Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers Conference Call to discuss the Fourth Quarter 2018 Financial Results. Today, we have with us from Safe Bulkers, Chairman and Chief Executive Officer, Polys Hajioannou; President, Dr. Loukas Barmparis; and Chief Finance Officer, Konstantinos Adamopoulos. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] Following this conference call, if you need any further information on the conference call or on the presentation, please contact Capital Link at 212-661-7566. I must advise you that this conference is being recorded today. Before we begin, please note that this presentation contains forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, concerning future events, the company's growth strategy and measures to implement such strategy, including expected vessel acquisitions and entering into further time charters. Words such as expects, intends, plans, believes, anticipates, hopes, estimates and variations of such words and similar expressions are intended to identify forward-looking statements. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the company. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, change in the demand for drybulk vessels, competitive factors in the markets in which the company operates, risks associated with operations outside the United States and other factors listed from time to time in the company's filings with the Securities and Exchange Commission. The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company's expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. And now I pass the floor to Dr. Barmparis. Please go ahead sir.

Good morning. I'm Loukas Barmparis, President of Safe Bulkers. Welcome to our conference call and webcast to discuss the financial results for the fourth quarter of 2018. We will start our industry update in slide four, where we present the quarterly charter hire average for both Panamax and Capes. As seen in both graphs the weakness -- a seasonal weakness in the beginning of this year, followed by strengthening of the market during the second half. In addition the uncertainties related to U.S.-China trade and the iron ore trade disruptions in Brazil have enhanced this seasonal weakness. In slide five, we discuss the demand side. Noting the successful disruption in iron ore trade from Brazil, which affect directly the Cape market, but also indirectly the overall drybulk trade. The top left would present the monthly imports from -- of coal in China. According to Clarksons for the first 11 months year-on-year, the imports of coal rose by about 9%. The restrictions related to the seasonal conditions have slowed down imports in Q1 though similar pattern is evidenced in all previous years. On the top right graph, we present the outlook of Indian coal imports, which in 2018 had sharp increase. And according to Clarksons focus this trend is expected to continue in 2019. Presently India has a positive sign and plenty of volume in coal imports. On the bottom graph will present the Chinese imports of soybean. The effect of trade war is evident in 2018. Hopes of U.S. and China reaching a trade agreement may restore the growth pattern. Let's move onto slide – to supply dynamics and fleet outlook in slide 6, where we present the deliveries the aging and the order book of Panamax to post-Panamax fleet. As shown with the green line on the right, 16%…

Thank you, Lucas and good morning to all. In Slide 15, we present some financial data on a quarterly basis. Our quarterly revenues our adjusted EBITDA and our operating cash flow have been constantly increasing thus improving our overall financial strength. This fact is also determined in Slide 16 where we present our adjusted EBITDA on a per vessel and per quarter basis. As our OpEx numbers include all items like dry-docking and pre-deliver expenses; in slide 17, we present the breakdown of daily OpEx and daily OpEx excluding dry-docking and pre-delivery expenses. Daily vessel OpEx increased by 11% to $4,353 for the fourth quarter of 2018 compared to $3,914 for the same period in 2017. Daily vessel operating expenses excluding dry-docking and pre-delivery expenses increased by 6% to $4,109 for the fourth quarter of 2018 compared to $3,887 for the same period in 2017. We present the slide 18, our daily free cash flow waterfall for the full year of 2018. During 2018 we continue to be profitable maintaining one of the most competitive breakeven points in the industry. We have earned about $13,000 per day on time charter equivalent basis and built less than $8,800 per day per vessel for all our daily outflows including operating, G&A, preferred dividend, interest and principal repayments. Our daily free cash flow stood at about $4,300 per vessel per day. In slide 19 we present our quarterly TCE which stood at $13,875 and we focus on our expenses both OpEx and G&A. The audited figure for this for Q4, 2018 was $5,737 as a result of: an 8% increase in average number of vessels to 41 vessels; of an expense of $900,000 related to three dry-dockings fully completed and one dry-docking partially completed in Q4, 2018 compared to none for the same…

Our question comes from the line of Ben Nolan from Stifel. Please go ahead. Your line is open. Mr. Ben, your line is open.

This is Ben Nolan. Can you guys hear me?

Yes yes.

Okay, good. Yeah. So my first question relates to may be how you're thinking about the time charter strategy in combination with your scrubbers. Obviously that is having scrubbers on your ships as they come and are delivered is a bit of a competitive advantage. But given the state of the market as it is at the moment with somewhat depressed by trade in Brazil and everything else that you guys walk through, is it may be -- are you thinking about possibly not going as long in terms of tenure or duration on those contracts as may be you otherwise would be for the vessels with scrubbers?

