Safe Bulkers, Inc. (SB) Q1 FY2026 Earnings Call Transcript & Summary

Thank you for standing by, ladies and gentlemen, and welcome to Safe Bulkers' Conference Call for the First Quarter 2026 Financial Results. We have with us today, 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 or 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 will soon be made available on Safe Bulker's website at www.safebulkers.com. Many of the remarks today contain forward-looking statements based on current expectations. Actual results may differ materially from results projected from those forward-looking statements. Additional information concerning factors that can cause actual results to differ materially from those in the forward-looking statements is contained in the first quarter 2026 earnings release, which is available on Safe Bulkers' website again at www.safebulkers.com. I would now like to turn the conference call over to one of our speakers today, the Chairman and CEO of the company, Mr. Polys Hajioannou. Please go ahead, sir.

Good morning to all. I will do the talking. I'm Loukas Barmparis of Safe Bulkers, and I'm welcoming you all to our quarterly results presentation. During the first quarter of 2026, we operated in an improved charter market environment compared to the same period in 2025 with increased revenues due to higher charter hires and slightly increased earnings from scrubber fitted vessels. The dry bulk market witnessed increased market volatility mainly due to geopolitical [indiscernible]. The increase of dividend to $0.06 per common share and the opportunity to [indiscernible] European investors through the parallel list in the Euronext Athens, a platform of [indiscernible] exchanges in Europe are the 2 highlights of the previous period. In the first quarter of 2026, we increased our EPS to $0.18, and from an EPS of $0.05 for the same period in last year, while we declared a $0.06 per share for dividend and continue the renewal of our fleet with 4 new builds and the sale of our oldest Kamsarmax and our oldest Panamax vessels. Following a comprehensive review of the forward-looking statements language presented on Slide 2, let us proceed to examine the supply side dynamics on Slide 4. The dry bulk fleet is projected to grow by about 4% in 2026 due to stable new deliveries with fleet growth estimated to be highest for the Panamax segment. 30% of the dry bulk fleet is over 15 years. The order book now stands at about 30% of the fleet. The forecast for dry bulk supply as per BIMCO is to grow 2% in 2026 in the open Strait of Hormuz scenario versus 1% growth in case of close. For [indiscernible], about 1% of drybulk capacity is currently part in Persian Gulf. Asset prices remain elevated in line with the current freight market. Currently, about 10% of ship capacity in the dry bulk order book will be able to use alternative fuels upon delivery. However, the dual fuel order book remains small in the dry bulk segment. The postponement of the adoption of the global fuel standard by IMO as well as recent discussions may move the path on decarbonization towards more pragmatic solutions. In our total order book and 24 Phase III [indiscernible] in 2020, we do have 2 dual-fuel newbuilds on order with deliveries in Q1, able to operate with fossil fuels until alternative fuels become available and economically viable. Hedging for the increased more seasoned cargo intensive limits of the [indiscernible] after 2030 and the potential adoption of new [indiscernible]. Safe Bulkers fleet now counts 13 Phase III vessels on the water, all delivered from 2022 onwards. In addition, 21 vessels have undergone environmental upgrades and 11 vessels are [indiscernible] incorporating superior fuel efficiency characteristics. Approximately 80% of our fleet is Japanese built compared with a global average of roughly 40% and [indiscernible] our focus on construction quality, asset [indiscernible] retained value and fuel efficiency. We also underlined the improved quality of our Chinese ships, which incorporate improvements in durability and fuel efficiency. Our average fleet age of 10.5 years, approximately 2 years younger than the global fleet average of 12.5 years, strengthening our competitive position in terms of operational performance and fuel consumption. Our commercial competitiveness will strengthen as we will be taking delivery of our remaining order book of 11 Phase III vessels. By 2029, Safe Bulkers fleet is expected to comprise 45% Phase III vessels, positioning us favorably to compete basin the fuel efficiency. 