Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Safe Bulkers Inc (SB, Financial) reported a strong quarter with increased revenues compared to the same period last year.
- The company has a significant contracted revenue backlog of $175 million from Capesize vessels alone, providing cash flow visibility.
- Safe Bulkers Inc (SB) maintains a comfortable leverage of 32%, which is considered manageable given the age of their fleet.
- The company has a robust liquidity position with approximately $318 million in liquidity and capital resources.
- Safe Bulkers Inc (SB) has a green fleet advantage with 23 vessels having undergone environmental upgrades, aligning with stringent environmental regulations.
Negative Points
- The charter market is gradually softening, particularly for Panamax vessels, due to supply-demand imbalances.
- Geopolitical uncertainties, including tensions in the Middle East and Ukraine, contribute to a softer global GDP growth outlook.
- China's slower economic growth and real estate sector crisis are expected to impact demand for key commodities like iron ore.
- Freight rates are likely to be softer due to the projected growth in fleet sizes outpacing demand.
- Asset prices, which rose in 2024, are projected to weaken over the next two years, potentially impacting the company's asset valuation.
Q & A Highlights
Q: You outlined that consolidated leverage is 32% at the end of the quarter. Are you comfortable at this level, or are you striving to lower your debt? Is the goal to be debt-free?
A: Konstantinos Adamopoulos, CFO: We are very comfortable with a 32% leverage level. We do not plan to reduce it much further, especially as we take newbuilding deliveries in the next three years. A ratio below 40% is good, and even if it rises to 45% or 50% in later years, it remains comfortable given the fleet's age.
Q: Panamax spot rates have lagged compared to other dry bulk classes like Capes and Supramaxes. Could you provide some color on why there might be a discrepancy?
A: Konstantinos Adamopoulos, CFO: The company owns Panamaxes, Kamsarmaxes, Post-Panamax, and Capes, focusing on medium to large dry bulk assets. The discrepancy is due to market dynamics and demand, particularly from China for Capesize vessels. Future expansion will depend on market opportunities and price conditions.
Q: Are there plans to expand the fleet in specific categories like Kamsarmax or Capes?
A: Konstantinos Adamopoulos, CFO: Expansion is opportunistic and will depend on market conditions and opportunities. We are open to expanding in sectors like Kamsarmax or Capes if prices are favorable.
Q: How does the company view its leverage in comparison to the scrap value of its vessels?
A: Loukas Barmparis, President: We feel extremely comfortable with our leverage, as it is less than $200 million from the scrap value of the vessels when they are 25 years old.
Q: What is the company's strategy regarding fleet renewal and environmental upgrades?
A: Loukas Barmparis, President: We have a fleet renewal strategy involving the divestment of older vessels, acquisition of second-hand vessels, and delivery of newbuilds. Our fleet is environmentally upgraded, with a significant portion being eco vessels, positioning us favorably for future regulations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