Yeah. Look the charting policy will be decided in due course. It's very early days, because nobody is sure what will be the exact differential of compliant fuel with HFO. Currently the futures market in Singapore estimate the differential is $240 for the end of the year. We want to see what the market will be evaluating by the end of the year or by the September, October. And at that time we'll start deciding of how we plan the chartering of those ships. It is quite possible that a number of those ships will work on the spot market to try and capture the biggest upside because we have 100% 2019 scrubber outfitting in our fleet.

Yeah. No, that's interesting and certainly having vessels in the spot market is a little bit of a departure from what you currently do but I can appreciate may be the competitive advantage that having the scrubbers might provide there. The -- my second question is thinking through the capital strategy, and obviously you guys can issue more shares if you want to buy that -- the vessel that's on order or not I guess, but at the same time you have been buying back shares. Currently the market is weak. How are you weighing your options between preserving cash, buying back shares or using shares? What's your current strategy with respect to what to do with the cash that you do have?

Yes. Obviously, when we buy shares it has be lower than when we issue shares. So we keep this principle and we'll evaluate in the future. But it's not in our -- its not our priority to buy back stock at this point. We bought some stock at the end of the year. It was lower than the levels we issued the stock to the seller, so we did that part. In the future, we have this option to pay for the ship with part shares. We may exercise depending on the share price.

Okay. All right. No, that's helpful. And then lastly, from me, obviously, I appreciate the -- you laid out what the dry-docking days are associated with the scrubber and ballast water installations. I might have missed it, but could you maybe sort of say what the CapEx schedule may look like associated with the scrubbers in particular?

There is a detailed schedule in our press release about the installation of the scrubbers. And you can find it spread out through the three quarters say Q2, Q3 and Q4 of 2019.

Yes. The CapEx is about $2 million to $2.1 million and this is the order of CapEx per vessel.

Okay.

And for scrubbers and may be in the order of $0.5 million for ballistic water treatment plant. So basically, I mean, if you understand that on our medium-size vessels, it's cheaper than on the bigger ones.

Yes.

Sure. Okay. Now that's helpful. And just out of curiosity lastly from me. Have you guys sorted out how to -- or the time period over which you will depreciate the scrubber CapEx?

Until the 10th of July.

This is added a book value recipient, you depreciated the 0.5 million of that.

Yes.

And also the values of the ships will be adjusted, because clearly it's an investment on the ship. So the value of the ship will be adjusted upwards when these equipments are fitted.

Perfect. Yeah. That’s all very helpful. I appreciate it. Thank you guys.

Thank you.

Your next question comes from the line of Jon Chappell. Please go ahead. Your line is now open.

Hi. It's Jon Chappell from Evercore ISI. Just one follow-up question from me on Ben's, I think, second question regarding uses of capital. So the spend on the CapEx is -- on the scrubbers is pretty light, $38 million, only one ship left to buy. You smooth it out, the debt repayment by refinancing. So it would seem that there is some excess liquidity. So, I guess, the way to ask is twofold. One, how to do you think ships versus shares? And the part two to that is, Polys, your comments about issuing -- or buying back the stock lower than where you issued it, it makes a ton of sense. But you also said, you're not into buying it right now, but you bought it at the end of the year and the stock's significantly lower than it was at the end of the year. So why not today, if you're buying it back in December?

First of all, the market -- the weak market of Q1 slightly made us to reconsider these options, because we want to preserve liquidity. Second, we have quite a big expenditure in 2019 with the ballast water treatment and the scrubbers. So it's 19 vessels roughly $40 million for the scrubbers alone and another maybe $10 million for the ballast water treatment plant. So it's a liquidity that, we are investing in this year, whilst the start of the year is not so bright. So we'll wait to see how all things develop the trade wars and the market, which is slowly creeping up now. But we have about five weeks of the start of the year. So we have to be more careful. Of course, the levels we bought the stock back is more or less within $0.10 or $0.15 of the levels that the stock is trading today. So it's not a big deal. There we still consider it very cheap. If you consider only – not only our three Capes sizes, the values of their charters as the market has been dropping after the Vale accident. The value of our 3k charters is increasing because it's average $30000 per day on these three ships alone. So we will do the investments on this technology. We will wait to see how things develop with the chartering of the ships in the second half of the year. And then, we decide how much liquidity we have and what we do with it. Just thing is to decide, what you do with the liquidity. The most important is to make sure you have that liquidity there.

