Costamare Inc. (CMRE) Q2 2024 Earnings Report, Transcript and Summary

Thank you for standing by, ladies and gentlemen, and welcome to the Costamare Inc. Conference Call on the Second Quarter 2024 financial results. We have with us Mr. Gregory Zikos, Chief Financial Officer of the company. At this time all participants are in a listen-only mode. There’ll be a presentation followed by a question-and-answer session [Operator Instructions] I must advise you that this conference is being recorded today, Wednesday, July 31, 2024. We'd like to remind you that this conference call contains forward-looking statements. Please take a moment to read Slide number 2 of the presentation, which contains the forward-looking statements. And I will now pass the floor over to your speaker today, Mr. Zikos. Please go ahead, sir.

Thank you, and good morning, ladies and gentlemen. During the second quarter of the year, the company generated net income of about $91 million. As of quarter end, liquidity was above $1.1 billion. In the containership sector, continued vessel diversions around Africa and an early peak season, with higher-than-expected cargo demand have resulted in charter rates remaining on an upward trajectory against the backdrop of short supply of prompt tonnage. During the quarter, we chartered on a forward basis seven containerships for a minimum period of between two to three years. The new charter agreements are expected to generate incremental contracted revenues of above $220 million. Our fleet employment stands at 100% and 88% for '24 and '25, respectively, and total contracted revenues amount to $2.4 billion, with the remaining time charter duration of 3.5 years. On the dry bulk side, we are now progressing with our strategy to renew the owned fleet and increase its average size having concluded the sale of one 2011-built Handysize and agreed the sale of one 2009-built Supramax vessel while simultaneously acquiring two 2012-built Capesize ships. CBI, our dry bulk trading platform is commercially managing a fleet of 54 ships, the majority of which are on index-linked charter in agreements. As mentioned in the past, we have a long-term commitment to the sector which has been a strategic decision for us. Finally, regarding Neptune Maritime Leasing, the platform has been steadily growing, having currently funded 25 shipping assets for a total amount of approximately $285 million on the back of a healthy pipeline. Moving now to the slide presentation. On Slide 3, you can see our second quarter results. Net income for the quarter was above $91 million or $0.77 per share. Our liquidity was above $1.1 billion. Slide 4, we have proceeded with the full redemption of our Series E Preferred Stock resulted to annual cash flow savings of approximately $10.1 million. Slide 5, on the containership side, we have chartered seven containerships with incremental contracted revenues of above $220 million. Our revenue days are fixed 100% for this year and 88% for '25 while our contracted revenues are $2.4 billion with the TEU weighted remaining time charter duration of 3.5 years. In parallel, we continue to charter all our dry bulk prices in the spot market, having entered into more than 25 chartering agreements since our last earnings release. Slide 6, we have concluded the acquisition of two Capesize dry bulk vessels as well as the sale of 100 size dry bulk ship. In addition, we have agreed to dispose of one more Supramax vessel. Slide 7, regarding CBI, we have chartered in 54 period vessels, where the majority of the fleet is being charted on index-linked agreements. Our leasing platform has already an investment of about $123 million from our side. As of the date of this presentation, NML is financing 25 ships through sale and leaseback transactions and has a very healthy pipeline. Slide 8, we have refinanced the existing indebtedness of three dry bulk vessels without an increase in leverage. This deal was coupled with improvement of funding cost and extension of maturities. In addition, we have roughly available $116 million for financing vessel acquisitions. Finally, we do continue to have a long uninterrupted dividend track record. Slide 9, liquidity is above $1.1 billion. This liquidity gives us the ability to look for opportunities to grow the company on a healthy basis. Moving to Slide 10, charter rates in the containership markets have increased across all segments since the beginning of the year, remaining stable the last couple of weeks. The continuous injection of new building capacity remains, however, the principal threat of the markets. Idle fleet remains at low levels of 0.6%. And last slide, on Slide 11, you can see the recent dry bulk market trends in the spot and forward markets. The order book is at 9.4% of the total fleet. With that, we can conclude our presentation, and we can now take questions. Thank you. Operator, we can take questions now.

