010 Kamsarmax, to its new owners, with profits recognized in Q3. It will be replaced by the Nisi, a 2016 Kamsarmax, arriving in October. We continue to seek acquisitions in the dry bulk sector, meeting our commercial and capital return criteria. The appreciating market value of our bulkers position us well to reward our shareholders further. New investments. Offshore sector. We acquired a minority stake in a company designing an energy construction vessel for $8.5 million, completing by 2027.

This vessel is designed to operate across all major subsea subsegments against a growing demand backdrop, will serve renewables and oil and gas sectors benefiting from increased offshore demand. Aframax time charter. We joined a time charter on an Aframax crude tanker, committing about $300,000 in working capital for up to nine months. This has been made in partnership with a very prominent Aframax pool operator. Commercial developments, Panamax vessels. The Exelixsea extended its charter from August 15 for about 11-14 months. The Synthesea extended its charter from October forward for about 11-14 months, the same charters. Capesize vessels.

The Goodship charter extends from July until July 2024 until late 2025, and the Gloriusship starts a new 70-80-day charter in August in continuation with the existing one at $22,500 a day. For Q3 2024, we estimate a daily time charter equivalent of approximately 18,000 for the blended fleet, with 65% of the days already fixed. Industry overview. The dry bulk market is strong, driven by Capesize demand and increased grain and coal demand as well. China's iron ore imports rose 6%, with Brazilian exports also up by 6%. Stable Chinese steel market, driven by manufacturing and infrastructure, is expected to prevail globally in the next years. Global steel production is expected to remain stable in 2024 and 2025.

West African bauxite exports up 14% in the first half, with further increases expected in the future. Canada's iron ore exports rise 15%, expected in the second half of the year. Long-term trends in aluminum and steel consumption are sustainable, driven by energy transition and infrastructure demands. Several mining expansion projects are expected to ensure steady Capesize demand.... Coal and grain cargo growth provides stability for smaller vessels with increased inefficiencies, reducing effective vessel supply. The dry bulk order book is at historically low levels, with net fleet growth expected to be below 2% annually for the next two years, favoring a positive market balance. This concludes my initial summary. I will now hand over the call to Stavros for a detailed financial update. Stavros, please go ahead.

Stavros Gyftakis (CFO)

Thank you, Stamatios. Welcome everyone to our earnings call. Let us start by reviewing the main highlights of the financial statements for the second quarter and the six-month period that ended on June 30, 2024. Our overall performance showed significant improvement compared to 2023, which I must remind you, was a transitory year for United. In the second quarter, our net revenues reached $12.4 million, marking a 24% increase from the same period last year. This growth was driven by our expanded fleet, improved freight rates, and our operating leverage. Our Adjusted EBITDA for the second quarter was $6.3 million, and we recorded a net income of $0.7 million. In comparison, these figures for 2023 were $2 million and a net loss of $3 million respectively.

For the six-month period, net revenue totaled $23 million, while Adjusted EBITDA rose to $10 million, compared to $12.8 million and $0.6 million respectively last year. Despite the improved profitability in the second quarter, we recorded a net loss of $0.8 million for the six-month period ending June 30, 2024. Moving on to our balance sheet, our cash position at the end of June 2024 was $7.7 million, reflecting the significant CapEx program undertaking during the first six months for the dry docking of four of our vessels and the advance payment for our new Kamsarmax vessel, NISI, which is expected to be delivered within the year. All our vessels have returned to service since the beginning of the second half.

CapEx is now behind us, while we have also delivered the Oasi to her buyers, and therefore, our liquidity position has improved significantly as of today. Outstanding debt, which includes liabilities from our bareboat transaction, stood at $91.7 million. This translates to a loan-to-value for the fleet of approximately 50%, including the bareboat in liabilities. Regarding our debt, we recently concluded a new $18 million sale and leaseback agreement to fund the $17.1 million purchase option of the Synthesea. The financing bears an interest rate of 2.7% over three-month term SOFR and amortizes over a seven-year term through monthly installments of approximately $100,000.

We have continuous options to repurchase the vessel at predetermined prices following the second anniversary of the bareboat charter and a final purchase option of $6.5 million at the end of the bareboat period, which we expect to exercise. Additionally, we recently entered into a $16.5 million loan facility with a prominent lender in Taiwan to finance the exercise of the $12.4 million purchase option for the Chryssi. The principal will amortize over a five-year term through quarterly installments of $0.4 million and a final balloon payment of $8.5 million. The facility is priced at 2.6% over three-month term SOFR. Our financing terms keep improving, and we expect this to reflect positively in our future profitability.

Regarding our investments and divestment activities that Stamatis mentioned previously, we expect to record an accounting profit of approximately $1.5 million in the third quarter from the sale of the Oasi. Concerning our investment in the offshore sector, we have committed to participate with an amount of up to $8.5 million, which will be called based on certain milestones and conditions in five separate installments over a period of 33 months. This schedule aligns with the construction of the ECV unit, allowing for minimum impact on our liquidity. Lastly, concerning our participation in the P&L of the Aframax time charter, we have committed $250,000 for the vessel's working capital. Finally, I would like to express our optimism about future growth and the implementation of diversified strategy.