Yeah. That makes sense. So just to be clear then even though you think kind of the weakness so far this year is seasonal and temporary, you've shipped it to a little bit more defensive mode just to make sure, if in case things stay worse than they are – or worse than you expected for longer than you expected that you can just kind of keep the buffer?

No. I don't think anybody expected drop from $14,000 a day in the beginning of January to $4000 in the spot market at the end of January. We fix a ship at $14000 at $39.50 at – on the 1st of January of this year. Then, we had the seasonality – the flat season at Queensland, the delay of core cargos from Australia, the big collapse of the dam in Brazil, with all the cancellations and the force majeure plus trade war plus delivery of new buildings every January. All these things coupled together, I mean, one thing can deteriorate the market let alone all these together. So when the market – the spot market reach $4000, $5000 a day you have to consider certain things. Now, it's creeping up slowly back to $8000 or $9000 in the Pacific. So I mean, there is volatility there and you have to – so long you are below your breakeven levels on the spot market, you have to be a little bit defensive. You cannot go out as if you're fixing the small ships at $14,000 a day. So we have to be a little bit more careful and this is what we're doing here.

Yeah. That's very responsible. Fair. Thanks, Polys.

Thank you. We will now take our next question. Please go ahead. Your line is now open. Q – Max Yaras: Hi. This is Max Yaras from Morgan Stanley. I have a couple of questions for you guys, kind of general market questions. You laid out kind of a demand picture and highlighted India coal imports as may be a driver. Just wondering, what are – what kind of main catalyst do you see coming up for maybe a demand turnaround? Or what kind of key drivers do you see?

Look we are more optimistic this year on the grains and the coal especially we're seeing healthy numbers on that front. I think the Indian coal will remains strong. The Chinese coal where we have the question marks there what will happen with the ports they close every winter and how they will after the winter burn is over, how they will start buying coal. And there will be question mark what happen with this 40 million tons of iron ore lost from the Brazilian trade and how it will be replaced from which area and how the ton miles will be affected. So generally it looks like the first half of 2019 will be not bright or as bright as it was in 2018. And overall we never know how if the trade war is resolved, how this will affect trade and how positive and how fast this will be shown in the flows of cargo. And overall, I think it looks the first half will be lower and there should be healthy recovery in the second half of the year. The second half of the year also you have to remember, there is a big number of ships going into the shipyards for retrofitting scrubbers. This will affect a lot also the older ships that they to take dry-dockings because every year one-quarter of the fleet is going through their periodical dry-dockings. So these ships will find that most of the yard spaces is used by the large Capesize and the big tankers and other big ships retrofitting scrubbers. This will consequently raise the cost of dry-dockings for secondhand ships for a normal maintenance and things like that. The older ships which are 17 years old that they have to face new regulations and they have to pay the extra 40%, 50% higher cost to dry-dock their vessels. I think the owners, if the market is not at breakeven levels or near to breakeven levels they will seriously considering other options when that dry-docking will be coming due. So I think it will be a quick recovery of the market once older ships start getting away. I mean the lower the market is and more ships are doing these jobs of retrofitting scrubbers the higher the cost will be in normal dry-dockings for all owners in the world. So the older ships will find it a struggle.

Right. And then to stay on that last topic, just kind of wondering if you have an estimate for scrapping in 2019 and 2020 especially if rates stay kind of weak in the near term? And then if you said the new -- there is a new kind of normalized fleet supply growth what that has to be longer term?

The fleet supply for the next few years is not huge, it's not huge. And it could be on par with the demand growth. So we're not worrying too much about the fleet supply. What could be positive for us will be the -- could be the scrubbing rate which last year I think was very weak and one of the lowest scrapping rates in the last 9, 10 years. This year we could be surprised by the number of scrapping that we will see. So it all depends. If this low-freight market persists for two, three months or four months, many people with older ships will consider all option. Last year if you remember, the scrapping was just under five -- on drybulk was just under five million deadweight, which was minimal, one of the lowest years scrapping. So this year, we could see 15 million or 20 million if the freight market does not perform and also the cost of dry-docking keeps going high. So I mean the market will be -- is very finely balanced. And small changes either on demand or supply can influence the market a lot. In 2017, I think the scrapping was 15 million or more. Last year it was only five. So if this year, we don't have a good market we'd see scrapping going 15 million to 20 million deadweight.

Thank you for the color.

Thank you.

We will now take our next question. Please go ahead. Your line is now open.

Hi, gentlemen. It's Randy Giveans with Jefferies. How are you?

