Diana Shipping Inc. (DSX) Q4 2014 Earnings Report, Transcript and Summary

Greetings and welcome to the Diana Shipping 2014 Fourth Quarter and Year-End Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ed. Nebb, Investor Relations Advisor. Thank you sir, you may begin.

Thanks very much and greetings to all. Welcome to the Diana Shipping Inc. 2014 fourth quarter and year-end conference call. The members of the Diana Shipping management team who are with us today are Mr. Simeon Palios, Chairman and Chief Executive Officer; Mr. Anastasios Margaronis, President; Mr. Andreas Michalopoulos, Chief Financial Officer; Mr. Ioannis Zafirakis, Chief Operating Officer and Secretary. Before management begins their remarks, let me remind you of the Safe Harbor notice which is attached to today’s news release. Certain statements made during the conference call, which are not statements of historical fact, are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act. The forward-looking statements are based on assumptions, expectations, intentions and beliefs as to future events that may or may not prove to be accurate. For a description of the risks, uncertainties and other factors that may cause future results to differ materially from the forward-looking statements, please refer to the Company's filings with the Securities and Exchange Commission. And now with that, let me turn the call over to Mr. Simeon Palios, Chairman and Chief Executive Officer.

Thank you Ed. Good morning and thank you for joining us today to discuss the results of Diana Shipping Inc. for the fourth quarter and full year 2014. The year was highlighted by the continued deployment of our strong financial resources to invest in the expansion of our fleet as opportunities permitted. In addition we continue to work to enhance shareholder value through share repurchases. To review our financial results the company’s recorded a net loss of $6.2 million and a net loss available to common stockholders of $7.7 million for the fourth quarter of 2014. The comparable net loss and net loss available to common stockholders for the fourth quarter of 2013 amounted to US$9.6 million. For the full year 2014, the company recorded a net loss of US$10.3 million and a net loss variable to common stockholders of US$15.3 million. This compared with a net loss and net loss available to common stockholders of 21.2 million for 2013. Our time charter revenues were $46.1 million for the 2014 fourth quarter, up from $39.5 million a year ago. Time charter revenues were US$175.6 million for the full year 2014 compared with $164 million in 2013. The increases over the year ago period were mainly due to the expansion of our fleet partly offset by decreased time charter rates. Diana Shipping continued to maintain our fourth quarters balance sheet reflecting cash and cash equivalents of nearly US$219 million. Long-term debt including recurrent portion was US$486 million compared to stockholders equity of approximately US$1.3 billion. We deployed a portion of our capital to enhance shareholder value by repurchasing and retiring approximately 2.85 million shares during the second half of 2014 at an aggregate cost of approximately $25.3 million. As a result the company issued and outstanding shares as of December 31, 2014 to approximately 81,806,000. I am pleased to note that we expanded and strengthened the Board of Directors effective March 4, 2015, the Board has increased its size from seven to nine members. Mr. Kyriacos Riris and Mrs. Semiramis Paliou were appointed to fill the newly added positions. The Board has determined that Mr. Riris will serve as an Independent Director. As per our established strategy, we continue to take advantage of the current market conditions to expand our fleet. We took delivery in February 2014 of the newly build motor vessel Crystalia and nice class Panamax dry bulk vessel of 77,525 tons dead-weight. The newly build motor vessel at Atalandi and class Panamax dry vessel of 77,529 tons dead-weight was delivered in May 2014. In August 2014 we took delivery of the motor vessel G.P Zafirakis a newly build capesize dry bulk vessel of 179,492 tons dead-weight, continue our expansion into 2015. In January we took delivery of the motor vessel Santa Barbara 179,426 tons dead-weight newly build capesize dry bulk vessel that we agree to purchase late in 2014. We also signed a ship building contract in early 2014 for the construction of a Kamsarmax dry bulk vessel of approximately 82,000 tons dead-weight of which we expect to take delivery during the second quarter of 2016. As a result of our exploration activities our fleet currently consists of 40 dry bulk vessels with two additional new building new Kamsarmax dry bulk vessels and one new building Kamsarmax dry bulk vessel expected to be delivered in 2016. We continue to manage the fleet in a prudent manner that promotes a balance of time charter maturities and produces a predictable revenue stream, currently our fixed revenue days are 66% for 2015. Moving forward the Diana shipping will continue to deploy strong financial capacity to support shareholders while you oriented that strategy. Specifically we will continue to seek opportunities to expand our fleet in order to be well positioned for a more promising place of the dry bulk side. At the same time our willingness to repurchase the company stock when and thus appropriate reflects our confidence and the value of our sales as a long-term investment. With that I will now turn the call over to our President, Stacey Margaronis, for a perspective on the industrial conditions. He will then be followed by our Chief Financial Officer, Andreas Michalopoulos, who will provide a financial overview. Thank you.

