MPC Container Ships ASA (MPCC) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the MPC Container Ships' Company Update and Guidance Increase Conference Call. [Operator Instructions] Speakers today will be CEO, Constantin Baack; and CFO, Moritz Fuhrmann. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Constantin Baack. Please go ahead.

Thank you, operator, and good morning, everyone. This is Constantin Baack, CEO of MPC Container Ships. I would like to give you an update in today's Company Update and Guidance Increase Call. Thanks for joining us today. We have issued a stock market announcement this morning. The release and the accompanying presentation can be found on our website. Please note that the material provided and our discussion today contains certain forward-looking statements and indicative figures, actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business. I'm joined here by our CFO, Moritz Fuhrmann, and we will now run you through the highlights of today's announcement. Let me start with a quick summary of today's news as we are excited to announce a number of accretive and strategic measures, which align perfectly with our ongoing portfolio optimization strategy and our commitment to focus on sustainably returning capital to investors. There are 3 pillars. First, [indiscernible] of 5 modern Eco-vessels, which enhances the overall composition of our fleet and will increase our earnings and distribution capacity already in 2023 and onwards. Moving forward, we will continue to execute our portfolio optimization strategy that will remain centered around upgrading our existing vessels, acquiring modern Eco tonnage as well as investing in new buildings with premium earnings capabilities and lower emissions as well as potential vessel sales of some of our existing fleet. Secondly, attractive financing. In conjunction with the acquisition, we have signed a term sheet with a European bank for a $50 million senior secured facility to support the transaction. Furthermore, we have also secured a competitive lease financing with BoComm in the amount of $75 million. That one is secured by 12 vessels out of our existing fleet. The third pillar is strategic divestments. We have negotiated the commercial agreement for early redelivery of one of our vessels, in line with similar agreements that we have announced previously as well as an agreement on the sale of another vessel, both transactions will generate significant cash inflows. As a result of the aforementioned measures, we have raised the financial guidance for financial year 2023 to operating revenues of $650 million to $670 million and EBITDA of $450 million to $475 million. And on that note, I would like to hand over to Moritz, who will run you through some more details with regards to our measures.

Thank you, Constantin. Turning to the next page. Starting with the fleet acquisition. As just mentioned, obviously, we are very happy to having been able to securing 5 state-of-the-art modern eco feeder vessels that are very much complementary to the fleet on the water and further increasing the footprint of MPCC in the feeder segment. Total acquisition consideration of $136 million for 5 ships, which has been funded by a combination of bank financing and cash on hand. When looking at new acquisitions from an MPCC perspective, obviously, very important 3 pillars. One is the accretiveness when it comes to EPS and DPS. So from the very beginning in '23, already accretive, obviously, also going forward. In addition, we do have derisking through charters attached. Two charterers in this instance, 2 very good names, investment grade and an operator that is cargo-backed. And also very important looking ahead, considering regulatory burden, those vessels will be in compliance going forward without any retrofitting CapEx needs to be in compliance. And thirdly, derisking, that I just mentioned, through the charter attached. In addition to the fleet acquisition, we have also been able to announce 2 further measures, when it comes to fleet optimization. One is a commercial agreement on one of our existing ships, the AS Nadia, which is also in line with previously announced cash compensation that we have received from other ships in the fleet. The good thing is that the vessel will remain on the balance sheet, and we'll continue on a time-charter with MSC up until December '23, February '24 at $20,000 per day. The use of proceeds will be determined after having received the cash compensation, which is expected to happen early Q3 '23. And in addition, we have been able to agree the sale of the AS Emma which is a 2010 built baby Panamax for a total consideration of USD 22 million. The handover is expected to take place in Q4 '23. So up until November '23, we will benefit from the current time-charter attached to ship. And why have we sold the ship? Because we believe it's an attractive price. And at the same time, we've been able to divest from an asset which is not strategic to the company anymore from an ESG perspective, but also from a subsegment perspective. Again, use of proceeds will only be determined once the vessel handover has been successfully taken place in November '23, so later this year. And on that note, I'm handing back to Constantin to walk us through the history of S&P market, but also fleet optimization, portfolio optimization.

