Costamare Inc. (CMRE) Q3 2024 Earnings Report, Transcript and Summary

Thank you for standing by, ladies and gentlemen, and welcome to the Costamare Inc. Conference Call on the Third Quarter 2024 Financial Results. We have with us today Mr. Gregory Zikos, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. [Operator Instructions]. I must advise you that this conference is being recorded today, Friday, November 1st, 2024. We would like to remind you that this conference call contains forward-looking statements. Please take a moment to read slide number two of the presentation, which contains the forward-looking statements. And I will now pass the floor to your speaker today, Mr. Zikos. Please go ahead, sir.

Thank you and good morning, ladies and gentlemen. During the third quarter of the year, the company generated net income of about $80 million. As of quarter-end, liquidity was above $1 billion. In the containership sector, with added vessels of less than 1%, the fleet can still be considered as fully employed. The market is split between the larger sizes, which do remain in limited supply, and smaller vessels, where the availability of tonnage is greater. As the pool of bigger tonnage is unable to meet demands, charter rates continue to evolve at firm levels. During the quarter, we chartered seven containerships at healthy levels. The new charter agreements are expected to generate incremental contracted revenues of above $165 million. The containership fleet employment stands at 100% and 94% for 2024 and 2025 respectively. Total contracted revenues amount to $2.3 billion, with a remaining time charter duration of 3.3 years. On the dry bulk side, we are now progressing with our strategy to renew the owned fleet and decrease its average size. During the quarter, we agreed to acquire two 2014 and 2015 built Ultramax vessels and during 2011 built Capesize ships, while at the same time progressing with the disposal of smaller tonnages. CBI manages a fleet of 56 ships, the majority of which are on index-linked charter agreements. We have a long-term commitment to the sector, and we view the vessel owning and the trading platform as highly complementary activities. Finally, with regards to next-in-my-time leasing, the platform continues to grow with committed funding for 32 shipping assets, reflecting total funding commitments of above $410 million on the back of a healthy pipeline. Moving now to the slide presentation. On slide three, you can see our third quarter results. Net income for the quarter was $75.5 million or $0.62 per share. Adjusted net income was $81 million or $0.68 per share. Our liquidity stands at over $1 billion. Turning into slide four, regarding our S&P activity, we have agreed to acquire one Cape size and two Ultramax dry bulk ships. In parallel, we have concluded the sale of two Supramax vessels and agreed to sell one Handysize ship. Slide five. On the chartering side, we have chartered seven containership with incremental contracted revenues of above $165 million. Our revenue days are fixed 100% for '24 and 94% for '25, while our contracted revenues are $2.3 billion with a TEU-weighted remaining duration of 3.3 years. In parallel, we continue to charter all our dry bulk prices in the sport market, having entered into more than 30 chartering agreements since our last earnings release. Slide six. Regarding our financing arrangements, we will fully prepare with cash on $100 million unsecured bonds issued by customary participations. In addition, we have agreed to refinance our dry bulk fleet without an increase in leverage. This deal is coupled with improvement of funding cost and extension of maturities. Finally, we have roughly available $94 million for financing of vessel acquisitions. Slide seven. Regarding CBI, we have chartered 56 period vessels, with the majority of the fleet being on index-linked agreements. On our leasing platform, we have already invested around $123 million. NML continues to grow with complete funding for 32 ships and has a very healthy pipeline. On Slide 8, on this slide, you can see our liquidity exceeding $1 billion. This gives us the ability to look for opportunities to grow the company on a healthy basis. Slide 9. Charter rates in the containership market continue to evolve at very firm levels, especially in the latter segments, despite there is a decrease in book rates. The continued injection of new building capacity, though, remains the principal threat of the market. The idle fleet remains at low levels of 0.8%. Moving to the final slide, then, you can see the recent dry bulk market trends in the spot and forward markets. The dry bulk order book stands at 10.3% of the total fleet. With that, we can conclude our presentation and we can now take questions. Thank you. Megan, we can take questions now.

Thank you. [Operator Instructions] Your first question comes from the line of Omar Nokta with Jefferies. Please go ahead.

Thank you. Hi, Greg. Thanks for the update. Just a couple of questions from my side. Just first on the Greek bond, I think it's the Greek bonds, the €100 million that you've redeemed early. Just wondering, I know those were relatively much lower interest cost, and so just want to get a sense of what drove the early redemption of those bonds.

Yes, yes. You're right. Yes, this is a bond which was originally maturing next year, and we are like preparing a year earlier. This was on an unsecured basis, relatively competitive terms, at like a 2.7% cost. The reason being that there are some tax implications which have to do with pillar 2, and for that reason, because this bond was issued by Costamare participation, a Cypriot, meaning European Union subsidiary of ours, for tax reasons and for some legal implications, we had to redeem it earlier. However, we did use those funds for close to four years, and as you rightly said, it was in terms of pricing, I think it was competitively priced.