Thank you Simon and good morning. There is no doubt at the last quarter of 2014 brought a great disappointment to owners and huge movements in earnings of all bulk carriers unfortunately on the downside. A year ago capesize vessel time charter rates stood at around $40,000 a day and hopes were high for 2014. As we say prices at the time approach US$60 million. As we all know by now 2014 ended in a disastrous way despite seaborne Chinese iron ore import increasing by about 100 million tons. The Baltic dry index started the year at 2,113 and stood at 771 on the first trading day of 2015. As regard the Panamax index it started 2014 at 1,780 and ended the year at 827 while the capesize index started at 3,733 and stood at 456 on the first trading day of 2015. Just to update on these indices, the Baltic dry index closed March 3rd at 553, the capesize index at 490 and the Panamax index at 564. As has been pointed out recently by the Korean shipping messenger in the early part of this year the Baltic dry index slumps with lowest point in 29 years hit by a shipping glove, falling commodity prices and declining import demand from China. We agree with these analysts and the most important factor in the Baltic dry indices decline is industry wide over capacity. Let's turn to macro-economic considerations, a couple of weeks ago the IMS downgraded world growth estimates for 2015 from 3.8% to 3.5% and for 2016 from 4% to 3.7%. China the world's largest iron ore consumer expanded 7.4% last year, the slowest pace since 1990 according to the statics bureau. The Chinese government will announce its 2015 growth target in March this year. According to most brokers this is expected to be around 7%. In the mean time the IMF lower this 2015 growth forecast for China's economy from 7.1% to 6.8% mainly because of the slowdown in real-estate and other investments. China's trade performance, slumped in January with exports falling 3.3% from a year ago level, while imports stumbled by 19.9%. The slide in imports is the sharpest since 2009. This data highlighted according to Maersk Broker is deepening weakness in the Chinese economy. In January this year the retail sales in the U.S. registered an unexpected month-on-month decrease of 0.8%, despite lower oil prices which were expected to have increased disposable income and spending. It seems our consumers preferred to reduce their personal indebtedness first before embarking on more spending on goods and service. Nevertheless Maersk Broker reports that the strong labor market should keep the U.S. economy on solid ground at least during the early part of this year. It should be kept in mind though that the growth in the United States has a more limited impact on bulk carrier demand than on container ship sector for example. The reason is that overall the U.S. is a net exporter rather than a net importer of dry bulk commodities, as regard things like containerized finished goods the opposite is most definitely the case. Let's look at steel now. World crude steel production reached 1.662 billion metric tons in 2014 up by 1.2% compared to 2013. According to Commodore Research who sites Chinese statistics, Chinese steel output will fall in absolute terms this year. In spite of this the same organization is forecasting the Chinese iron ore imports will reach 1 billion ton this year increasing by 67 million tons or 7% from the last year's record. This can only come about if Chinese steel mills continue consuming greater amounts of imported iron ore compared to domestic iron ore. According to Clarkson's Chinese Ministry of Finance removed the export tax rebates on steel products containing boron on 1 January, 2015. It is widely expected but the removal of this export tax rebate may place some pressure on Chinese steel product exports in 2015, and it will help the government cut over capacity and consolidate China's steel industry. The crude steel capacity utilization ratio in December 2014 was 72.7% which was 2.4% lower than in December 2013. Average capacity utilization in 2014 was 76.7% compared to 78.4% in 2013. Chinese steel prices have dropped by 8% so far this year according to Commodore Research compared to a drop of 14% during the whole of 2014. In China crude steel production increased 0.4% in 2014 compared to 7.5% increase the year before. This was the weakest growth going back for 24 years. As for iron ore according to Clarkson's during 2014 total seaborne imports of iron ore increased by an impressive 12% and reached 1.328 billion tons. During 2015 Clarkson predicts that global iron ore imports will grow by 6% and reach 1.413 billion tons. According to Pareto Securities the dry bulk shipping market started the year with concerns about excess supply of iron ore in China. Officially inventories of iron ore along the coast lines have declined in recent weeks to 93.2 metric tons and are marginally higher than a year ago. Unfortunately as Pareto points out there are no official statistics on the inland inventories of iron ore and we share the fear that these stockpiles are actually rising rapidly and could act as a drag on shipping activity going forward. Steel mills could very well draw down on these stockpiles rather than import more steel making material from the Western Australian area and from Brazil. Much will obviously depend on domestic iron ore production which for some unknown reason was increasing during 2014 until it came to a virtual halt at the end of the year. Clarksons expects the Chinese iron ore imports to grow 7.5% this year, the slowest since 2010. Furthermore Maersk Broker reports that China's iron ore imports in January were 78.6 million tons, which was down 9% year-on-year and down 10% compared to December's record high. This drop can be partially attributable to the Chinese New Year festivities which started soon thereafter. This steel making raw material is the biggest commodity carried by dry bulk ships and China is indeed the biggest buyer. Coking coal now. Global seaborne trade of coking coal dropped according to Clarkson's by 1% last year, expected to increase by only 2% in 2015. For several years India has failed to meet domestic production targets of coking coal and has been increasing imports. In 2014 imports increased by 24% year-over-year. Projections indicate that with recently commissioned infrastructure projects coking coal imports are expected to increase by further 9% this year. India accounts for approximately 25% of projected coking coal imports in Asia. On thermal coal on a worldwide basis, seaborne trade of this commodity is expected by Clarksons to increase by 2% this year and reach 953 million metric tons. According to Clarksons thermal coal imports to China decreased by approximately 6% year-on-year in 2014. The reduction in Chinese import demand was partly caused by higher levels of domestic hydro electric power generation which also contributed to a rise in Chinese thermal coal stocks. For 2015 China is expected to import about 188 million metric tons of thermal coal, which would be 2% higher than in 2014. Indonesian authorities recently announced that the country's coal production target for 2015 will be 416 million tons. If that transpires this year it will be the best event that the dry bulk market could have hoped for coming from Indonesia. India according to Commodore Research is likely to import even larger amount of Indonesian coal this year and Chinese coal imports could possibly increase this year as well. World coal exports only increased by 40 million tons 3.3% that is to 1.247 billion tons during 2014 and the tendency for shorter haul shipment proved the negative factor for the market. The world's largest consumer of coal China experienced a reduction in total annual imports for all types of coal in 2014, for the first time in 10 years with the exception of 2008 when the dip came about due to the financial crisis. As for stockpiles according to Commodore Research coal stockpile at the Qinhuangdao Port China's largest coal port have reached eight million tons. The continued drive