Precious Shipping Public Company Limited (PSL) Earnings Call Transcript & Summary

Okay. So we will take part of this presentation as usual. First, we begin with the Mayuree Naree. I think we've discussed everything on the slide except the last point. The last point is that on the 10th of July 3 out of the 20 crew members who were rescued lodged a suit in the labor court claiming damages of THB 50 million plus interest. We have appointed a law firm to defend our position. And just to let you know, 2 of those crew members have taken money from us and signed a receipt for it and release from for any further claims against us. So and then yet they have filed the suit. Coming to the impact of the current war between USA/Israel versus Ian. Again, we have discussed most of these items in the last presentation. So I just focus on the last 2 points. Because of the high gas price and LNG prices, this has actually boosted coal demand. And the last point is saying that fertilizers like sulfur, gypsum will be needed and they will increase the tonne-mile demand. If you come to the tanker sector and look at what we've got, again, we have basically discussed this in all our last few meetings. Just to look at the last point, the MR2 clean tankers currently are averaging around $30,000 per day. Coming to the Hatthaya Naree. This will give you some more color on what's happening in the Persian Gulf. So as we've told you before, the ship was redelivered from Norden on the 7th of March and anchored off Sharjah on her account thereafter. We have since fixed the ship on the 24th of June starting at 08:00 GMT at a time charter rate of USD 34,000 a day. The ship completed loading on the 16th of July, having berthed on the 14th of July. 14th July night, she berthed. So from 24th June to 14th July, she was idle at the charterers' cost. Then she berthed on the 14th of July in Qatar and completed loading on the 16th of July and then has been anchored off Dubai after having picked up bunkers on the charterers' account. She remains inside the Persian Gulf since it is too dangerous to exit through the Strait of Hormuz. The discharge ports could be a safe port in South America, East Africa or Indonesia or China. So the ship has loaded a cargo sulfur of about 32,000 from Qatar. The additional War Risk Premium, Strait of Hormuz transit insurance and crew war bonus incurred will all be on charterers' account starting on the 24th of June at 08:00 GMT. Total bunker consumption on our account, that is between 7th of March and the 24th of June is about $293,000. The vessel is currently laden and anchored on Dubai pending improvement in the SOH security situation. There is a request from the charterers to load an additional 2,000 tonnes of cargo from another port within the Persian Gulf and we are considering that request, and we'll be happy to provide that. We will delay the ship further in the Persian Gulf. We are also checking whether we can claim a loss of hire from our war insurers for the period from redelivery on the 7th of March until delivery into the next charter on 24th June under a Restraint provision or alternatively under a Blocking & Trapping provision. Once that is clarified, we will let you know. Coming to the dry bulk markets. What we have here for you is to show you that despite the fact that steel production in China is down in the first half of this year, iron ore imports have actually gone up by 6.2% over 2025 first half. And you must remember that 2025 versus 2024 was already up by 1.8% on the whole year. So again, this 6.2% is a record of iron ore imports into China. Coming to coal imports. Last year, coal imports fell by almost 10% in the year-over-year calculation. But for the first half of this year, we are at 1.7% above what was there in last year's first half. Keep in mind that in the first 4 or 5 months of this year, actually we were struggling. China was struggling to get to the same level of coal imports as it had done last year in the first 4 or 5 months of the year. It's the 5th and the 6th months which have made a big difference and have taken all the negative out of the coal imports and made it a positive number for the first 6 months. Steel production, as I've already said, it's down by 2.9% compared to last year first half. And last year itself as a whole year was down by 4.4% over the year before. If you look at steel consumption in China, year before year number was up by 19.2%. Considering that level of increase, the first half being down by 2.6% is not very significant. If you look at steel exports compared to last year, last year was a record year for steel export on a year-over-year basis. So the first half at down 5.5% is