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 commodity trade. The global GDP growth expectations from 2026 and 2027 as reflected in the IMF's April forecast called for a growth around 3% in the coming years, accompanied by gradual control of inflationary pressures [indiscernible] on forecast global dry bulk demand growth of about 3% in 2026 on the open [indiscernible] scenario. Cargo volumes are projected to expand about 2% in 2026. Iron ore demand expected to grow up to 3% in 2026 in open Hormuz scenario, lower prices driven by increased exported output effectively stimulates trade and enhanced competitiveness there's a lower-grade domestic Chinese supply. However, increased Chinese port inventories may soften import demand in second half of 2026. Coal shipments are projected to decline by 1% to 2% in 2026. The International Energy Agency expects global coal demand to fall by 1.5% between 2025 and 2027 with coal imports declining up to 4%. Chinese demand is projected to fall by 1.5%, while Indian-Asian regions remain growth pockets. Thermal coal trade is weakening, coking come remains relatively resilient. However, the close of Hormuz has reversed short term. This coal trend and initial have supported trade. Grains remains the strongest performing major bulk with shipments estimated to grow about 5% in 2026 in the open Hormuz scenario. Strong targets in the U.S., EU, Argentina, Russia and Brazil under [indiscernible] supply. However, China policy pushed towards greater [indiscernible] efficiency and used soya meal usage presents a downside risk. Minor bulk growth in an open Hourmuz scenario is expected to be quite strong for 2026. Energy transition related on [indiscernible] remain supportive, though bookside trade growth remain moderate due to China's aluminum production gap. Fertilizer demand continues to be a key factor affected by the Hormuz closing. As China remains a central string factor for dry bulk this broader economic economy, strong exports offset weak domestic demand still being affected by [indiscernible] and manufacturing overcapacity. Its GDP is forecasted to grow by 4.4% in 2026. The trade tensions between the U.S. and China, although truce has been reached and recently reaffirmed, remained a key source of global economic uncertainty. Domestic production policy in coal and grain simple [indiscernible] strategies represent downside risk to sea-borne trade. India continues to perform and is projected to experience the fastest growth among major economies with a forecasted 6.5% GDP increase in 2026. Each expanding domestic market and manufacturing sector may continue to increase positively to the dry bulk demand with infrastructure investments playing a vital role. Following indecisive supermajority victory in the February [indiscernible] election, the Japanaese government has secured a strong political mandate to implement a more attractive fiscal strategy aimed at accelerating Japan transition [indiscernible] deflation to sustainable growth. This approach includes targeted fiscal stimulus and public investments to push demand and sustained economic momentum. Summing up, the supply-demand equilibrium in Slide 6. In the open Hormuz scenario, the supply growth is expected to be 2% versus demand growth of 3% for 2026. The trade market has shown strength during the first quarter of 2026 and continues to be healthy today with [indiscernible] at about 32,000 and Panamax port at about 20,000. In relation to our Capesize class vessels, all 7 were started under period charters with an average remaining charter duration of 1.7 years at an average day is at a high of about $24,600, topping $110 million in contract revenue backlog from Cape alone. Moving to Slide 8. We are proud that Safe Bulkers has become the first shipping company with common stock traded on both NSE and Euronext Athens. Euronext platform provides access to European capital markets, including Oslo, Milan, Paris, Brussels, Amsterdam, Dublin, Lisbon and Athens. By listing our common stock on the main market of the regulated securities market of Euronext Athens, we aim to broaden and diversify our shareholders' base, expand the pool of institutional and retail investors for European markets reinforce our long-term strategy, positioning and governance profile and offer to our European investors direct access to premium [indiscernible] blue chip maritime company. Moving to Slide 9 for an overview of our quarterly highlights, we need to point out that we have declared our 18th consecutive quarterly dividends and increased it to $0.06 per share, representing a 3.7% dividend yield at current share levels. At the same time, our free cash flow continues to finance our program. We maintain our liquidity and capital resources of about $374 million and comfortable leverage of 34%. We had $74.4 million of net revenues, and we do have an active 10 million share repurchase program. Since January, we placed orders for 5 Kamsarmax Phase 3 newbuilds and 1 Capesize new build, and we [indiscernible] older [indiscernible] one of our Capesize class assets. Lastly, we issued our 2025 ESG report reflecting the company's continued commitment to proactively manage the environmental risks and supporting the communities in which we operate, meeting stakeholders' expectations. On Slide 10, we present our returns to shareholders of $95 million paid in common dividends and $78 million paid in common shares [indiscernible]. Since 2022, reflecting our consistency in generating sustainable intents across market fluctuations because of our