in coal port stockpile remains a negative factor for the dry bulk shipping market and near-term coal import prospects. Turning to grains now according to Clarksons combine global wheat and coast grain trade is projected to decline 3% to 297 million metric tons in 2014, 2015 crop year. Chinese, Moroccan and Russian import demand is projected to decline due to a stronger domestic supply then what was recorded the year before. Chinese imports are expected to drop by 27% year-on-year mainly due to the recovery from weather related crop damaged which effected the 2013, 2014 season by destroying 20 million metric tons a week. Similarly total grain exports from the United States are expected by Clarkson to drop during the current crop season by 6% to 73.9 million metric tons. Let's look at this spot market and time charter earnings of dry bulk carries. According to Howe Robinson the huge logistical difficulties caused to Brazil and iron ore shippers by the rainy season combined with planned annual routine maintenance that have the major impact from capesize demand contributing to January weakness in earnings for this type of ship. As of the first week of February the average spot market earnings for capes have dropped to a miserable US$5,125 per day. As if this was not bad enough the equivalent rate of Panamaxes stood at $3,906 per day, a rate which is definitely below operating expenses. The four time charter rout average for Panamaxes stood at $4,424 per day at the beginning of February while the cape for TC route was at US$6,530 per day. What has helped most of these ships to stay away from layup is firstly the hope of seasonally improved rates later this year and secondly the fact that one year time charter earnings were on average to the $10,875 per day of capes and around 7,500 per day for Panamax. Let's look at supply and the new building order book. Banchero Costa reports that 746 orders were placed for dry bulk carriers during 2014 of which 145 were for Panamaxes and 132 capes and 19 for very large four carriers. As of February 1st this year there was 162.7 million tons dead-weight on order representing 21.4% of the existing dry bulk carrier fleet. Of this total the capesizes on order represent 69.1 million dead-weight equivalent to 22.3% of the existing capesize fleet. As for Panamaxes there are 44.9 million dead-weight tons on order representing 16.7% of the existing Panamax fleet. The greater disappointment goes in the Handymax sectors, were a staggering 26.8% of the existing and relatively modern fleet is on order. Deliveries of all type of bulk carrier new buildings are mainly concentrated in 2015 expect for the capes were 2016 we see 33.2 million tons dead-weight delivered compared to 27.7 million tons this year. Scrapping, demolitions of dry bulk carriers during 2014 came to 251 vessels according to Banchero Costa totaling 15.3 million tons dead-weight. This year to date about 55 bulkers have been sold was scrap, of 4.154 million tons dead-weight compared to 305 ships of 15.9 million dead-weight tons sold during the entire year. In 2014 the average age of bulkers being sold for scrap has dropped to 25.4 years as of early this year according to Braemar ACM ship broking. This has been coming steadily down since 2011 when it was around 32 years. Clarkson's report at the average age of all dry bulk ships scrap during 2014 was 27.3 years. As for demand according to Clarksons in volume terms global seaborne dry bulk trade grew by 4% year-on-year in 2014, boosted largely by growth in the iron ore trade. Bulk seaborne trade growth is expected to be 4% up year-on-year and reached 4.668 billion tons this year. Looking at supply now, the new building delivered in 2014 amounted to 514 vessels according to Banchero Costa a total of 48.1 million tons dead-weight. The Panamax and Post-Panamax fleet is expected to grow this year by 6% and only 3% in 2016 according to the same source. The cape and the VLOC fleet is expected to grow by 6% in 2015 and by the same percentage in 2016. Interestingly enough the Handymax fleet is expected to grow by a massive 12% this year and 6% in 2016. This will undoubtedly put pressure on Panamax earnings this year and possibly next. Total deliveries in 2015 are expected to reach approximately 61 million metric ton dead-weight inclusive of ships which had been scheduled for delivery in 2014 but have been delayed. This bring us to slippage now which according to Banchero Costa meeting deliveries during 2014 was around 20% in slippage terms. So far this year due to delay deliveries from 2014 a 127% of the order book has been delivered so far compared with scheduled delivery. This percentage will undoubtedly go down as the year progress, but it is unlikely that slippage will exceed 20% during 2015. The outlook now, according to Commodore Research about 11 Capesize orders have been changed to tanker orders so far this year, which is a positive development for 2016 and beyond. Braemar Seascope reported after the spring festival is over; the scope of recovery in bulk carrier earnings will be fairly limited. We foresee that the BDI will be hovering around 700 and 800 points towards the end of this month, a large number of new buildings commissioned during the good years of the mid 2000 came online in 2008 to 2009 at precisely the wrong time. Unfortunately, this overcapacity has only worsened during the year since then. The result of this trend is unfortunately that rate unlikely to remain low for a long time as the industry overcapacity works itself out of the shipment that will in all likelihood remain the case even if global mainly Chinese commodity demand recovers substantially. So this is once again the environment which the management team of Diana Shipping is implementing investment strategy which we have repeatedly stated and explained. Our priorities to preserve these strength and integrity of our balance sheet and gradually increase leverage towards the 60% to 65% or even 70% mark and asset values, we believe that purchasing vessels at this point in the cycle will prove to be profitable investment as the market strengthens gradually from 2016 and beyond. We also believe that provided there is a continued restrain in ordering, the lack of bank finance and the even greater lack of investor appetizing the capital markets will eventually lead the industry to better days. All the ships will be scrapped and earnings will gradually increase, this should find our company in the advantageous position of owning mostly very modern ships to the large income generating capability. That will be the time when our dividend can be reintroduced and older vessels can be sold at very advantageous prices. The company can then expand through the essence of fresh equity which will enhance both our ability to pay dividend and the level of those dividends. To close on a more positive note on the state of the dry bulk carrier market allow us to present the quote from Shakespeare’s play, Richard the III Act 1 Scene 1 where the physically deformed Richard the III recites, “Now is the winter of our discontent made glorious summer by this son of York.” This quote full of metaphors which usually appears only in its first half ignoring the second creates a false impression of doom in what Richard here resembling the poor bulk carrier ship owner, he is trying to express indeed what Richard is saying here is that the long winter is now made glorious summer through his rather succession to the English crown after the throne in Henry the VI. Likewise in shipping better days will quickly succeed the winter of this content when the market -- because the private equity funds from their important damaging unfortunately role in shipping and ship owners show the strength in ordering new buildings. Then as Richard said, all the clouds that lowered upon our house in the deep bosom of the ocean will be buried. I will pass on this note, the call to our CFO and Andreas Michalopoulos who will provide us with the financial highlights of the last quarter and whole year 2014. Thanks.

