Safe Bulkers announced its unaudited financial results for the three month period ended March 31, 2023. The Board of Directors of the Company also declared a cash dividend of $0.05 per share of outstanding common stock.
Management Commentary
Dr. Loukas Barmparis, President of the Company, said: “During the first quarter of 2023, we operated in a relatively weak market compared to the previous year. Having comfortable liquidity and leverage, we terminated the ATM program, which had not been in use since September 2021, continued our common stock buy-back program targeting the repurchase of ten million shares in the aggregate, and declared a dividend of five cents per share of common stock.”
Appointments to the Board of Directors
In March 2023, on the recommendation of the Corporate Governance, Nominating and Compensation Committee, the Board of Directors of the Company (the “Board”) voted to expand the size of the Board from seven directors to nine directors and to elect Kristin H. Holth and Marina Hajioannou to fill the new positions. The Board determined that Ms. Holth is independent for purposes of the NYSE independence standards and appointed Ms. Holth to serve on the Corporate Governance, Nominating and Compensation Committee and the Audit Committee.
Environmental Social Governance and Responsibility – Environmental investments – Dry-dockings
The Company is continuing the environmental upgrade program of its existing fleet in relation to International Maritime Organization (“IMO”) greenhouse gas (“GHG”) emission regulations. As of May 5, 2023, 10 vessels in total have been upgraded, with 10 more vessels targeted for upgrade by the end of 2023. The low friction paint applications that are part of the environmental upgrades are recorded as operating expenses, while energy saving devices are capitalized and recorded as capital expenditures.
During the first quarter of 2023, the Company made environmental upgrades for two Capesize class vessels including scrubber installation, namely the MVs Maria and Michalis H. As of May 5, 2023, the Company has further upgraded three vessels, namely the MVs Koulitsa 2, Maritsa and Kanaris. During the second quarter of 2023, the Company has scheduled two more scrubber installations in Capesize class vessels and in total nine dry-dockings with an estimated aggregate number of 270 down-time days. The Company continues to use biofuels in certain voyages targeting a lower carbon factor and lower environmental impact through the consumption of less fossil fuel.
Furthermore, the Company has an extensive newbuild program of 12 vessels designed to meet the IMO regulations related to the reduction of GHG and NOx emissions (the ”IMO GHG Phase 3 – NOx Tier III”), of which three have already been delivered, renewing and expanding its fleet with vessels of the most efficient existing designs. The aggregate capital expenditure of the newbuild program is approximately $409.6 million.
Fleet update
As of May 5, 2023, we had a fleet of 44 vessels, consisting of 12 Panamax, 7 Kamsarmax, 17 Post-Panamax and 8 Capesize vessels. Twelve vessels in our fleet are eco-ships built after 2014 and three vessels are IMO GHG Phase 3 – NOx Tier III ships built 2022 onwards, with an aggregate capacity of 4.5 million dwt and an average age of 10.7 years.
Orderbook
As of May 5, 2023, we had an orderbook of nine IMO GHG Phase 3 – NOx Tier III newbuilds, eight of which are Kamsarmax class vessels and one is a Post-Panamax class vessel, with four scheduled deliveries in 2023, three in 2024 and two in the first half of 2025.
Newbuild delivery
In January 2023, the Company took delivery of the Post-Panamax class vessel MV Climate Ethics, its third IMO GHG Phase 3 – NOx Tier III, Japanese newbuild.
Newbuild acquisition
In February 2023, the Company entered into an agreement for the acquisition of an IMO GHG Phase 3 – NOx Tier III, Japanese, 82,000 dwt, dry-bulk, newbuild Kamsarmax class vessel with a scheduled delivery date in the second quarter of 2025. This vessel is sister to a number of newbuilds in the Company’s orderbook with advanced energy efficiency characteristics and lower fuel consumption.
Vessel sales
In September 2022, the Company entered into an agreement for the sale of MV Pedhoulas Trader, a 2006 Japanese-built, Kamsarmax class vessel at a gross sale price of $15.9 million to an unaffiliated third party. The sale was consummated in January 2023.