track record and management and our resilient business model. Concluding the company update in Slide 11, we present our fundamentals. Safe Bulkers is a dry bulk company with $657 million market cap, 45 vessels on the water, having $300 million scrap value. We maintained significant firepower with $17 million cash, $208 million in undrawn RCFs and $240 million borrowing capacity, I guess, our significant order book of 11 new builds, mainly in Japanese cities. We focus on our majority in Japanese big fleet advantage on fleet energy efficiency and lower [indiscernible] taxation reflected in our CII rating of 0 vessels on the bottom rating of 3 categories. We maintain a [indiscernible] technologically advanced fleet, strong balance sheet, comfortable leverage and low net debt per vessel of $8.1 million for a 10.5-year old modern fleet. We have built a resilient business model with cash flow visibility of $161 million in revenue backlog, healthy expansion for a sensible fleet that achieves scale and a healthy 3.7% annualized dividend yield position to leverage on its fuel efficiency. I now pass the floor to our 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 first quarter of 2026, we operated in an improved charter market environment compared to the same period in 2025 with increased revenues due to higher charter hires and slightly increased earnings from scrubber-fitted vessels. Moving on to Slide 13 with our quarterly financial highlights for the first quarter of 2026 and compared to the same period of 2025. Our adjusted EBITDA for the first quarter of 2026 stood at $40.7 million compared to $29.4 million for the same period in 2025. Our adjusted EPS for the first quarter of 2026 was $0.18, calculated on a weighted average number of 102.2 million shares compared to $0.05 during the same period in 2025, calculated on a weighted average number of 105.1 million shares. On the top graph, during the first quarter of 2026, we operated 45 vessels on average, earning an average TCE of $17,095 compared to the operation of 46 vessels earning an average TCE of $14,655 during the same period last year. Our daily vessel OpEx decreased by 9% to $5,223 for the first quarter of 2026 compared to $5,765. Daily vessel operating expenses, excluding dry docking and predelivery expenses also decreased by 7% and to $5,147 for the first quarter 2026 compared to $5,546 for the same period in 2025. Moving on Slide 14 with a quick overview of our quarterly operational highlights for the first quarter of 2026 compared to the same period of 2025. Now let's continue to Slide 15, where we present our balance sheet analysis, noting that assets are presented in the book value. Strong liquidity and ample cash reserves provide significant financial flexibility to navigate market volatility. The company maintains a healthy balance sheet supported by a robust equity base and conservative leverage levels. Our capital structure positions the company for sustainable long-term growth and resilience. Let's now focus on our liquidity, our cash flows and our capital structure as they are presented in Slide 16. We maintain a comfortable leverage of 34%. Our debt remains comparable to our fleet scrap value, although our fleet is just 10.5 years old on average. Our weighted average interest rate stood at 5.15% for our consolidated debt with a portion of EUR 100 million being fixed at 2.95% coupon in an unsecured 5-year bond. We have paid a considerable part of our CapEx in relation to our outstanding order book. Our liquidity and capital resources stand strong at approximately $374 million which together with a contracted revenue of about $164 million, gives a total of [ $5,038 million, ] and this is more than double our outstanding CapEx, this provides flexibility to our management in capital allocation. Furthermore, we have additional borrowing capacity in relation to one existing unencumbered vessel and 10 new bids upon their delivery. We ensure that our capital expenditure is adequately covered by our contracted future revenues, fortifying our balance sheet towards the trajectory of sustainable growth. Concluding our presentation on Slide 17, we present our daily free cash flow for the first 3 months of 2026, illustrating the company's ability to generate free cash flow, highlighting disciplined cost control at efficient vessel operations. We would like to highlight that based on our financial performance, the company's Board of Directors declared an increased $0.06 dividend per common share. The company is maintaining a healthy cash position of about $167 million as of June 12 and another $208 million in revolving credit facilities, the combined liquidity and capital resources of $375 million and a contracted revenue of $161 million. This underscores our capacity to support debt service, the reinvestment and shareholder returns at the same time, which enables us to expand the fleet, build a resilient company and create long-term [indiscernible] for our shareholders. Thank you for your attention, and we are now ready for the Q&A session.

