Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers Conference Call to discuss the Third Quarter 2019 Financial Results. Today we have with us from Safe Bulkers, Chairman and Chief Executive Officer, Mr. Polys Hajioannou; President, Dr. Loukas Barmparis; Chief Financial Officer, Mr. Konstantinos Adamopoulos; and Chief Operating Officer, Mr. Ioannis Foteinos. At this time, all participants are in a listen-only mode. There will be a presentation followed by question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today. Forward-looking statements: 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, believe, 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 these expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in the demand for drybulk vessels, competitive factors in the market 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 obligation 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.

Welcome to our conference call and webcast to discuss the financial results for the third quarter 2019. In the third quarter of 2019, we entered into charters at higher rates than the first half of 2019. As a result, we had a profitable quarter despite the down time of several vessels due to scrubber retrofitting. We remain focused in implementing our environmental investments installing scrubbers on approximately half of our fleet and completing tank cleaning in the other half in anticipation of the effectiveness of the IMO sulphur cap regulations in 2020. Let's move into analyzing the market conditions. In slide 4, we present the performance of Cape and Panamax charter rates as compared to same period of 2018. Despite the negative start of the year, drybulk market recovered during the third quarter of 2019, reaching the highest level since 2015. Capesize reached the $38,000 and Panamax $18000, but as the Capes are trading at about 23.7000 and Panamax at about 14.200. Trade war developments are still on, but mainly main concerns have been east. Turning to slide 5, we present the Chinese imports of the major bulk commodities. As of now in annualized terms, Iron ore imports in 2019 are 1.6% lower in comparison to 2018. This is mainly due to the disruption of the trade from Brazil. However, after recession of Brazilian exports in Q3, the imported volumes in annualized terms summed by 14% in Q3 in comparison to first half of this year. Chinese coal imports were robust throughout 2019 and in annualized terms increased by 19% as compared to last year. Specifically for the third quarter, coal imports in annualized terms increased by the starting 25% as compared to first half of 2019. Chinese grain import reflects precisely the start of the U.S.-China trade tension. Year-on-year…

Thank you, Loukas and good morning everyone. In slide 14, we present our quarterly time charter equivalent which stood at $13311 today and we focus on our expansions of both OpEx and G&A. The aggregate figure for these two components for the third quarter of 2019 was $5811. And this was a result of dry docking expense related to four completed dry dockings. With the great monitored fees charged by our managers maybe due to the favor of a movement in exchange rate of euro versus dollars. As the majority of our management fee expense denominated to euro and also users at the Greece company administrator expenses. Moving on to slide 15. We present some financial data on a quarterly basis. Our quarterly revenues have adjusted EBITDA and the operating cash flow have been improving up overall financial strength. We present slide 16 our daily free cash flow was at fall for the third quarter of 2019. We had about $1,303 per vessel and less than $9,600 per day per vessel for all our daily outflows including operating G&A, interest principally payments and preferred dividend leaving about $3,700 per day per vessel as daily free cash flow. Let's move to slide 17 with our quarterly financial highlights for the third quarter of 2019 compared to the same period of 2018. Net revenue increased by 1% to $50.7 million from $50.1 million, mainly due to the improvement in further rates. As a result TCE equivalent per vessel increased marginally to $13311 per day from $13,265 during the same period in 2018. Daily vessels earning expenses increased by 7% to $4,448 compared to $4,151 for the same period last year, whereas, daily running expense excluding dry booking and pre-delivery expenses increased by only 1% to $4,053 for the third quarter of 2019…

Thank you. [Operator Instructions] Thank you. And your first question comes from the line of Randy Giveans, Jefferies. Please go ahead. Your line is open.

Hi, this is Chris Robertson on for Randy. Thanks for taking our call. I wanted to ask some clarifying questions on slide 8 in terms of the scrubber program. So as of last quarter, I think you had expected all the scrubber units to be installed by the end of the year. I think we're seeing a few slip into Q1 now. Can you comment on if the delay is due to, kind of, getting space at the shipyard to the bottleneck and the manufacturing supply chain of the scrubber? Or is it simply just engineering and installation delays?

No. We don't have engineering or installation delays. The original flap had one vessel for March of 2020. The new one has a five vessel show if I remove the full vessels from the year-end to the first quarter of 2020 simply because due to trade reasons, it happens that a certain vessels delay a little bit. So we didn't find any reason to put these vessels in the shipyard during the Chinese New Year. So that's why we have delayed them. At the same time, we enjoy a good market right now so there is no reason to overburden this quarter.