Yes, thank you. [Operator Instructions] Our first question comes from Ben Nolan from Stifel. Please go ahead.

This is Dylan O'Malley on for Ben Nolan. Thanks for taking our question. We were hoping you could add a little rough context on the rate levels for the 7 new containerships or the seven new containership charters you mentioned earlier in your press release.

Yes. These are ships, I mean, we don't announce specifically the charter rates, but these are ships which were charted on a forward basis. One of them is like 2000-built vessel. So it is like 24 years old. And those have been chartered at a very healthy rate amount in the mid-30s.

Yes. Thanks for that. We're also hoping you can add a little bit of color on your perspective on why dry bulk purchase activity has slowed and your outlook for the rest of the year?

Yes. In total, I mean, you have seen that we have been buying bigger vessels like Capesizes and in total, we have acquired six of those. I mean five Capes and one 2013-build Ultramax. Now we are quite price sensitive. So depending on market conditions, our strategy is to dispose of smaller handysize vessels and move towards the larger sizes. But it's only a matter of pricing and where asset levels are. So we take our time. I think that since we bought up to now those six ships, they have been bought at quite attractive prices. But at the same time, we don't have to rush. We will see and wait and where we feel that the price makes sense, then we have the ability to execute fast based on our cash balances and also access to commercial bank debt.

[Operator Instructions] Our next question comes from Climent Molins of Value Investor's Edge. Please go ahead.

Good afternoon. Thank you for taking my questions. I wanted to start by asking about the strategy on the CBI segment. It seems the proportion of vessels and charting on fixed contracts has increased slightly quarter-over-quarter. Could you provide some insight on the reasoning behind this? And is it a directional bet on the market? Or are you hedging the positions with FFAs or physical volumes?

Yes, a couple of things. Yes, you are right, it's slightly -- there's a slight increase in fixed rate charter in vessels. But this is just because of the specific deals that were available in the market. It's not that we have taken a direction of approach that going forward. We need to have more ships charter in on a fixed rate rather than on index. It's just that it happened that those deals with the specific vessels, vessel with specific charter hires. We found them to be attractive, but there is no more than that. We are quite flexible and depending on market conditions, we may hope to have more vessels on index-linked period. All fixed rate to the contrary. So there's nothing specific there. And what was the second part of your question?

Yes, whether this was like it was hedged via FFAs or physical volumes?

We buy a lot of FFAs and yes, we definitely use them as a hedging tool. We have quite a book for the FFAs, for the Capes and also for the Panamaxes. FFAs can be used as hedging instruments or if someone has a positive view of the market and they cannot secure assets in the water can also buy long FFA days. But regarding hedging, yes, this is hedging tool that we have been utilizing quite a lot.

That's helpful. Thank you. And pro forma for the redemption of the Series E Preferred, you continue to see it on a very large cash position. Is there any appetite to redeem additional preferred service or to prepay debt? Or are you comfortable keeping cash balances at current levels?

Yes. We'll see. Look, the Series E Preferred Stock we redeemed. It was the most expensive we had. It was 8.875%. So it was quite expensive. We redeemed this having savings of slightly above $10 million per year. Now whether we're going to go ahead and also redeem CSD, for example, or not which has been the second most expensive series outstanding. This is a more generic question of capital allocation, where we feel that we can utilize our equity in order to buy ships, also to repay debt or like redeem the Preferred. But I mean, compared to the cost of debt, I think the preferred is a bit -- it's more flexible, but it is more expensive. We'll see. But this is a decision taken at the Board level, considering all the circumstances like -- and whether we feel that there is room for new transactions where equity -- where our equity will be used. So I'm afraid I'm not ready to tell you now whether and like when we're going to be redeeming Series E, for example, or Series D. It remains to be seen. But now -- but regarding the last one, considering our cash balances, I think it was quite obvious that at some point that a series of Preferred Stock will be paid.

Make sense. Thanks for the color. That’s all for me. Thank you for taking my questions.

This concludes our question-and-answer session. I would like to hand the call back over to Mr. Zikos for any closing remarks.

Thank you for being with us today and for dialing in the Costamare second quarter 2024 results. We are looking forward to speaking with you again during our Q3 results call. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.