[Operator Instructions] Our first question is from [indiscernible] with [indiscernible] Securities.

Congrats on a great quarter. I wanted to ask you about your fixed charter coverage. Are you close to where you would like to be for the remainder of 2026? Or should we expect any further increases or changes in charter coverage?

Yes. Look, the chartering of the vessels is done in a way that accommodates market conditions. So we have been experiencing a very strong quarter as we talked in the second quarter. The number of spot vessels have been increasing to take advantage of the current squeeze in future quarters, especially towards the last quarter of 2026. The company will be looking to lock in on longer-term contracts, usually on our type of vessels. Those are around 12 months on the Kamsarmaxes and around 36 months on the Capesizes. So for the time being, we try to enjoy the positive spot market.

Absolutely. My next question is about the LNG facility disruptions in Qatar. Back in March, your [indiscernible] knocked out 17% of Qatar's LNG export capacity for over 2 years. As a result, we would expect to see some solid support to steam coal trade in both 2026 and 2027. Is this fair to assume?

I think it's fair to assume we already see it, especially from Australia and Indonesia, the amount of cargo we have seen in the last 2 to 3 months has been substantial. And this is helping the market in the Pacific is levels in the -- on the BKI average of around $20,000 to $22,000 a day. Of course, there will be volatility on those numbers, but there is a lot of cargo -- coal cargo in the Far East for the reason you you mentioned. Now if this Strait of Hormuz opens after a few weeks or a couple of months, things get normalized. Still, we expect that LNG will start coming out, but in a smaller quantity than one before the war started. So some of that capacity will be lost for a number of quarters or for a couple of years. So we expect that coal will be in demand in the subsequent couple of years.

Great. And one last question. We -- if everything as planned. I mean we should see substantial benefit from reconstruction activity in Iran. It's probably too early to tell. But if you could make a comment about it, it would be really helpful.

Yes. I think this will be particularly positive for Handysize and Supramax vessels, Ultramax vessels. It's not so much affecting the Kamsarmax or Panamax vessel. But of course, when you see Supramax levels at healthy level, Supramax and Ultramax is 1 type of cargo that is -- part of the cargoes of [indiscernible] when the market is not good. So when they have their on extra demand. This will be keeping them busy on that front. Also, we expect a lot of fertilizer cargoes out of the Persian Gulf, but they have been stuck there for the last 3 or 4 months. This will help also the Kamsarmax market as well as the Ultramax market. So if we see the smaller ships improving and getting more cargo. This can only be good also for the Kamsarmax market. If you see right now, they are all earning about the same, around $20,000 a day comfortably on the spot market, maybe the modern Ultramax are earning around $25,000 a day and in the modern [indiscernible] earning around $18,000 a day. So these are very healthy levels, and we expect that any sort of reconstruction in the Iran will boost that trade. Of course, it remains to be seen the details of the agreement reach between United States and Iran, how much of the sanctions will be removed and how much of foreign flag vessels will be allowed to get involved in this trade with run. But I think that maybe this would be part of an agreement of the agreement that has been reached. But we don't know the exact details of it.

[Operator Instructions] There are no further questions at this time. I would like to hand the conference back over for closing remarks.

Thank you very much for attending our presentation for the first quarter 2026 results, and we're looking forward to discussing with you the next quarter. Have a nice day. Bye.

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