C3is Inc. (CISS) Q3 2023 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to our C3is Third Quarter 2023 Earnings Conference Call and Webcast. This is Dr. Diamantis Andriotis, CEO of the Company. With me on the call today is our CFO, Nina Pyndiah. Before we commence our presentation, I would like to remind you that we will be discussing forward-looking statements, which reflect current views with respect to future events and financial performance and are based on current expectations and assumptions, which by nature are inherently uncertain and outside of company's control. At this stage, if you could all take a moment to read our disclaimer on Slide 2 of this presentation. I would also like to point out that all amounts quoted, unless otherwise clarified, are implicitly stated in U.S. Dollars. Today, we released our earnings results for the third quarter of 2023. So, let's proceed to discuss these results and update you on the Company's strategy and the market in general. Slide 3 shows the dry bulk market fundamentals. Since Q4 last year, shipment volume growth rose from minus 1% to 4.5%. At 793 million tons, China's imports of iron ore was the highest ever for the January, August period, beating the previous record of 773 million tons in 2020. Year-on-year, global coal imports are up 8.6% and well on track for all time highs. China's imports growth have been tremendous, increasing by 70% year-on-year to 233 million tons through August, just slightly below the total import volume of last year. Through to the end of this year, coal demand is likely to remain strong due to seasonal restocking for the winter. Year-on-year, global grains imports are up by 3.4%. Having entered the post-COVID era, China is expected to increase its imports by around 4.2% for the period 2023, 2027. The demand for dry bulk commodities, iron ore, coal, grains, minor bulks, is expected to rebound by 3.1% in terms of tons and 3.7% in terms of ton miles for 2023, while further improvements are expected for 2024. After contracting by 1.1% in 2022, minor bulk ton mile trade is expected to rise by 2.4% for 2023, while further improvements are expected to materialize in 2024 where a growth of 3.2% is expected. On the handysize fleet growth, this segment 20,000 to 39,000 deadweight is quite overaged with a very small order book. The dry bulk carrier order book is standing at the 30-year historical low level, about 8% of the current dry bulk carrier fleet capacity in September 2023, while 16% of the dry bulk handysize fleet is above 20 years of age. The handysize bulk air fleet includes many old vessels with plenty of demolition potential. Compliance with new environmental regulations EEXI, CII are likely to accelerate demolition and this coupled with an overage fleet might induce scrapping, thus reducing available fleet supply. In this size range, 70% of the trading fleet is over 20 years old, 10% is between 15 and 19 years old, 43% is between 10 and 14 years old, 20% is between 5 and 9 years old, while 10% has less than 5 years. True to form, the dry bulk freight market has delivered mass upheavals over the past three months, strong demand, elevated congestion in some places and subdued supply growth have provided the fertile soil for a freight rate surge. The Baltic Dry Index went from a low 933 points early in Q3 to a year high of 1752 towards the end of the quarter. Handysize rates went as low as $7,000 in early August but rose to a comfortable $12,000 mark in mid September have remained there. Moving on to Slide 4. The tanker segment shows attractive market opportunities ahead. In September 2023, Saudi Arabia and Russia announced crude oil production cuts of about 1.3 million barrels per day for the remainder of the year. Crude oil demand is affected by several factors such as the ongoing war in Ukraine and is creating trading partnerships benefiting longer haul routes and causing charter rates for tankers to rise. Crude prices jumped by about 4% following the crisis in Middle East, which is fairly typical reaction as market supply a fair premium permits broadly on the perception of high risk. That's not a huge jump and the price could quickly fade, if the oil market continues to function normally. Crude oil demand in ton mile terms is expected to grow by 6.8% in 2023. Seaborne crude oil trade has been supported by increasing demands from China and rising exports from U.S., Brazil and Norway. In 2023, crude oil trade is expected to increase by 6.4% or 340.7 million deadweight whereas in 2024 it is expected to further increase by 4.8% or 357.2 million deadweight. Critically, changes in other factors such as quickly diminished speed or congestion that can increase quickly will provide firmer support for rates than the singular supply demand balance would suggest. Slide 5 shows the Aframax tanker order schedule and the handysize demolition scenarios. The crude tanker trade in fleet is expected to grow by 2.2% in 2023 and only 0.6% in 2024. The tanker order book remains at historically low levels, standing at 5.8% of the fleet capacity in September 2023. Emissions regulations are expected to have a further moderating impact on active tanker supply. The thin order book as it stands and the difficulty to access CBR slots in the context of firm tanker order books made the overall supply outlook appear rather supportive of a firm market in its own right. Fleet should grow faster from 2026, 2027 onwards. The global Aframax order book now stands at 119 vessels. Six vessels are scheduled for delivery within the remainder of 2023. Going forward, we do anticipate a shortage of supply of vessels as the ratio of order book to vessels over 20 years of age is 79% and environmental regulation has a negative impact on newbuildings. On the handysize segment, scrapping age over the last 10 years has averaged 24 years across all segment groups. A large number of handysize vessels will turn 24 years old by 2027 and thus been eligible for demolition under a scenario where 24-year old ships are scrapped. Over the last three years, however, demolition age has increased to 28 years on average. In 2027, around 12% of the handysize fleet will reach 28 years old, impacting fleet growth. Slide 6 shows the current fleet of C3is. By the end of Q3 2023, C3is owned and operated a fleet of 2 handysize dry bulk carriers and 1 Aframax oil tanker with an average age of 13.2 years. All vessels have had their ballast water treatment systems already installed. Furthermore, there are no immediate capital commitments for special survey as the next one due is Q3 2025. All vessels are encumbered and currently employed on short to medium term period charters and spot voyages. For the contracted revenues of the Company until December 2023, the Eco Bushfire has been on time charter at a daily rate of $8,250,000 from the 1st October 2023 until 23 of October. From the 25th of October to the 25th of December, the vessel will be on time charter at $20,000 per day. The Eco Angelbay is on time charter at a daily rate of $26,000 from the 25th of October to 25th December. While on previous employment, the rate was $8,250 per day. The Afrapearl II Ex Stealth Berana is on spot voyages. Slide 7 shows a sample of international charters with whom the management company has developed strategic relationships and has experience repeat business. Repeat business highlights the confidence our customers have for our operations and satisfaction of the services we provide. The key maintained in our relationships with these companies are high standards of safety and consistence of service. I will now turn over the call to Nina Pyndiah for our financial performance.