Thank you, Stacey and good morning. I am pleased to be discussing today with you Diana’s operational results for the fourth quarter and year ended December 31, 2014. For the fourth quarter of 2014, net loss amounted to $6.2 million, net loss available to common stockholders amounted to $7.7 million and the loss per share was $0.10. Time charter revenues increased to $46.1 million, compared to $39.5 million in the fourth quarter of 2013. The increase was attributable to the revenues derived from the vessels Myrsini delivered in October 2013, the P.S. Palios delivered in December, 2013, Crystalia delivered in February 2014, Atalandi delivered in May 2014 and G.P Zafirakis delivered in August 2014. This increase was partially offset by decreased revenues due to the decrease in average time charter rate that we achieved through our vessels during the quarter, compared with the same quarter of 2013. Ownership days were 3,588 for the fourth quarter of 2014, compared to 3,241 in the same period of 2013. Fleet utilization was 99.2% compared to 99.5% in the same quarter of 2013, and the daily time charter equivalent was $12,090 compared to $11,694 in the same quarter of 2013. Voyage expenses $3.5 million for the quarter. Vessel operating expenses amounted to $22.3 million, compared to $19.9 million in the fourth quarter of 2013, an increase by 12%. The increase was attributable to the 11% increase in ownership days, resulting from the enlargement of the fleet. Daily operating expenses also increased mainly due to increased repair and maintenance costs taxes and environmental costs and was partly offset by decreased crew costs. Daily operating expenses was $6,225 for the fourth quarter of 2014 compared to $6,155 in the same quarter of 2013 representing an increase of 1%. Depreciation and amortization of deferred charges amounted to $18.3 million, general and administrative expenses increased to $7.5 million compared to $7.4 million in the fourth quarter of 2013. The increase was mainly attributable to increased number of employees and salaries and was partly offset by decreased compensation cost on restricted stocks. Interest and finance costs were $2.2 million for the quarter compared to $2 in the same quarter of 2013. This increase was mainly attributable to increased average debt and average interest rates in the fourth quarter of 2014 compared to the same quarter of 2013. Interest and other income amounted $2.9 million and was the same as in the fourth quarter of 2013. Income from investment in Diana Containerships amounted $2.2 million this compared to a loss of $2.1 million for the same quarter of 2013. Moving through the year ended December 31, 2014 now. Net loss for Diana Shipping Inc. amounted to $10.3 million, net loss available to common stockholders amounted to $15.3 million and loss per share was $0.19. Time charter revenues increased to $175.6 million compared to $164 million for 2013, the increase was attributable to the enlargement of the fleet and was partly offset by decreased average time charter rates. Ownership days were 13,822 compared to 12,049 for 2013. Fleet utilization was 99.4% compared to 99.3% for 2013 and the daily time charter equivalent rate was $12,081 compared to $12,959 for 2013. Voyage expenses were $10.7 million for 2014. Vessel operating expenses amounted to $86.9 million compared to $77.2 million for 2013, an increase by 13%. The increase was attributable to the 16% increase in ownership days resulting from the enlargement of the fleet. Despite the increase in total operating expenses daily operating expenses decreased mainly due to decreased average crude costs, insurances, and other operating expenses. This decrease was partly offset by increased repairs and maintenance, taxes and environmental costs. Daily operating expenses were $6,289 for 2014 compared to $6,408 for 2013 representing a 2% decrease. Depreciation and amortization of deferred charges amounted to $70.5 million for 2014. General and administrative expenses amounted to $26.2 million compared to $23.7 million in 2013. The increase was mainly attributable to increased number of personnel and salaries. Interest and finance costs amounted $8.4 million compared to $8.1 in 2013. This increase was mainly attributable to increased average debt and average interest rates during 2014 compared to 2013. Interest and other income amounted to $3.6 million compared to $1.8 million in 2013. The increase was due to interest income and finance fee deriving from our loan agreement with Diana Containerships Inc. partly offset by decreased interest income due to the reduction of our average cash balance. Income from investment in Diana Containerships Inc. amounted to $12.7 million and was mainly due to our additional investment of $40 million during the year increasing our share ownership in Diana Containerships to 26.24%, this compared to a loss of $6.1 million in 2013. Share repurchase program. During the second half of 2014 we repurchased and retired 2.8 million shares for an aggregate cost of about $25.3 million and subsequently to year-end we additionally repurchased and retired 413,804 shares for an aggregate cost of $2.7 million. Thank you for your attention, we would be pleased to response your questions now and I will turn the call to the operator who will instruct you as to the procedures for asking questions. Thank you.