In March 2023, the Company entered into an agreement for the sale of MV Efrossini, a 2012 Japanese-built, Panamax class vessel to an unaffiliated third party at a gross sale price of $22.5 million and with a forward delivery date for June 2023. Upon delivery to new owners, the vessel will be chartered back by the Company at a gross daily charter rate of $16,050 for a period of ten to fourteen months.
Chartering our fleet
Our vessels are used to transport bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping routes. We intend to employ our vessels on both period time charters and spot time charters, according to our assessment of market conditions. Our customers represent some of the world’s largest consumers of marine drybulk transportation services. The vessels we deploy on period time charters provide us with visible and relatively stable cash flows, while the vessels we deploy in the spot market allow us to maintain our flexibility in low charter market conditions as well as provide an opportunity for a potential upside in our revenue when charter market conditions improve. The chartering of our vessels is arranged by our Managers15 without any management commission. As of May 5, 2023, we employed, or had contracted to employ, (i) 11 vessels in the spot time charter market (with up to three months original duration) and (ii) 34 vessels in the period time charter market, including one for a vessel scheduled to be delivered in the second quarter of 2023 (with original duration in excess of three months). Of these vessels 11 have an original duration of more than two years and four have an original duration of more than one year. As of May 5, 2023, the average remaining charter duration across our fleet was 0.9 years.
As of May 5, 2023, we had contracted revenue of approximately $285.1 million, net of commissions, from our non-cancellable spot and period time charter contracts excluding the Scrubber benefit. Given the volatility associated with the Capesize charter market, as of May 5, 2023, all eight of our Capesize class vessels have been chartered in period time charters, five of which have remaining charter durations exceeding one year. As of May 5, 2023, the average remaining charter duration of our Capesize class vessels was 2.6 years and the average daily charter hire was $24,021, resulting in a contracted revenue of approximately $179.6 million net of commissions, excluding the additional compensation related to the use of Scrubbers. During the first quarter of 2023, we operated 43.83 vessels, on average earning a TCE of $15,760 compared to 39.54 vessels earning a TCE of $21,352 during the same period in 2022. Our contracted fleet employment profile as of May 5, 2023, is presented in Table 1.
Debt
As of March 31, 2023, our consolidated debt before deferred financing costs was $430.2 million, including the €100 million – 2.95% p.a. fixed coupon, non amortizing, unsecured bond issued in February 2022 and maturing in February 2027. As of March 31, 2023, our consolidated leverage16 was approximately 33% and our weighted average interest rate during the three-month period ended March 31, 2023, was 4.63%. During the three-month period ended March 31, 2023, we made scheduled principal payments of $7.1 million, voluntary debt prepayments of $35.0 million and draw downs of $48.0 million on our revolving facilities. The repayment schedule of our debt as of March 31, 2023, is presented in Table 2 below:
Liquidity and capital resources, capital expenditure requirements and debt as of March 31, 2023
We had $98.7 million in cash, cash equivalents, bank time deposits and restricted cash, $109.0 million in undrawn borrowing capacity available under existing revolving reducing credit facilities and $148.2 million in undrawn borrowing capacity available under three loan relating to three existing and three newbuild vessels as well as one sale and leaseback agreement with purchase obligation in relation to a newbuild vessel. We paid $72.8 million for our capital expenditure requirements in relation to our orderbook. Furthermore, we had contracted revenue of approximately $282.1 million, net of commissions, from our non-cancellable spot and period time charter contracts excluding the Scrubber benefit, and additional borrowing capacity in connection with the financing of seven unencumbered vessels and five newbuilds upon their delivery.
We had a fleet of 44 vessels, an orderbook of nine newbuilds and a contract to sell one vessel. The remaining capital expenditure requirements were $244.5 million in aggregate, consisting of $243.1 million relating to the nine newbuilds on order, and $1.4 million relating to three Scrubber retrofits. The schedule of payments of the remaining capital expenditure requirements is $127.0 million in 2023, $74.5 million in 2024 and $43.0 million in 2025.