being improved upon as we speak. In the month of June, it has started to go back up. So we hope that by the end of the year, it will either be at the same levels as 2025 or maybe even more than that. Coming to bauxite and alumina, again, a record year. If you look at that, you can see clearly that first half was up at 17.1% and -- despite the fact that the year-over-year number for 2025 was at 26.3%. So again, China has done a marvelous job for the dry bulk market. Here are the big numbers. Iron ore was at 629 million metric tons in the first half of this year and it was up by 6.2%, as I've already explained. The June month was a staggering 112.7 million metric tons. In terms of coal, it was up. It was at 225 million metric tons. The first half volume was up by 1.7%, as I explained, and the month of June was at 42.8 million metric tons, a 5-month high. If you look at the soybeans, it was at 34 million metric tons. And if you look at Q2 volume over Q1 volume, it is 2x the level. So you can see clearly, China has been on a tail in the second half -- in the second quarter, loading many more tonnes of soybeans. If you look at finished steel exports, the month of June -- 10.3 million metric tons was exported. June was up from January's 18-month low of 7.8 million metric tons. So you can see clearly June has started the recovery process. And we think that by the end of the year, steel exports will be equal to, if not more than last year. If you look at in terms of tariffs, et cetera, I mean, China exports a small amount of carbon and steel in dry bulk, about 129 million metric tons in the first half, 4.7% of global dry bulk exports, very small. And the U.S. accounted for just 1.3% of China's dry bulk exports. China, of course, on the other hand, imported the largest amount of commodity in the world at 1.4 billion metric tons. That was 41.3% of global dry bulk imports. #2 country was European Union, and you can see how poorly they performed compared to China and the rest of the #2, 3, 4, 5, 6, you can see clearly that they don't perform anywhere near what China does. And look at U.S.A. imports are just at 2.4% of global imports. If you look at China's imported numbers, they are all again -- I've already explained in the previous chart. If you look for the exports, U.S. exports just 1.7% of dry bulk goods to China or 18.78 million metric tons in the first half of 2026, showing an unofficial boycott of U.S. from China continues. Now Trump has now put in a new tariff of 10% to 12.5% on 60 different countries, claiming it is aimed at stopping forced labor. Of course, a few U.S. states have already challenged this latest attempt by Trump in the trade courts claiming the tariffs are illegal. Most likely, they will be thrown out again. If you look at grain, the forecast for the 2026, 2027 export year was 744.3 million metric tons. It's down by 23.6 million metric tons or 3% from the current 2025-2026 estimate, but up 38.8 million metric tons or plus 5.5% from the 2024-2025 season. And you can see clearly with the rest of the slide, what it shows you what's going up and what's coming down. If you look at Guinea. Guinea exported in the first half of 2026, 115 million metric tons. It's plus 15% year-over-year. It's a record. 53.9 million metric tons was exported in the second quarter of 2026. It was up by 5.3% year-over-year, a slower pace than in first quarter 2026. 70% of exports from Guinea are still being shipped to China. So again, China is a major player in all of this. If you look at our ships and compare them with the world fleet, you can see clearly on what type of cargoes we carry more than others and where we are less than others in the world fleet. And the striking item which you see is steel where we are at 3.1x the world average and wood, 2.4x the world average. Fertilizers, 2.3x the world average and agricultural goods at 1.2x the world average. The rest are where we are not as strong because we are super strong in these other areas. If you look at the supply side, you can see clearly that the order book as of the start of the third quarter was at 142.65 million metric tons or 13.18% of the existing fleet. So it seems large. But then if you look at the percentage of fleet over 20 years of age at the start of the third quarter, it was at 12%. Now if you look at the slide below, you can see that from -- starting in the year 2000 and ending at, say, 2003, you can see that the supply side was less than or equal to just about 20-year fleet. And yet you can see the same thing from 2021 onwards all the way up to 2026, these lines have got no daylight between them, which means that we should expect just based on supply side dynamics, we