[Operator Instructions]. Our first question comes from the line of Amit Mehrotra with Deutsche Bank. Please proceed with your question.

So you all have been bearish on the dry bulk market for some time now. And you've been absolutely right but with the shift and sentiment and sort of the decline in asset values I would imagine that you are incrementally less negative and I'm just trying to understand you'll get a better understanding of that maybe a way to ask you sort of on a scale of one to ten, one being no change to your bearish outlook and ten being that you think there is now sufficient negative sentiment for dry bulk to recover. Where are you thinking on that scale? And what levels of scrapping or lay ups do you think you would need to see to further impact that changing view.

Amit this is Ioannis Zafirakis speaking. We are to put it blindly at number one, we have no change whatsoever in our bearish view about the market. We have not seen the scrapping and the laying up of vessels that we want to see before will start going up this scale. The psychology as regard to market turning positive should turn little bit more to the less and less optimistic. But not at the pessimistic level. We won't achieve that before and some other things as we have explained in the past, before we start going up in the scale of your question.

Maybe I can just follow up on that given that view does that change the way you Diana Shipping thinks about capital allocation say for the next 12 to 18 months. Maybe you fear even more cash into share buybacks or the container business instead of using it to buy new dry bulk vessels. Is there any change that we can expect given that view of the sort of one on that scale?