Yeah, that makes sense. Thanks for that. And then just a second clarification question here. Of the nine vessels, which you expect to have scrubbers installed by the end of October, which ones were installed exclusively during 4Q versus 3Q?

I think we provided this information in the table, so -- in the table five of our results. So we say that during Q4 we have -- we had in total nine installations. So the vessels that were done, they were Pedhoulas Farmer. Then we say it is in the Panayiota K, short reversals were done during the fourth quarter -- the third quarter.

Got it. Thank you. In terms of the low sulphur fuel oil you'll use for the rest of your vessels. Are you going to lock in future supply in order to secure availability or have locked in a price? And do you have any plans to hedge the price of the low sulphur fuels?

We don't worry about fuel availability, because we have too many ships, big ships of installing scrubbers. So the fuel availability is -- if I revert that this is consumption wise more than 20% of the fleet consumption will be on HFO. I will come back to you. You mean, about the compliant fuel or the HFO?

The compliant fuels.

The compliant fuel I think will be available and we see the number of VLCC waiting outside Singapore and would be available in good volumes in the – in the key areas especially in the Far East. I think that, the main problem with the compliant fuel is the compatibility of the fuel how each fuel is – was created – fuels are blended and it's a refined product. And this will be the major issue for ship partners. How good is the fuel that, we will have. As far as we're concerned that will be the season for the first two or three months of the New Year, on the ships that we need to be burn the compliant fuel – we would rather start with LSMGO consumptions for where it's calling LSMGO on both our ships already and we will now start the travelling LSMGO and maybe towards March and April we'll start converting into the compliant fuel to be on the safe side. So if there are any problems appearing we then supply us to known in the market.

Got you. That makes sense. Turning to Slide 5 on some of the demand factors here. So I

One clarification we'd like to make is that we provide certain data in each press release for the expected downtime during each quarter. This is to help analyst to make the appropriate calculations. So for in a our table 5 we say that during Q4 of 2019, we will installed – the total number of installations will be nine installations including Q4 and expected downtime in days 315. So by using this number you can come to better approximation of our EPS.

Right. Okay. Shifting over to the demand side of slide 5. So can you talk a little bit more about the increase in the Chinese grain imports rising during the quarter? Was that mainly driven by a substitution effect from U.S. grain? And then what kind of products drove the increase? And from where were they being imported from?

Look basically it was majority of grain imports in the China was coming from South America from Brazil and Argentina. We see this continuing even now and we see a very active seasonal in South America. There is a steady flow of grain cargos into China. Now that looks like the trade war will be reaching a partial bill at least – partial bill in the next couple of weeks. We saw the commitment of the Chinese purchase U.S. only company’s. We already see cargos market in the last 10 days. Also, we have done a very good fix of simple balance into the U.S. cargo to fix $19,500 per day for a round voyage from U.S. to China. It shows you that new cargo is coming into the market and the Chinese will have an active fourth quarter of imports from the U.S. So I think up until now it was all South America but right now we see a shift into showing up in stand from U.S. markets.

Then last follow-up question for me. Can you talk about anything outside of the Chinese iron ore coal and grain trades that you find interesting in terms of a demand driver?

We see book side a lot of book side movement from Australia into China. We see steady flows of Australia and Indonesia coal and South African coal into India. So India is very active as well. So you have coal movements into China which are very well supported and very active. In Europe, we see the exports now from the Black Sea, with volume more growing in cargos from Black Sea, for United to the continental to the Far East. We see volumes now started picking up from the Baltic sea of coal movements into Euro coal into the Mid. So these are the main areas of activity in the last few weeks.

Great. I appreciate you taking my call. Thanks.

Thank you.

Thank you. And your next question comes from the line of Chris Wetherbee from Citi. Please go ahead. Your line is open.

Yeah. Hi. Thanks for taking the call. Wanted to ask a question about slide nine. You had some helpful information there so I appreciate it. But looking at the top-left chart there, you kind of highlight the scrubbers as a percent of the fleet for the various size ships. I guess, you do the math here, it looks like it's been 18% of those three vessel segments are going to be scrubber fitted, obviously, overweight the Capesize. Do you have a sense of how much of the fuel consumption that is with 18% of the ships? Can you give us a sense does this sort of tie into that 23% number that you mentioned on the slide as well in terms of what the heavy fuel oil will be preserved that? I'm just trying to get a sense of how much of the fuel consumption is actually going to be going for to these scrubber-fitted ships?

