Dr. Loukas Barmparis
Analyst · those forward-looking statements
Good morning to all. I am Loukas Barmparis, President of Safe Bulkers, and I will do today the presentation, and I'm welcoming you at our quarterly results. Key developments of the previous period include the performance of the IMO Net-Zero framework and the expected gradual market fragmentation due to geopolitical reasons for fees and tariffs resulting in increased market volatility. The dry bulk market recovered compared to the previous quarter, and we sold 2 of our oldest vessels as part of the company's ongoing fleet renewal strategy. Our company maintains a strong capital structure providing flexibility in our capital allocation. Lastly, we have declared a dividend of $0.05 per share of common stock rewarding our shareholders. Following a comprehensive review of the forward-looking statements language presented in Slide 2, let us proceed to examine the supply side dynamics in Slide 4. The dry bulk fleet is projected to grow by about 3% on average in 2025 and in 2026 due to stable new deliveries. The order book now stands below 11% of the current fleet. Asset prices are projected to pick up in line with the current freight market. Recycling volumes are anticipated to rise through as market conditions prompted that into older vessels, especially in relation to the 25% of dry bulk fleet being older than 15 years and the overall average age of the dry bulk fleet. As a result, the ship recycling would be double over the next 10 years compared to previous decade as per Bimco projections. Currently, 15% of ship capacity in the dry bulk order book will be ready to use alternative fuels upon delivery. And out of those ships 52%, they may use methanol, 35% LNG and 13% ammonia or hydrogen. However, the dual fuel order book remains small on dry bulk segment. The postponement in adoption of the global fuel standard by IMO, may bring another path on decarbonization towards more pragmatic solutions. We do have 2 dual fuel new builds on order with delivery in first quarter of 2027. Safe Bulkers fleet now counts 12 Phase 2 vessels on the water, all delivered 2022 onwards. On top of that, 24 vessels have been environmentally upgraded and 11 are eco vessels having superior design efficiencies. 80% of our fleet comprises Japanese built vessels, double the global average of 40%, while our average fleet age of 10.1 years being 2.5 years younger compared to the global average of 12.6 years. Our commercial competitiveness will strengthen as we will be taking delivery of our remaining order book of 6 Phase 3 vessels. By first quarter of 2027, Safe Bulkers fleet will be comprised of 35% Phase 3 vessels, 18 out of 51, positioning us favorably to compete based on the fuel efficiency of our vessels, while the shipbuilding capacity will continue to be constrained, leading to longer lead times. Moving on to Slide 5, we present an overview of the demand and basic commodities trade. The combination of trade war as expected through tariffs, high debt, high interest rates, new fiscal demands and persisting geopolitical tensions, elevated policy uncertainty, straining public finances can pose a considerable down risk for global growth and disinflation. For our segment, we anticipate an improving freight market rate as a result on the trade truce resulted from the agreement between U.S. and China with an increasing focus on the existing fleet decarbonization and energy efficient new builds. The global GDP growth expectations for 2026 and 2027 as reflected in the IMF's October forecast call for a growth of about 3% in the coming years, accompanied by a gradual control of inflationary pressures. According to Bimco the forecasted global dry bulk demand growth will be 2% in 2026, followed by 1.5% in 2027, with grains and minor bulks being the best performing sectors. China and India are gradually boosting domestic coal production, reducing import demand. China has been rapidly phasing out fossil fuels from electricity generation, boosting renewables, reducing import dependence. China's economy is still being affected by property sector crisis and manufacturing overcapacity. Trade tensions between the U.S. and China, although truce has been reached, remain a key source of global economic uncertainty. On the good side, additional Chinese purchase of U.S. soya beans were reported with a total of about 1 million tons sold since the U.S.-China trade war truce while the U.S. has suggested that China could purchase up to 12 million tons of U.S. soybeans. India continues to perform and is projected to experience the fastest growth among emerging economies with a forecasted 6.2% GDP increase in 2026. Its expanding domestic market and manufacturing sectors may continue to contribute positively to the dry bulk demand with infrastructure investments playing a vital role. The Japanese government approved a $135 billion economic stimulus package, the country's largest package since the COVID period amidst slowing economic growth with measures also containing dedicated funding for the Japanese shipbuilding industry. Currently, in the spot rate market, multiple miners continue offering cargoes in both basins. Steady gains were made in the Atlantic with sentiment supported by expectation of further U.S. China grain sales and a tight forward tonnage list. Fresh U.S. grain cargoes also boosted the NOPAC rates. Looking forward in 2026 and 2027 an expected decline in coal cargoes and limited iron ore cargo growth will negatively impact demand growth. Instead, growth is expected to come from stronger grain and minor bulk shipments and from longer sailing distances. Summing up the supply-demand equilibrium on Slide 6. The supply growth is expected to continue to outpace demand. The freight market has rebounded recently during the start of the third quarter. All 8 of our Capes are presently period chartered with an average remaining charter duration of almost 1.7 years at an average daily charter rate of $24,800 providing us visibility of cash flows, topping $124 million in contracted revenue backlog from Capes alone. Moving to Slide 8, we present an overview of our quarterly highlights. We have declared our 16th consecutive quarterly dividend of $0.05, representing 4.1% dividend yield. At the same time, our free cash flows finances our newbuilding program. We maintained ample liquidity, profitability and capital resources of $390 million and a comfortable leverage of about 35%. We sold 2 of our oldest vessels in our fleet in line with our fleet renewal strategy and achieved 0 vessels in D & E carbon intensity CII rating of IMO for 2024 as described in our 2024 sustainability report. On Slide 9, we present our returns to shareholders of $83.9 million paid in common dividends and $74.9 million paid in the form of shares repurchases since 2022. We have been consistent in generating sustainable returns across market fluctuations because of our track record, hands-on management and our overall business model. Concluding the company update on Slide 10, we present our strong fundamentals. Safe Bulkers is a dry bulk company with $496 million market cap, 45 vessels in the water having $274 million scrap value. We maintain significant firepower with $124 million cash and $267 million in undrawn RCFs, revolving credit facilities and $176 million borrowing capacity against our significant order book of 6 newbuilds, mainly in Japanese shipyards. We focus on our majority Japanese build-fleet advantage, on fleet energy efficiency and lower CO2 taxation reflected in our CII rating of 0 vessels on the bottom ratings of D & E. We maintain a technologically advanced fleet, strong balance sheet, comfortable leverage and low net debt per vessel of $8.7 million for a 10.1-year old fleet. We have built a resilient business model with cash flow visibility of $164 million in revenue backlog, healthy expansion for a sizable fleet that achieves scale and a meaningful 4.1% annualized dividend yield positioned to leverage on its fuel efficiency. I now pass the floor to our CFO, Konstantinos Adamopoulos, for our quarterly financial review. Konstantinos, the floor is yours.