Yeah, hi.

Question for the scrubber strategy, obviously, you're putting among the Kamsars, the post-Panamaxes not the Panamaxes. Is that mainly due to just economics and the numbers of days at sea? Or is there may be questions of HSFO fuel availability?

Yes. Look the scrubbers we wished to go for the relatively higher consumption vessel, which were the post-Panamaxes plus one Cape that we have in the spot market. So we fitted on all those -- the scrubbers. Then we selected -- out of our Kamsarmaxes, we selected Chinese built Kamsarmaxes, which they have higher consumption than the Japanese ones. On the Panamaxes, we didn't see any reason to put scrubbers from those because half of our Panamaxes are eco-engine with a -- built after 2014 and the other half is built in 2003 to 2006, which is a bit old to consider the investment on those vessels. So in the end we came out with this 50% scrubber and 50% non-scrubber. We are not worried at all about availability of HFO. We are very confident because the places we supply bunkers to our ships -- where our charters supply bunkers to our ships is mostly in Singapore and Fujairah. This is where the bunkering of the vessels take place on the Panamax fleet -- in the post-Panamax fleet. We believe that we will find sufficient quantities of HFO in Singapore, because these are the places where also the big tankers are passing and the big containers are passing. So it's a major hub. And on the other ships we’ll compete with compliant fuel available in the market, which again we are sure that the refineries have done their work and they will be there and offering healthy prices on compliant fuel.

Also I would like to say that when we speak about HFO, which is thin fuel oil. The thin fuel oil as we know is a residual of the distillation. It's residual, which means it's leftover. So it is left there in any case. 7% to 8% of the crude oil consist with heavy molecules which is a residual fuel oil. Now if you want to this to make -- to crack it and use it as the MGO as a distillate, if you want to do the cracking from the heavy fuel oil and coal to distillates this has some cost. So it's impossible not to have the residual the heavy fuel oil. It is possible to have the same cost when you trade -- you compare the price of heavy fuel oil and the distillate prices which of course are let's say more -- they have been refined and they should be more expensive because of the cost of the refining at least. Q – Randy Giveans: Okay. And then you mentioned the scrapping. What is your view of may be increased scrapping and the use of all these recycled steel by China. That puts some downward pressure on iron ore imports needed because they were using more for recycled steel. Do you see that kind of continuing in 2019, 2020 even?

I don't know what they do with the scrap steel they're buying, but I guess they are using it for softer industries. And like in the past they will keep using it. So I don't see any threat from there. I mean, we are not expecting a year that we will suddenly see $100 million deadweight of ships being scrapped to start worrying that this will be affecting the steel industry and the production of steel in China. We're talking about the normalized 15 million to 20 million tons of scrapping that we had back in 2017. So I'm not an expert to reply to or give an opinion on how the Chinese are using this scrap steel. Q – Randy Giveans: Okay. No, problem. And I guess last quick question from me. Your averaged about $13,875 a day per time charter equivalent in 4Q 2018. Can you give some guidance for 1Q 2019 in terms of your average TCE and percentage of the quarter that's already been booked?

Look I mean, the spot ships of January as I told you very tremendously the first fixture we did in the start of the year was almost $14,000 a day on the 3rd of January. On the 29th of January -- the second fixture in the spot market we did was on the 29th of January which was equivalent something like $4500 a day for a 30-day split. I mean, January and part of February, it was very, very depressed month. It reminded us a bit of the tanker business. On one day, we'll see this is earning $50,000 a day and the next week maybe they're earning $5,000 a day. So it is also -- this is not the norm for drybulk. I mean, you can have fluctuations of $2,000 $3,000 a day in a month, but you don't have $10,000. So slowly, slowly now the market start creeping back. We're adding fixtures in the spot market $8,000, $9,000 a day. So I mean, it's not healthy, but it's not terrible. So I mean, every company has to go back to the basics, redraw the board, control your expenses. We've done this before. We'll do it again. And we will be on top of things. I think that market with the grain season starting in March will slowly start to appreciate. But of course, a lot depends on so many external factors. And let's see what happens with this twist and turns of the trade war, how this will affect sentiment, will there be a resolution, who is the winner, who will be the loser, how the market will perceive it. I mean, the stock markets perceive right now, but there will be a solution and the resolution of the trade war. On the other hand, there will be…

Thank you.

We have no further questions at this time. Please continue.

So, thank you very much for attending this conference call and we are looking forward to discuss again during our next call next quarter. Thank you. Have a nice day.

That concludes the conference for today. Thank you for participating. You may all disconnect.