Thank you, Moritz. On Slide 5, we have illustrated and those who have participated in previous calls, we have shown this slide before, but we are illustrating the development of our acquisition-divestment activities, obviously, starting all the way in 2017 with ramping up the fleet. You can see the one line is basically reflecting the Clarkson's secondhand price index, then we have the newbuilding price index. And at the bottom of the chart, you can see in bars the respective number of vessels that have been acquired or sold at each respective point in time. And the bullets represent -- or the circles represent the number or the volume of the respective transactions. And we are basically -- or we have acquired overall, since the foundation of the company, 88 vessels for more than $1 billion on average around USD 10 million to USD 12 million per vessel. We have, in the meantime, sold 22 vessels in total, which is roughly $430 million or $20 million per vessel. And at the same time, we have been able to earn -- retain earnings of more than $640 million. So we have constantly built up the portfolio, have not only bought have also sold, especially at the higher end of the cycle. And at the same time, and that's now zooming in, in what is shown here as a red dotted box what we call strategic execution always aiming at creating shareholder value across cycles where we have basically since Q3 2021 have taken a number of strategic measures, which includes the acquisition -- the latest acquisition of the 5 Eco-vessels, plus the acquisition earlier this year of 2 scrubber-fitted vessels as well as our 4 newbuilds, where we have been able to lock-in EBITDA backlog well exceeding the construction CapEx. And we have obviously also been able to dispose certain assets and/or agree on commercial agreements with regards to the charters. So that is a picture more in general showing our approach to the fleet and the S&P market. If you then turn to the next slide, where we have basically zoomed in on the developments from Q3 2021 until pro forma today, i.e., catering for the transactions that we have announced to date. Starting from top to bottom, basically, we have been able to increase the fleet size from 66 to 70 vessels and not just increase the fleet size, we have also exchanged a number of vessels, as I've explained on the previous slide. And we will continue the portfolio optimization going forward. Meaning, we have replaced or sold slightly older vessels and have instead acquired very attractive, more modern Eco-vessels or newbuilds with charters attached. Hence, increasing the overall quality of the portfolio composition. During the same period, we have distributed more than $600 million, documenting our commitment to return capital to investors, which will remain going forward a key, if not the key ingredient in our capital allocation strategy. And lastly, the last 3 items here on this slide. We have at the same time, also been able to reduce our debt even with this transaction or the transaction that we announced today included on a pro forma basis, significantly reduced our debt outstanding. We have a very large number of unencumbered vessels post or pro forma of this transaction providing high balance sheet flexibility. And we are still operating at industry low levels when it comes to financial leverage of 25%. So therefore, we believe a lot of the measures that we have executed are positively contributing to the value proposition of MPCC and to our ability to pay out sustainable dividends, which is very important. Now looking ahead, MPC Container Ships is, in our view, in a very favorable position, given the combination of strong charter backlog, very healthy balance sheet, optimized fleet that will continue and under the current market conditions, we will definitely continue to do that, whilst we will definitely remain committed to our ambition to reliably provide additional distributions to our shareholders. And with that, we are basically complete with our presentation, and I would hand back to the operator and allow for questions, if there are any. Thank you very much.

[Operator Instructions] There are no questions on the phone lines at this time. Please continue.

Thank you, operator. There are also no questions through the web. And therefore, I mean, I'm sure our presentation was obviously comprehensive. And we -- as I mentioned, we are thrilled about the various measures that we have implemented. If there are any questions going forward, feel free to reach out to our IR mailbox. And we are certainly looking forward to continue to develop our company and are thrilled about today's announcement. On that note, back to you, operator, and we can close the call. Many thanks.

This concludes today's conference call. Thank you for participating. You may now disconnect.