should expect strong years ahead. Coming to the investment in the MR tankers, Tharinee Naree. Now here, I'm going to give you some more detail. So we're only doing this because it's a new venture for us. It's the first time that we're doing an oil tanker, and we thought that it's better to show you what the results are looking like. As you can see clearly that the voyages on this type of business are fairly short in terms of time flow. And if you see the amount of demurrage which is collected, it's quite large in all of these cases. And you can see that the bottom line is pretty strong. So if we take the special survey costs and we take the purchase cost out of the picture, then the daily operational cost of this ship is running somewhere between $5,000 and $6,000 a day. Against that, we're getting in constraints as you can see, they are gross, so there are some commissions involved, but not too much. And you can see what is the earnings that we are getting on this figure. So it looks like we've taken the right decision to go into tankers and we hope to exploit this further. I think I've given you full details on this MR tanker segment the last time around. And I just want to reemphasize the order book being at 16.5% of the existing fleet at the start of Q3 against that the 20 years ships at the start of Q3 was at 18.3%. So a huge difference between [indiscernible]. So you can see clearly that this should result in good strong earnings on this sector for some time at least in the future. And if you look at what would be the 20-year old fleet at the end of 2030, providing no scrapping takes place between now and then, it would have grown to 38.7% and the 25-year age at the end of 2030 would have been 15.7%, so almost equal to no order book. So what was our strategy? It was to diversify from being a pure dry bulk player, which we have done. It was to reduce the fleet average age, which has been done. And it was to increase the average dead weight tonnes on each of our ships, which has also been done. And then all this has led to the reduction in the greenhouse gas emissions that we make on our ships. So if you look at this slide, it shows you that in 2014, our average grams of CO2 per tonne mile of cargo carried was at 12.5. And if you look at 2025, though the number of ships remains roughly the same between 2014 and 2025, you can see that we have been able to bring this down by a staggering 56% to 5.5 grams of CO2 per tonne mile of cargo carried. And how did we achieve it? Mainly by selling older ships. We sold 23 ships between 2014 and 2026, average size 25,000 tonnes in the Handysize sector, average fuel consumption per day at 19 tonnes and average grams of CO2 per tonne mile of cargo carried at 17. We also sold 3 Supra that we had. They are the smallest Supras that we had. They are almost 54,000 tonnes dead wight each. And they had average fuel consumption of 27 tonnes per day and they had an average grams of CO2 per tonne mile of cargo carried at 10. Against that, what is the purchase? Handysizes, we sold 23, we bought 9. Average size of the 9 that we bought was 38,400. Average speed was 11 knots, average age was just 5.7 years old at the time of purchase and the average fuel consumption was 18 tonnes per day on these ships. And the average grams of CO2 per tonne mile of cargo carried dropped from 17, which was there in the past on the ships sold down to 7. If you look at Ultramaxes, we hope to have 17 of them latest by the first quarter of next year. Average size will be 64,000 tonnes. The average would be 12 knots. The average age at purchase of all these ships will be 0.8 years and average fuel consumption will be about 20 tonnes per day. That would bring the average grams of CO2 per tonne mile of cargo carried down from the 10 that was there on the 3 ships sold down to 5 on the 17 ships that would be in our fleet. So you can see clearly that the strategic fleet renewal has reduced our CO2 intensity by 59% for Handysize and 50% for Supras/Ultras. This is the state of the fleet. Number of ships is at 42. We are including Mayuree Naree in this as yet. We will take it out by the end of this year. The average age is at 11.2. So we are actually reducing the average age instead of growing it. We sort of stabilized it between 2024 and 2025 at 12.1 years, and now we have actually been able to reduce it. The insured value, which is a rough calculation of what the market value should be is almost $925 million, the book value is at $774 million and the total deadweight is almost 2 million deadweight tonnes and the average size of the ship has gone up to 47,000 [ average ships ]. Now Gautam will take you through the financials of the...

Thank you, Khalid. So highlights for Q2 2026. So during the quarter, our net profit was THB 521.5 million or USD 15.87 million or a gain of THB 0.35 per share. Our EBITDA was THB 998.56 million or USD 30.38 million. During the quarter, we paid a final dividend for the year 2025 in the amount of THB 0.10. We also paid an interim dividend number 1 for the year 2026, also in the amount of THB 0.10. We took delivery of the first Ultramax that we are building at Sanfu shipyards. This is called the Rossarin Naree. We took delivery on 29th of May. In terms of financing, we signed a USD 8.3 million credit facility agreement with EXIM Bank of Thailand. This is for the -- which actually we have not yet drawn. In terms of joint venture, so we formed a joint venture to acquire the MR tanker High Tide. This is a 2013-built vessel, which will be delivered to us between 24th of August and 10th of November of this year. We have a 45% shareholding in this particular vessel and joint venture. In terms of long-term charter contracts, we have 8 ships that were on long-term time charter contracts at fixed rates and 11 ships that are on long-term time charter contracts at rates linked to the underlying index for vessels of their size. Mayuree Naree, so we received USD 10.98 million in war risk insurance proceeds relating to the vessel loss and statutory crew compensation. 17 of the 20 crew that were rescued have reported back to work, while as Khalid mentioned, 3 have initiated legal proceedings against the company and the company is defending these claims. At this point of time, the company does not expect any impact on its financial statements. Hatthaya Naree, Khun Khalid has already covered, so I will pass this one. This is a picture of our vessel acquisitions and disposals. So as you will see, so we took delivery, as I mentioned, of one newbuilding Ultramax Rossarin Naree in the second quarter. We're going to take delivery of another Ultramax newbuilding from Sanfu shipyards in this quarter, in the third quarter, one in the fourth quarter and one in the first quarter of next year. And we will also be taking delivery of the High Tide, the MR tanker vessel. This will be most likely in October or early November of this year. In terms of key figures, so Q2 revenue was USD 58.3 million compared to USD 44.2 million in Q1. Net profit was also up to USD 15.9 million, up from USD 3.4 million in Q1. Earnings per share as a result was much better at THB 0.35 compared to THB 0.07 in Q1. Return on equity was 7.34%, up from 2.09%. Our net debt-to-equity ratio is at 0.73, almost unchanged from the 0.72 level in Q1. And the number of ships increased from 41 to 42, although as Khun Khalid mentioned, this includes the Mayuree Naree as well. So this slide on the top left shows you the average time charter rate per day in dollars. And you'll see that Q2 2026 was the strongest quarter over the last 5 quarters, where average rates were $16,676. Similarly, the EBITDA was also the strongest at $30 million. Bottom left graph shows you the dividends paid in Q2. Of course, we paid the final dividend for the year 2025 and interim dividend number 1 for 2026. And our cash balance was quite healthy at USD 42 million. This shows you our statement of financial position. So vessels -- the book value of vessels and equipment was $776 million at the end of the second quarter. Against that, we had loans and total debt of about $398 million and shareholders' equity of almost $0.5 billion. We began the second quarter with cash of $44 million. We generated $32 million of cash from operations. CapEx $33 million, finance costs of $6 million. We had loans of $33 million, loan repayments and prepayments of $25 million. We had the insurance proceeds from war risk underwriters in relation to the Mayuree Naree that was $11 million. We paid dividends of $9 million, thereabouts in total. And we ended the quarter with $42 million of cash. So this over here shows you the -- our debt maturity profile. So you will see that the big balloon that we have as such is in 2029. Our average debt maturity is almost 6 years. Here we show you the -- our net debt and net debt-to-equity ratio. So it's currently at 0.7. Total debt of -- or net debt rather of $356 million. This is, of course, up, but we have taken on debt to expand our fleet to acquire the new ships that we've been acquiring. Over here, we show you the -- on the top line, we show you the average age of ships in our fleet. So you'll see that from the year 2006 until about 2011, our fleet was fairly elderly, whereafter we embarked on a newbuilding program, a fleet renewal program and the average age came down. It bottomed in 2016 at 5.8 years and then it crept up a bit to 2024, 2025, the highest level was 12.1 years. And then since then, we've been -- we've managed to bring it down by selling some of our older ships and also replacing them with younger ships. So the average age is 10.9. The red line over here shows you the average size of ships in our fleet. So you can see that the -- again, from 2006 to about 2011, the average size was about 25,000 deadweight and that today is about almost 47,000 deadweight. The dark green line shows you the average time charter rates per day, which -- so during -- from 2006 until about 2009, 2008, 2009, the market was quite strong as China joined the WTO and that led to a big boom in the dry bulk market. However, after that, there were -- as Khun Khalid showed you, the order book was about 80% of the total fleet and all the ships were delivered from about 2008, 2009 until about 2016, 2017. The supply overhang led to pressure on freight rates, a gradual reduction in freight rates, which bottomed out in 2015, 2016. And thereafter, the demand/supply fundamentals have been much healthier. And so you've seen average rates move up. The light green line, we show you the average operating expenses for our fleet, which has been fairly stable over time. Of course, it goes up during inflationary periods like during COVID and during the last 6 months or so. This is a breakdown of our average operating expense. This is for the dry bulk fleet. This -- if you compare the Q2 figures to Q1 figures, it actually remained fairly stable. For the quarter, Q2, it was at $5,676 almost identical to the $5,686 total figure in Q1. So in this graph, we compare our operating expenses to the industry average operating expenses for similar vessels. And you'll see that for the latest year data was published in 2025, we were about $700 per day lower than the industry average in terms of our operating expenses. Over here, we compare our performance to the performance of 2 other listed peers in the Supramax/Ultramax sector. These are global peers. So you'll see that our operating expenses plus G&A expenses are the lowest of our peers. Not only that, we also outperformed them in general on EBITDA per ship. So our EBITDA per ship and the number to look at is really the last 12 months EBITDA per ship, so we are at $2.3 million EBITDA per ship compared to $1.9 million and $2.2 million. This is our dividend track record. So our policy is to pay not less than 25% of net profit as dividends. We have generally exceeded that target. There was a period from 2014 until about 2020, where we stopped paying dividends because of extreme weakness in the freight markets, but we have since resumed payment of our dividends. These are financial highlights. There's a lot of numbers here. I'm going to leave this as a reference slide for you. Yes, this total return to shareholders. So we listed in 1993. If you were an investor in our IPO in 1993 and if you held on to our stock until today, you received all the dividends that we have paid out over time, you would have earned a 15.71% IRR on your investment. Just some data on Investor Relations, which I shall leave as a reference slide. Here's a bit on our ESG footprint. So starting with the environment. So we were declared a climate action leader by the Asian Food Marketers Association (sic) [ Agricultural and Food Marketing Association ] in March last year. We have now for 4 years consecutively received carbon-neutral certification from the Greenhouse Gas Management Organisation or TGO. We've been quite successful, as Khun Khalid mentioned, in replacing our older, less fuel-efficient vessels with eco vessels and reducing our CO2 emissions. And how do we do that? So we did that in a combination of selling the older ships, acquiring younger ships, but also investing in energy-saving devices in our existing ships. So various energy saving devices. And this has helped us reduce the carbon per tonne mile emission by more than 50% over this 12-year period. We've also, for instance, installed new propellers on some of our existing ships, which has resulted in a very phenomenal energy savings. And unusually for a dry bulk company, we have ISO -- we have an environmental policy statement that's based on ISO 14001:2015 standards. We are a founding member of the Getting to Zero Coalition, which is a 200-company/country alliance that is advancing zero emission vessels around the world. We were also the first Asian shipping company to issue sustainability-linked bonds in the amount of THB 1,360 million back in October of 2024. This is the 2 tranches. It's a 5-year tranche and a 10-year tranche. We have committed to reduce our grams per CO2 per tonne mile by 38.4% compared to 2019 as a baseline year. And for this bond, we also received an award as Best Sustainability Linked Bond. So social in terms of our impact in Thailand. So we donated a canal cleaning boat to the City of Bangok. We've been -- since 1995, we've been awarding scholarships to students at the Merchant Marine Training Centre. Many of these students actually join us as well. A picture over here actually are 2 of our female cadets. We started employing female cadets a couple of years ago, and now we have actually 7 female cadets sitting on our fleets worldwide, including one Third Officer. So we're very proud of that. Annual donation, so we support a school called Mechai Pattana School in Buriram Province. We have, of course, also helped provide relief for the -- with Chiang Mai for a forest fire last year, small pictures of our community support initiatives. We have achieved second recertification under Thailand's Collective Action against Corruption program, which runs from 2025 to 2028 and we've been members since 2018. We've been adjudged as a company with excellent corporate governance for 16 consecutive years. We've also received full score on -- for our AGM. In terms of ESG rating, so we are rated both locally as well as internationally. So in terms of our international ranking, so we are actually in the top 9% of global listed transportation companies under S&P's Corporate Sustainability Assessment ranking, that's an ESG ranking and also in the top 8% of Morningstar's ESG Risk Rating Ranking of global listed shipping companies. And we have also well ranked under this FTSE Russell ESG score. With that, we will be open for questions. I'll leave this. You can scan and share your feedback.