So theoretically speaking no because as you know we are more on a shed way of doing things. Having said the psychologically there is an element where by having the view that we have we are not very quick in our decisions to buy a vessel, we are not offering the price that we should have had offered to buy vessels that we have inspected. But the answer to your question is that we should not change the base of our base repurchases and the staggering manner of our purchases and shows from the one hand the survival of the company even in a prolonged down market. But at the same time we are sitting over good average in our purchases rather than pin pointing the absolute bottom.

Last question with respect to your available days for the first quarter and for the full year. Can you just provide us how many days are locked in and at what rate versus the TCE rates achieved in 4Q of little over 12,000?

Of course this is easy for anyone to see from our Web site. But we have fix coverage for 2015 at the moment is around 66%. With an average daily time charter of $12.3000 per day.

Our next question comes from the line of Gregory Lewis with Credit Suisse. Please proceed with your question.

Stacy or I guess Ioannis, could you talk a little bit about the dynamic that we've seen here to date I mean you characterized that is miserable. But when I look capesize vessels and Panamax vessels pretty much every day this year it looks like they're not even covering their daily operating expenses. I guess I'll just be interested in how you view the sustainability of rates that low before we eventually see not necessarily a stacking response but I have a handful of vessels and I'm just going idle them, because I'm actually losing money at running at these rates. Just to be curious on sort of the thought process around that?

This is a very good question and it has to do for with fact of how long ship owners they can keep burning cash. The five plus the interest rates at the moment as we speak are at the very-very low level shelves a lot and we all know that vessel, when the vessel is losing money it is a big liability and especially in a high interest environment. The history says that ship owners they try to sustain, they try to burn some cash before they take the decision to lay up the vessel or to put the vessels idle. And we’re still in that phase where the pockets of the ship owners are such that they can sustain the fact that with their losing money. And that’s one another reason why we are not very optimistic about the near future, but there will be a point where they will believe to that and they will say enough is enough, I am not covering my variable cost, let me lay up the vessel or try to sell it or even scrap it.

Another to what Ioannis said, you have to understand that there is a differential between rates on this spot market and there is a differential rate for the 12 or the two year period. Now by having this differential in rates the first on the spot is around for the capes around $4,000 to $5,000 daily as opposed to two years for a good vessel at around $11,000 to $12,000 daily. So the $12,000 is well above the running expenses of the vessel admittedly for a two year period we’re committing the same, but anyway is about the running expenses of the vessel, the pure running expenses of the vessel.

Our next question comes from the line of Fotis Giannakoulis with Morgan Stanley. Please proceed with your question.

You have always been very vocal about the weakness of the market and obviously the market has performed exactly as you have said, without trying to ask you to forecast the future. Can you give us your experience -- share with us your experience about how long usually this market, this weak market lasts? We’re right now below operating expenses as you’ve mentioned although the one year rates they’re slightly above but the spot market is well below operating expenses. Based on your past experience and your judgment how long do you think that the situation can continue?

I think on these subjects Fotis we have been talking quite substantially for a very long time. But the criteria is that when the potential buyer lose interest in buying ships and he’s happier to have less ships and more ships, then you have a psychological effect that things are taking place in a such manner that the indifferent equilibrium comes to place, because the appetite is not there, the prices are going down. The vessels have definitely to lay up and things are moving to the proper direction in putting the market in a different phase all together. And this up to now it has not been some for example our ships today capes that they have been inspected by almost 10 people. There is still appetite admittedly at lower levels but the appetite is still there and psychologically that appetite has to go away.

Fotis the things that we have been saying is that the deeper the downturn the quicker the recovery is going to be. If we are hovering around this levels and always we’re considering that to be the lower part of the cycle and that we’re at the lower level, then that will take much longer compared to a scenario where we truly have a blood bath as I keep saying and we have a hiccup even on the demand side for example. And the steeper that downturn the quicker the recovery is going to be, but do not expect from our side to give you a forecast for the market, we never say that we know what the market is going to do after six months from today. What we keep saying is that stop trying to forecast, look at the fundamentals, look at the events that have happened and see whether we have seen any events towards the right direction and if you look carefully that you will notice that we have not seen any event taking place towards the right direction.

Yes I understand that and my question had to do mostly over the fact that even in this bleak market environment with your negative outlook where we have seen that after the financial crisis you have bought approximately 20 vessels. And obviously the prices are very attractive versus the historical and they can give you a very young fleet when the market recovers. But my question has to do with fact that as the market continues to be weak and as you also continue to acquire more vessels; your acquisition capacity is declining. And can you give us an estimate of how much more capacity do you estimate that you have given the pace of your acquisitions, can you keep buying one vessel a month that you are targeting for one, two years -- what is this duration that this purchasing power can last if the market stays long and how likely do you think that it is the market will stay longer than this capacity will remain?