Yes. As we say, there we'll get the data from DNV from the [indiscernible] society and DNV – the mark DNV bank. Once we make this people estimate, we have no reason to doubt it. Of 23% of the ships we have continued to bandage the hull, of course, not at a lot of them would start from day one of 2020, because many of the scrubbers will be retrofitted in the first half or first nine months of 2020. You know that to be honest we move early enough, including ourselves. We enjoy the vast majority of our ships around 80% to enjoy scrubbers before the 1st of January. As Loukas previously said, some five vessels -- for five vessels we let them fit the scrubbers after the Chinese New Year in February, because there's no point in a good market to put the ships in the yard in mid-December. And by any chance we don't complete by mid-January, we fall into the Chinese New Year. This year the Chinese New Year is very early. It's around 23rd of January. So we don't want to get stuck in a shipyard for two weeks with no workers there to complete the installation and the retrofitting. That's why, because of certain also changes of the partnership of the vessels, we decided that the ships that cannot arrive comfortably within early in December of the shipyard to postpone them on for a couple of months and go into in early February.

Okay. Okay. That makes sense. But look like -- so 23% is what you think is a reasonable number to sort of relate to that 18%. So 23% fuel consumption, 18% of the fleet?

Yes. We take it for consumption wise it make sense, because of the big ships, the big Capesize and Kamsarmaxs the VLOCs. This consumes much more than the Panamaxes or the Handymaxes. Although ultramaxes or -- yes, it looks like this number is about right. But it could be 22%, it could be 25%. I don't know. I mean, the experts will tell us in detail in the first three months of the year. We will have a very good idea of what's going on.

But on the basis of the numbers of Star Bulk are what additions, we don't doubt because this is huge fuel and everybody's installing. And there is a full analysis in this report that we have seen and that support this figure.

Okay. Okay. Now, that's helpful. I appreciate it. Yes. It's good to just get our arms around what we should be thinking about there. I guess, a couple of other questions. I guess, sticking on scrubbers, the $50 million that you guys highlighted sort of the scrubber investment. Is there any risk to that? We heard a lot from people in the market about the increasing price. I just don't know how much is locked in hopefully all of that $50 million is locked in to cover the 20 ships that are being retrofitted. But I just want to get a sense is there any sort of fluctuation to that number? Or is that pretty much a done deal?

No, I think that -- first of all, this -- I mean we have already indicated we have already capitalized $35.5 million until now out of this $50 million. We have not seen -- we have -- all the equipment is already contracted -- have a goal and we have paid installments or shall we go specialist corner that's also. We have the same contract that continues, so we don't find additional whatever that this figure will go -- will not be reflecting in the actual cost of our systems. We believe that for a medium-sized vessel, our cost is about -- all-inclusive is about $2.5 million.

Okay. Okay, that's helpful. And then my last question is just as we think about 2020 and sort of the economics of ships with scrubbers, is there anything we need to be thinking about either from a daily OpEx perspective or otherwise in terms of cost? Are they more expensive to operate? Do you anticipate them to be more expensive to operate? Just putting aside the incremental depreciation of the capitalized investment is there an OpEx component that we need to think about?

Yes. Look we are -- we have done the [technical difficulty] and we think that the operating expenses will be high -- materially higher because for scrubbers, we need a number of -- we need certain additional spare parts, which is reasonable and [technical difficulty] different spare parts for power rebalancing of diesel generators. I tend to believe that this could be about $100 per day cost increase due to this precautions that we intend to take. The payment is if we do not take such precautions, it's a downtime of scrubbers and continued operation with fuel oil with compliance rate which could be quite more complicated.

Okay.

And $100 per day but as you know we install 50% of the fleet it will be on a clip basis $50 per day. But basically this is a prudent thing to do to play some more spare parts for the diesel generator renovation from boat should something is need to be overhauled earlier and not to take any risk with operational discovery.

Okay, that's very helpful. I appreciate the time. Thank you.

Thank you.

Thank you. [Operator Instructions] There are currently no further questions sir. Please continue.

So, thank you very much for attending this conference call. And we look forward to discuss again with you in the next quarter. Thank you.

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