We anticipate further improvements in our profitability and are committed to rewarding our investors with dividends and share buybacks as appropriate. I would now turn the call back to Stamatis for his concluding remarks. Stamatios?

Stamatios Tsantanis (Chairman and CEO)

Thanks, Stavros. Following our successful tanker investment cycle in Q3 2023, which delivered strong returns for our shareholders, we have expanded our fleet to eight dry bulk vessels without diluted capital raisings. Since November 2022, we have declared total cash dividends of over $1.50 per share, cash dividends, of course, a significant portion of our current share price. Additionally, we aggressively returned capital with $6.7 million in common share buybacks at an average price of $1.87 per share. United Maritime is well positioned to benefit from positive dry bulk market trends due to index-linked time charters that provide direct exposure to Capesize and Panamax market fluctuations, a strong balance sheet that allows for leveraged exposure to the sector and the potential for higher returns on capital....

A proven commitment to rewarding shareholders through substantial capital returns, resulting in high dividend yield. Lastly, I'm confident in our recent offshore sector investment, which I believe will also generate higher returns for our company. That completes our call, and I would like to turn the call over to the operator for any questions you may have. Operator, please take over. Thank you.

Operator (participant)

Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star one one again. Please stand by, we'll compile the Q&A roster. This will take a few moments. And now we're going to take our first question, and it comes from the line of Tate Sullivan from Maxim Group. Your line is open. Please ask your question.

Tate Sullivan (Managing Director and Senior Research Analyst)

Great. Hi. Hi, thank you for having the call on USEA, and good to talk to you again. On the energy construction vessel topic, Stamatis, can you talk about how you started looking at that market? Has this been a long-term evaluation of that market, and have you done business with a Norwegian partner before, or two partners?

Stamatios Tsantanis (Chairman and CEO)

Good morning, Tate, and nice to hear from you again. Yeah, I believe it's a great diversification opportunity, and it's nothing super substantial. I think it's a good entry point, but Stavros sitting next to me is gonna give you more color on how we have decided to proceed with that. So, Stavros, if you want to.

Stavros Gyftakis (CFO)

Thank you so much. Yeah, Tate, we have been, we have started to look at the sector since early this year. Things have changed, I wouldn't say dramatically, but gradually there in terms of the demand. Demand has been increasing. There is very limited supply, and most of the ships have been built more than a decade ago. So there is actually demand for good performance in terms of energy. These type of ships, they can serve both the oil and gas industry and the renewables projects. So we think that the demand will be very robust for the ships going forward. The supply is very limited. Half of the fleet is older than 15 years, and there are actually only a couple of ships that are being built right now.

So we identified this specific niche as a good entry point for United for the offshore. And as you know, I mean, we have decent connections in the market, also in Norway. So this project was presented to us, we showed it to our board, and we all decided consensually that this would be a good opportunity for United to enter the sector.

Tate Sullivan (Managing Director and Senior Research Analyst)

Okay, great. Thank you for that. And then $8.5 million is your share, not the total cost of the vessel, correct?

Stavros Gyftakis (CFO)

No, no, no. The total cost of the vessel is around $100 million, around $96 million. Around $60 million will be financed by debt. So our participation results in a share of around 22%-23% of the vessel.

Tate Sullivan (Managing Director and Senior Research Analyst)

Okay. Okay, great. Okay, thank you. And then, the comments about the dry docking of the four vessels in the first half of the year, what portion of those dry dockings was in the 2Q versus... Well, they're all complete now. There's no cost that will be extended into 3Q, I guess is my takeaway.

Stamatios Tsantanis (Chairman and CEO)

Yes, we have almost nothing for the third and the fourth quarter, so we will have very good operating, you know, fleet for the second half of the year, which I believe is going to improve our cash flow quite significantly. So we do not anticipate all the ships that underwent dry docks also in upgrading processes, so the ships are actually running much better than before. So I believe that we're gonna have all of our fleet running very smoothly and very efficiently in the second half of the year with very limited downtime.

Tate Sullivan (Managing Director and Senior Research Analyst)

And the Taiwanese, was that the first time while...?

Stamatios Tsantanis (Chairman and CEO)

Sorry, Tate, can you please repeat the question because you're breaking up?

Tate Sullivan (Managing Director and Senior Research Analyst)

Was that the first time you have had a lender based in Taiwan?

Stamatios Tsantanis (Chairman and CEO)

Hi, Tate. We had a similar, we had experience with this lender in Seanergy, this the, the, the related, the previous parent of United. So basically, as you know, I mean, there are synergies on the management side between the two companies, and we have worked quite well with this lender. So he expressed interest to finance also United, now that the company is maturing, is or, is in a more mature state. So yeah, we proceeded with this financing with a known party to us.

Tate Sullivan (Managing Director and Senior Research Analyst)

Thank you both.

Stamatios Tsantanis (Chairman and CEO)

Thank you, Tate. Have a great day.

Operator (participant)

Thank you. The speakers now further questions for today. This concludes today's conference call. Thank you for participating. You may now all disconnect.