As we have said in the past our first priority is to ensure the survival of the company for as long as possible. At the same time we want to keep buying vessels in this lower part of the cycle because we strongly feel that we should shed this type of investment. And we have -- as we kept saying in the past we're talking about one vessel every two months and we tell we will try to spend let's say something like in the vicinity of $15 million every two months. And at the same time we will make sure that our cash flow, our loans et cetera are going to be serviced in such a manner that we will buy some more vessels for the next year at least. And then from then onwards we can survive a bad environment for another two to three years. This is our target.

So the target is to buy six more vessels during 2015 over the next 12 months and then wait to see five more vessels?

Five more vessels and spend something in the vicinity of $70 million from our own equity.

And one more technical question about your debt financing Andreas I think that you have one balloon that is coming due this quarter in March. Are you going to refinance that or are you going to repay that in cash?

We are going to ultimately refinance that balloon. We're at the moment finalizing on this refinance. For technical reasons we might not be ready on the 10th of March when this is to be repaid, so we will use our cash to repay and then refinance it swiftly after. And because it's part of an overall as Ioannis said that let's say we're looking at our loans at the vessels that are unencumbered at the moment to see what we can do with them. We are also going to leverage the new acquisitions like Santa Barbara which we acquired at the beginning of the year. So all that is part of that package together with motor vessel in [New York] that rightly so you said that is coming due in a few days.

Our next question comes from the line of Jon Chappell with Evercore. Please proceed with your questions.

Quickly on the share buyback. I mean given your view on the market I think your view on asset prices given your rate outlook I would have to think it as Ioannis said, you're still one, so you think that the market is going to continue to be weak. So if your stock right now is trading roughly at NAV maybe little bit of a discounted current asset prices but if you are expecting asset prices to drop still very meaningfully, is that a good use of capital buying back your stock and what could be perceived as a big premium to where you think asset values will ultimately end up once you want to retain more cash for the ultimate bottom purchasing?

Jon if you think about it this is exactly the same question as Fotis's question. For us buying back our shares is either buying back our shares or buying a vessel. In the headway of looking at our acquisitions as I explained earlier instead of buying a vessel every two months we could spend this $50 million buying back our shares either we're trading below net asset value in a similar manner without purchasing a vessel. You should consider the repurchasing of our shares as an investment at this part of the cycle. So it goes together with our vessel acquisitions, so from the moment we said we will keep the same pace and we will make sure that we will be buying even at this part of the cycle and having the outlook that we have then you shouldn’t worry about the share repurchases if we are to do any except if you are worrying with the fact that we are buying steel vessels without and not waiting to see the absolute bottom of the market.

And then just one follow up. When you are ready to making more substantial move and you think that things are closer to the bottom and maybe pick up the pace a little bit. I'm just curious about your ultimate financing goals at the prior peak you had been able to take on significantly more debt than you're sitting with today. Could you finance up to 60 plus percent of the acquisitions or the banks there for that type of lending in this environment?

Yes at the moment they are there for that type of leverage and we intend to explore that to the maximum.

Don't forget that Mr. Margaronis also talked about 75% ultimate level in dropping price environment. So it is very probable that the way that prices are going that we will end up being finance as the 75% level that we said.

Our next question comes from the line of Magnus Fyhr with GMP Securities. Please proceed with your question.

Most of my questions have been answered. But just as a follow up on the asset purchases any preference you mentioned 70 million in equity 60% financing buying five ships. Do you see any better opportunities -- better opportunities in the bigger class vessels or do you find basic on a case by case basis.

I think it's a matter of case by case, and I think that the resale is a very good target provided you can purchase them at reasonable prices. But there will be a number of resale and we are focusing more than second hand tonnage although, the second hand should be very young still we prefer the vessels which are coming straight from the ship yards. So that’s where we're focusing more. As regard to the size of the vessels as we have said in the past we strongly feel that market prevails as regard the prices. So for us if that vessel technically is something that we like and operationally wise we do not differentiate between a Panamax from a very big capesize vessel to because we are not paying the same price. We don’t have a preference, let me put it like this.

Our next question comes from the line of Sal Vitale with Sterne, Agee. Please proceed with your question.

Most of my questions have been answered. Just wanted to make a comment Ioannis I think I agree with what you said earlier about the state of the market in terms of psychology that there may be less optimism but there is not yet the degree of pessimism that we need for recovery. I guess following up on that comment as you saw recently this week there was a pretty significant order for additional new buildings by private equity back firm. How do we think about what's your opinion of what needs to happen? How about things need to get or maybe how long things need to stay at this level for the optimism to decline even further, any thoughts there would be helpful.

What you said at the beginning and what we said previously about having a real pessimism in the market is something that we should look for. What you describe about the new order that recently happen from a private fund is exactly their own ingredient for the market to turn positive soon. There is still a hidden optimism in a lot of places. What we need to see is this private money erratically going out of the market even some of the very big companies having problems meeting their CapEx's that being all over the news and then people start thinking twice before they spend money on the fifth special survey of the vessel even before. And we still have for example in our case yourself we have analyst wanting to ask questions. The next time that we will have less and less analyst really interested about the dry bulk sector it would be a very good point for the market to start for us to start thinking positively.