Thank you, Diamantis, and good morning to everyone. Please turn to Slide 8, and I will go through our financial performance for the third quarter and nine months of 2023. Voyage revenues for the three months ended September 30, 2023, amounted to $10.1 million and $14.96 million for the nine months ended September 30, 2023. Compared to Q2 '23, our revenues increased by 4.78%, primarily due to the increase in the average number of vessels. Our fleet operational utilization was 98.5% for the three months period and 93.6% for the nine months period. For the three months of Q3, the daily TCE was $27,903. And for the nine months of the year, the value was $18,761. Voyage expenses and vessels operating expenses for the three months ended September 30th were 2.8 million and 1.5 million, respectively. For the nine months period, the figures were 3.25 million and 3.3 million, respectively. The increases in both voyage expenses and vessels operating expenses are attributed to the increase in the average number of vessels. Voyage expenses for the nine months ended September 30, 2023, mainly included bunker costs of 1.3 million corresponding to 48% of total voyage expenses and commissions to third parties of 0.7 million corresponding to 26% of total voyage expenses. Operating expenses for the nine months ended September 30th mainly included core expenses of $1.9 million corresponding to 58% of total operating expenses, spares and consumables costs of $0.7 million corresponding to 21% and maintenance expenses of $0.3 million representing works and repairs on the vessels, corresponding to 9% of total vessel operating expenses. Total calendar days for our fleet were 263 days for the three months ended September 30th and 625 days for the nine months. Of the total calendar days in the third quarter of '23, 180 or 68.4% were time charter days, and for the nine months 506 or 81% were time charter days. General and administrative costs for the nine months ended September 30th was $0.9 million and mainly related to the portion of general and administrative expenses incurred by Imperial Petroleum, the former parent of C3is Inc., that were allocated to C3is. Depreciation costs for the nine months ended September 30, 2023, was $2.7 million a $2.67 million increase from $0.03 million for the same period of last year due to the increase in the average number of our vessels. Interest and finance costs for the nine months ended September 30th was $0.6 million and related to the accrued interest expense related party as of September 30th in connection with the $38.7 million financial liability, part of the acquisition price of our Aframax tanker, Afrapearl II which is payable by July 24th. EBITDA for the nine months ended September 30, 2023, amounted to $7.1 million. As a result of the above, for the nine months ended September 30, 2023, the Company reported a net income of $3.7 million. Turning to Slide 9 for the balance sheet, the fleet book value as at the end of September 23 was $76.5 million. Other current assets include trade receivables of $3.2 million, inventories of $2.1 million and advance and prepayments of $18,000. Trade account payables are mainly payments due to suppliers. Concluding the presentation in Slide 10, we outline the key variables that will assist us progress with our company's growth. Owning a high quality fleet reduces operating costs, improved safety and provides a competitive advantage in securing favorable charters. Maintaining the quality of vessels by carrying out regular inspections, both while in port and at sea and adopting a comprehensive maintenance program for each vessel. Disciplined growth with in-depth technical and condition assessment review. Timely and selective acquisitions of quality vessels. Current focus on short- to medium-term charters and spot voyagers. Chartering to high quality charters such as commodities traders, industrial companies and oil producers and refineries. Maintaining adequate level of cash flow and liquidity. No outstanding bank debt. At this stage, our CEO, Dr. Diamantis Andriotis, will summarize the concluding remarks for the period examined.

We are very pleased to announce that even though we have been operating as a newly listed entity for a short period of approximately four months following our spin off from Imperial Petroleum in late June 2023, we have managed to grow our fleet and achieve the remarkable financial performance. Specifically, during the third quarter of 2023, we generated record revenues of 10.1 million and a record net income of 3.3 million represent increases of 478% and 917%, respectively, from the previous quarter. Going forward, we strongly believe that the new acquisition of Araframax oil tanker, which was delivered to us in July 2023 well position us to capture the firm prevailing tanker market conditions and generate significant cash flow with the efficient operations of our expanded diversified fleet. Specifically, our 2 handysize dry bulk carriers currently operate under short-term time charters contracts, earning gross charter rates ranging from 20,000 to 26,000 per day and resulting in a fixed revenue backlog of approximately 2.9 million until December 2023. Our already secured revenues are supplemented by operations of our Aframax oil tanker in the spot market where voyage charter rates for Aframax tankers currently stand at very high levels in excess of $65,000 per day. This employment strategy will enhance our ability to finance our site liability by 38.7 million related to the acquisition of our tanker and due in July 2024, partially with cash on hand and cash on operating activities. With our company's impressive performance, we will continue to pursue growth strategy, focus on timely and select acquisitions of high quality vessels, which we may consider to be in the best interest of our company and our shareholders. We would like to thank you for joining us today and look forward to having you with us again at our next call on our fourth quarter 2023 results in February 2024. End of Q&A: