Safe Bulkers, Inc. (SB) Q2 FY2025 Earnings Call Transcript & Summary

Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers Conference Call on the Second Quarter 2025 Financial Results. We have with us Mr. Polys Hajioannou, Chairman and Chief Executive Officer; Dr. Loukas Barmparis, President; and Mr. Konstantinos Adamopoulos, Chief Financial Officer of the company. [Operator Instructions] Following this conference call, if you need any further information on the conference call on the presentation, please contact Capital Link at (212) 661-7566. I must advise you that this conference call is being recorded today. The archived webcast of the conference call also be made available on the Safe Bulkers website, www.safebulkers.com. Many of the remarks may extend forward-looking statements based on current expectations. Actual results may differ materially from the results projected from those forward-looking statements. Additional information concerning factors that can cause the actual results to differ materially from those in forward-looking statements is contained in the second quarter 2025 earnings release, which is available on the Safe Bulkers website, again, safebulkers.com. I would now like to turn the conference call over to one of your speakers, the Chairman and CEO of the company; Mr. Polys Hajioannou. Please go ahead, sir.

Good morning to all. I'm Loukas Barmparis, President of Safe Bulkers, and I will start the speech today and welcoming you at our quarterly results. During the second quarter of 2025, we experienced a softer market which impacted our revenues and profitability. We remain focused on fleet renewal, strong liquidity, comfortable leverage and long-term value creation. We have declared a dividend of $0.05 per share of common stock, rewarding our shareholders. We took delivery of our 12 new [indiscernible] and most recently shorter at the targeted price one of our oldest vessels, remain focused on capital allocation to our UB program, maintained a strong capital structure, ample liquidity and the leverage of about 88%. The selling price of our [indiscernible] at EUR 12.5 million compared to recent market levels indicated 10% turnaround of assets, buyers and the sediment shift in the dry bulk community. Following a comprehensive review of the forward-looking statements, which are presented in Slide 2, let's proceed to examine the supply side dynamics in Slide #4. The dry bulk fleet is projected to grow by about 2.8% on average in 2025 and in 2026 due to stable new deliveries. The order book now stands at about 8% of the current fleet. Asset prices are projected to pick up in line with the current trade market. Recycling volumes are anticipated to rise -- so as market conditions on the retirement of older vessels, especially in relation to the recent MEPC 83 and the Hong Kong convention on the [indiscernible]. Ship cycling [indiscernible] to 16,600 ships over the next 10 years versus the previous decade aspect Bingo construction. Only 9% of the ship capacity in the dry bulk order book will be fuel ready to use alternative fuels upon delivery and out of all ships, 37% will be burning LNG, 35% methanol and 23% ammonia. However, the dual-fuel order book is minimal on dry bulk segment. We do have 2 are vessels on motor with deliveries in Q1 '27. Currently, about 25% of the existing global city is older than 15 years. Safe barge fleet now down 12 Phase III vessels in the water oil delivered to 2022 onwards. On top of that, 24 vessels which have been upgraded edamentally will have 11 ships and eco vessels having superior design efficiencies. 80% of our fleet comprises of Japanese big vessels, surpassing the global average while our average fleet age being just 10.3 years versus a global average of 12.6 years. We believe we will become even more commercially competitive as we have on our order 6 more Phase II vessels, 2 of them do all methanol, positioning us favorably to compete within the global standards targets recently adopted by MEPC 83 and expected to be at the high [indiscernible]. The global implementation of GFS, the global fall standard is that ratified, we penalize the excess fuel carbon intensity compared to specifically determine using image and proven the scope of the regional sureregulation substantially affecting tradability. Moving on to Slide 5, we present an overview of the demand and basic commodity strand. Accommodation of a trade war as expressed through tariffs and persisting geopolitical tensions, AF, policy and certainty and posted considerable down risk for the global growth and against this inflation. For our segment, we anticipate an improving freight rate with a market with an increasing focus on the existing [indiscernible] carbonization and energy facing new beds. The global GDP growth expectations for 2025 and 2026 as reflected in the merely forecast core for growth of about 3% in the coming years, accompanied by gradual control of inflationary pressure. According to Benco, the forecasted global drive back demand will be from minus 0.5% to plus 0.5% in 2025 followed by growth of 1.5% to 2.5% in 2026 with gains in minerals being the best-performing sectors. China and India are basally boosting domestic core production, reducing import demand. China, in particular, has been rapidly phasing out face fuels from electricity generation boosting renewables reducing impact import dependence. The increase in import tariffs led to a 57% year-on-year drop in U.S. grain volumes of China as they are expected to continue favoring Brazilian cargoes bolstered by Brazil's flowing production. India continues to perform and is projected to experience the fastest growth among major economies with a forecast 6.4% GDP increase in 2025 and 2026. Its expanding domestic market and manufacturer sector may continue to contribute positively to the dry bulk demand with infrastructure investments gaining a vital role. 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, 7 of our [indiscernible] period started with an average remaining cater duration of almost 2 years at an average daily charter rate of $24,500, providing us via cash flows, topping EUR 135 million in contracted revenue backlog from Capes alone. Moving to Slide 8 to present an overview of our quarterly highlights. We have declared our 15th consecutive quarterly dividend of $0.05, representing 4.7% line. At the same time, our free cash flow finance, our renewable program. We maintain ample humidity, profitability and capital resources of EUR 830 million and the comparable leverage of 38%. We achieved 0 vessels in the carbon intensity CII rating for 2024 as described in our 2024 sustainability report. Lastly, we took delivery of our 12 Phase [indiscernible]. The most recently, we showed one of our oldest vessels in our fleet in line with our renewal strategy. In Slide 9, we present our returns to shareholders of EUR 17.7 million paid common dividends and the EUR 74.9 million paid in common shares in purchases since 2022. We have been consistent in generating sustainable tens across market fluctuations as a result of our track record and so management and our overall business model. Concluding the company update in Slide 10, we present our strong fundamentals. Safe Bulkers is a dry bulk company with $450 million market cap, 47 vessels in the quarter, having 312 million square value. We maintained significant firepower with onetime EUR 125 million cash and EUR 188 million in undrawn [indiscernible] EUR 176 million borrowing capacity taken out a significant order book of 6 [indiscernible], mainly in Japanese shipyards. We focus on our majority Japanese-grade on energy efficiency and lower CO2 taxation reflected in our CII rating of 0 vessels on the bottom rating of the [indiscernible] for 2024. We maintain an technologically at [indiscernible], strong balance sheet, comfortable leverage and low net debt to vessel of EUR 9.1 million for a 10-year old fleet. We have built a resilient business model with cash flow visibility of EUR 159 million in revenue backlog, healthy expansion for sizable fleet that achieves scale and a meaningful 4.7 million -- 4.7% annualized dividend positioned to leverage on the environmental regulatory landscape. I now pass the floor to our CFO, Konstantinos Adamopoulos, for our quarterly financial overview. Konstantinos, the floor is yours.

Thank you, Loukas, and good morning to everyone. During the second quarter of 2025, we operated in a weaker charter market environment compared to the same period in 2024 with decreased revenues due to lower charter hires decreased earnings from scarified vessels and increased operating expenses. Slide 12, we show our quarterly financial highlights for the second quarter of 2025 and compare them to the same period of 2024. Our adjusted EBITDA for the second quarter of 2025, we stood at $25.5 million compared to $41.8 million for the same period in 2024. Our adjusted earnings per share for the second quarter of 2025 was $0.01, calculated on a weighted average number of 102.5 million shares compared to $0.17 during the same period of 2024, calculated on the way the average number of 106.8 million shares. On the top graph, during the second quarter of 2025, we operated an average of $46.75 vessels earning an average time charter equivalent of $14,857 compared to 45.43 vessels, ending an average of time charter equivalent of $18,660 during the same period in 2024. Our daily vessel operating expenses increased by 6% to 6,607 for the second quarter of 2025 compared to 6,284 for the same period in 2024. Daily vessel operating expenses, excluding [indiscernible] expenses increased by 10% to $5,604 for the second quarter of 2025 compared to $5,089 for the same period in 2024. In conclusion of our presentation, we show on Slide 2, a quick overview of our quarterly operational highlights for the second quarter of 2025. We would like to highlight that based on financial performance, the company's Board of Directors declared a $0.05 dividend of common share. Emphasis we place on maintaining a healthy cash position of about $104 million as of July 18, 2025, another EUR 240 million in available revolving credit facilities, giving us a combined liquidity and capital resources of EUR 343 million. Furthermore, we have contracted revenue from our noncancelable sport and video brand charters onwards of EUR 171 million, net of commissions and before scrubber revenue. And also additional borrowing capacity in relation to 6 new bids supported delivery as well as on existing unencumbered vessels. We believe our strong liquidity and our comfortable leverage provides flexibility to our management in capital allocation and this will enable us to further expand the fleet, build a resilient company and create long temperate for our shareholders. This concludes our presentation. We are now ready for the Q&A session.

[Operator Instructions] At this time, I'd like to turn the floor back to management for closing remarks.

So thank you very much for updating this quarterly presentation about financial results for the second quarter and half year 2025, and we're looking to discuss again with you in the next quarter. Thank you very much. Have a nice day.

This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.