He has mentioned towards the end of my little presentation, I mean it is exactly what Ioannis described which is wrong with the market. These private equity funds have to lose interest in the bulk carrier market because the funds that they can make available and put forward for increasing their investment in shipping have more and more damaging effect the lower the asset value goes because more ships can be bought for a certain specific amount of an investment, then their investments go into hundreds of millions or billions rather than few million dollars apiece. So we had a problem there, and as long as there are many private equity funds willing to invest and take an interest in dry bulk shipping, the markets will unfortunately remain at relatively unprofitable levels.

And then just a quick follow-up, Stacey earlier you’ve mentioned several forecast I think you’ve mentioned that 7.5% is currently the Clarkson's forecast for Chinese iron ore imports at 7.5% increase for 2015, so is you personal opinion that we’ll see a number somewhere closer to the mid-single digits and what’s your view on this?

Yes, I mean the estimates vary from 6% to 7.5%, the thing is that the number is high that 1 percentage point is a lot of cargo, but the problem unfortunately is not that as we mentioned earlier, the problem is the ships that are going to be available to carry that cargo whether a 6% or 7% increase compared to 2014. And that’s what bothers us at this stage of the development in the markets. We have to have strong demand for sure but we need supply to go down that’s imperative. If the supply of ships keep coming the way they have been coming up to now and will be coming this year and next regardless of what that Chinese do, the only thing that they will manage by increasing their import is to make low rates, less low let us say and avoid having even lower rates, but that’s all we’re going to see if that develops. It’s not going to be a turning point for the market.

Our next question comes from the line of Ben Nolan with Stifel. Please proceed with your question.

I have just a few sort of modeling I suppose clarification. I was hoping if you could maybe say how much or what you’re CapEx your current CapEx profile is for 2015 and 2016 and then also the debt amortization profile and I know as Palios mentioned that there is maturity coming up, but or how much should I think about modeling in terms of annual debt repayment then also what’s the CapEx profile?

I think the debt repayment you will see in a few days in our 20-F and the best thing is to refer to that because that will take a lot of our time now to go through our debt especially due to the fact that we have diversified portfolio bank. In terms of capital expenditure as you know we have only three vessels on order therefore those three vessels until the end of -- we only put a 15% down payment until the end of 2014. In the first quarter of '15 we had only the steel cutting of the first Newcastlemaxes for 15% down payment $7,305,000. And during the rest of the year we will have steel cutting for the two other vessels that’s for both Newcastlemax remaining and the Kamsarmax DY 6,006 which would be a down payment of 15% for each of them. And then you will get also during this year mainly towards the later part of the year the [Keeling] for the three vessels. So now in terms of [Keeling] and CapEx for the Newcastlemax the payment will be 10% of the purchase price and for the Kamsarmax it will be 5% the payments for the [Keeling] and then all other CapEx for this year the rest will come '16 when we get the delivery of the vessels.

And as it relates to those vessels and maybe it relates to the broader market, given your outlook for the space have you considered all or felt out the yards with respect to maybe delaying the delivery of those vessels and do you expect there to be much push from ship owners to and maybe could talk to the success of ship owners and postponing delivery of new vessels?

I don’t think we’re in the -- with only three vessels on order and considering two things, one the purchase price of those vessels and two the number of those vessels that are only three we don't foresee to delay those vessels on our side, but we feel that some other owners might be actively looking in delaying those vessels especially the ones that we'll not be able to secure finance for in many orders that they have but that's for them to answering not so much for us.

Part of what Andreas said, and as for sure that the two Newcastlemaxes which we have on order will be first on the list to be chartered because of highly economical consumption there and the same holds true for the Kamsarmax. So we are not having a problem in delaying the ships as long as they are put in a slot where we don't have any other Newcastlemax to charter at the time neither Kamsarmax, so that's the governing factor. So we're going to proceed as per schedule and we are also already discussing leverage on those.

My last question relates to the share repurchase program. Just curious how much is left available under your repurchase program and whether or not you have done any so far in -- any addition in 2015 thus far?

Thus far we have done 0.4 million shares in 2015, we have stopped around the end of January 2015 that's $2.7 million. So in total we've done out of a $100 million, we have done $27.9 million, so we have plenty remaining but what is most important is what Ioannis said at the beginning of this call regarding share repurchase. Is that we trigger the share repurchase only because we can't find a vessel available during particular time span when we're looking for a vessel either because it's not technically correct or because we have not been able secure a vessel. So we only use it for that purpose but I hope we have answered it.

The 70 million remaining is certainly a number that we do not intend to use within this year.

We have reached the end of the question-and-answer session. I would now like to turn the floor back over to management for closing comments.