Coming to the Q&A, I think Gautam will take the first question.

Yes. I think the first question is about...

FFA.

FFA rate. So what is the current FFA rate for 2026. So currently, for Q4, it's about -- for Supramaxes it's about 19,000. And for August, September -- September is higher, almost 20,000, August is 18,500. How many days have we already locked in? I think that information has been provided in one of the previous slides we did. But we can -- maybe we'd like to check the data and we pull it up. We can share that data point later.

So coming to the second question, what caused [indiscernible] charter rates to outperform benchmark rates like Supramax? Again, this is basically due to good management and that we have linked many of our ships to an index-linked time charter over a longer period of time. So all these things have helped. Coming to the third question, how are -- what are your concerns about high iron ore inventory in China? We have no concern about inventory management in China for the simple reason that China buys any commodity only when prices are low and they are willing to stock it and hold it forever. And they don't care about anything else except the price of the commodity. Coming to item 4, the delivery schedule. I think Gautam has already done that. Then coming to item 5, regarding the end of June, why was your company's vessel the only one that did not sail out? The reason for that is that, as I've already explained, on the 24th of June, we were on time charter at $34,000 a day. And there was no way that we could sail out because at that time the ship was empty. The time charter has not yet given us permission to sail out or didn't ask for it. And the situation was such that those 7 or 10 ships sailed out, none of them were [ tight flagged ]. Only they had cargoes between Malaysia and Thailand, and that's why they were allowed to sail out not because of any other reason. Coming to item 6. Could you share your outlook for the second half? We normally don't give any forward-looking statements. So my suggestion is that you please have a look at the index levels of the ships. However, keep in mind, I've already explained that the supply side is pretty weak in terms of additional ships coming in. That will make sure that we continue to have outstanding earnings. Coming to question 7, the JOLCO financing. Again, Gautam will take this one.

Yes. First question is the bulk carriers, which types of vessels will the proceeds be used to acquire. So well, our expansion is primarily in the Ultramax sector. So that's where the proceeds are largely being used.

Coming to item 8. Does the company have plans to purchase secondhand bulk carriers this year? We put it down exactly what we have done so far, and this will be driven opportunistically. If there's a good opportunity to buy something in the secondhand value -- secondhand market, which is of a reasonably good value, which can start earning immediately, we will look at that. Coming to item number 9 regarding revenue diversification. Do you have a long-term target? No, it's all opportunistically driven. If we find that we can get more of these types of ships on the tanker market, which are good value, we'll certainly buy that. Could you please provide an update on the current coal market situation? And it remained the same and how does it compare between the first and second half of the year? In general, because of climate change, the heat that is being generated in every country is really, really strong. And as a result, most countries, especially in Asia, are all -- the majority of their power even in China comes from coal. So of course, coal is going to continue to be imported in a larger way. That's point one. Point two is that remember, there's no LNG coming out of the Persian Gulf and that will curb all the power being generated by gas-fired power plants. So they will not be available. So that will also help. And third, again, the hydropower, which normally is good, clean, green renewable energy is because of the fact that climate change has made heat extraordinarily large and that rains -- monsoons are much weaker than they were before in most countries, it results in lower hydropower generation. So again, all these factors are supportive of coal. And that's -- we've answered all the questions. So if you have any further questions, of course, you can try and send us a message, and we will try and get back to you in jiffy.

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