Okay, got it. Thank you for that. And then just, we've talked about this in the past, but just on the dry bulk business with the CBI, and there's been reports and shipping circles of changes happening there at the personnel level. Just in general, wanted to ask, how are you thinking about that platform? Clearly, you've been investing in the actual dry bulk ownership platform with the Cape acquisitions. But just in general about the trading business, how are you thinking about that going forward? Is it still a main piece of the pie, or are you looking to scale that back?

No, no, no. First of all, thank you for that question, because you're right, there were reports in Lois Vincent and Trade Vincent [ph], rightfully so. A lot of people ask the same questions you are asking. A couple of points. We do support CBI. This is a long-term business for us. As I mentioned in my commentary, we consider the dry bulk owning side, together with the trading platform of CBI, as highly complementary activities. And there is absolutely no thought to scale it back. Quite the opposite. The personnel changes, they were affected for various reasons, but they have absolutely nothing to do with our intention to continue investing in the dry bulk business, including the trading platform. So today, CBI commercially managed loans to 56 vessels, plus 37 ships owned by the dry bulk business. So we're going to be getting close to 100 ships. This is quite a substantial business of operation, which I think we should consider this internally as one business, as one entity. So going forward, our goal is to stay there and to continue investing.

Okay. All right. Thank you, Greg. That's it for me. I'll turn it over.

The next question comes from a line of Ben Nolan with Stifel. Please go ahead.

Hi, this is [indiscernible] on Ben, but thanks for taking my question. I wanted to ask, with the announced time charters giving some better cash flow visibility and strengthening balance sheet, any thoughts on moving the dividend higher from the $11.5 per quarter?

Okay. Now the dividend is like, yes, as we already said, $11.5 or $0.46 per year. Couple of points. First of all, this is a board decision and I'm not authorized now to sort of speak on behalf of the board. We have a dividend policy which is flexible and can be revised. Of course, I cannot exclude the possibility of like one of the dividend payments or of increasing the dividend steadily per quarter. In the past, we have done both. And also in the past, we use sell buybacks. But I'm afraid that at this moment, I cannot give any color on that. This is something which is not for me to say right now. But definitely in the past, we have done one of the dividend payments. We have not increased the dividend and we have also done buybacks and also prefer stock buybacks. Probably it's not the case now for the preferred stock, but this is something for the board to decide.

All right. Appreciate it. Thank you.

Thank you.

The next question comes from the line of Clement Mullins with Value Investors Edge. Please go ahead.

Good morning. Thank you for taking my questions. Most has already been covered, but I wanted to touch upon your sale and purchase activity. Over the past year, you've acquired some capes while also shedding some older tonnage. And I was wondering what's your view on current asset pricing on the dry side? And secondly, going forward, do you have a preference to continue building your cape exposure or are you comfortable as is?

Yes. I mean, what we have been traditionally doing over the last year or a year and the half, we have been buying capes opportunistically and disposing of smaller tonnage. Now, we have been quite careful on how much we buy and how much we sell. And where, like, asset prices are today for capes, for example, let's take the new buildings. I think they are at levels which we would consider high in order to put a new building order for a cape. Also, I'm not sure today whether asset values for the capes represent today's chartering capacity of those vessels and the FFA curve going forward. So they may be a bit overpriced. So, I mean, we don't have a reason to buy if something we feel is expensive. We can see the weight. Our fleet is big enough. So there is no need to grow it further. So asset prices are today, we have more opportunistic rather than buying and block vessels where, especially considering two, four for the capes, it hasn't been a great market as of now. So, I mean, we're going to be more careful and take it as we go.

That's very helpful. Thank you. And on the containership side, you've taken a fairly conservative approach to fleet renewal, basically focusing on generating cash flow from existing assets. Is there maybe any appetite to going forward, acquire some modern tonnage or is asset pricing still too high?

Look, we haven't, we don't have any new buildings, any new building commitments today, because had we any new buildings delivered today or like next year, I think asset prices for the containers of new buildings have been extremely high from a historical perspective. So either new buildings or like three, five-year old tonnage containers today, I think the prices are high irrespective of the chartering market. So I think we would be assuming excessive residual value risk. And this is the reason we haven't done it. Now, of course, there may be opportunities. We look at the market, but we are extremely cautious.

Makes sense. Thanks for the color and congratulations for the quarter.

Thank you.

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

Yes. Thank you very much for your interest in Costamare and for dialing in today. We're looking forward to speaking with you again during the next quarterly results call. Thank you.

Thank you. That does conclude our conference for today. Thank you all for participating. You may now disconnect.