We had $430.2 million of outstanding consolidated debt before deferred financing costs, including the unsecured bond issued in February 2022.
Liquidity and capital resources, capital expenditure requirements and debt as of May 5, 2023
We had $90.7 million in cash, cash equivalents, bank time deposits, restricted cash, $119.0 million in undrawn borrowing capacity available under existing revolving reducing credit facilities and $148.2 million in undrawn borrowing capacity available under three loan facilities relating to three existing and three newbuild vessels as well as one sale and leaseback agreement with purchase obligation in relation to a newbuild vessel. We paid $73.3 million for our capital expenditure requirements in relation to our orderbook. Furthermore, we had contracted revenue of approximately $285.1 million, net of commissions, from our non-cancellable spot and period time charter contracts excluding the Scrubber benefit, and additional borrowing capacity in connection with the financing of seven unencumbered vessels and five newbuilds upon their delivery.
We had a fleet of 44 vessels, were scheduled to receive nine newbuilds and a contract to sell one vessel. The remaining capital expenditure requirements were $243.9 million in aggregate, consisting of $242.6 million relating to the newbuilds on order and $1.3 million relating to three Scrubbers retrofits. The schedule of payments of the remaining capital expenditure requirements is $126.4 million in 2023, $74.5 million in 2024 and $43.0 million in 2025.
We had $421.0 million of outstanding consolidated debt before deferred financing costs, including the unsecured bond.
Common Stock Repurchase Program
In June 2022, the Company authorized a program under which it may from time to time in the future purchase up to 5,000,000 shares of its common stock. In March 2023, the Company authorized the increase of the share repurchase to a total of up to 10,000,000 shares of its common stock. As of May 5, 2023, approximately 83% of the program, or 8,312,259 shares of common stock, had been repurchased and cancelled.
At-the-market equity offering program
In August 2020, the Company filed a prospectus supplement with the Securities and Exchange Commission (“SEC”), under which it could offer and sell shares of its common stock (“Shares”) from time to time up to aggregate sales proceeds of $23.5 million through an “at-the-market” equity offering program (the “ATM Program”). In May 2021, the Company filed a supplement to its prospectus supplement to increase the capacity under the ATM Program to allow for sales of Shares for aggregate gross offering proceeds of up to $100.0 million.
Since the inception of the ATM Program the Company had sold 19,417,280 shares of common stock under the program with aggregate net offering proceeds to the Company of $71.5 million. The Company has not consummated a sale of shares of common stock under the ATM Program since September 2021. The ATM Program was terminated by the Company on May 8, 2023.
Dividend Policy
In April 2023, the Board of Directors of the Company declared a cash dividend of $0.50 per share on each of its Series C preferred shares (NYSE: SB.PR.C) and Series D preferred shares (NYSE: SB.PR.D) for the period from January 30, 2023 to April 29, 2023. The dividend was paid on May 1, 2023 to the shareholders of record as of April 20, 2023.
On May 10, 2023, the Board of Directors of the Company declared a cash dividend on the Company’s common stock of $0.05 per share which is payable on June 7, 2023 to the shareholders of record of the Company’s common stock at the closing of trading on May 26, 2023. As of May 5, 2023, the Company had 113,382,346 shares of common stock issued and outstanding.
The declaration and payment of dividends, if any, will always be subject to the discretion of the Board of Directors of the Company. There is no guarantee that the Company’s Board of Directors will determine to issue cash dividends in the future. The timing and amount of any dividends declared will depend on, among other things: (i) the Company’s earnings, fleet employment profile, financial condition and cash requirements and available sources of liquidity; (ii) decisions in relation to the Company’s growth, fleet renewal and leverage strategies; (iii) provisions of Marshall Islands and Liberian law governing the payment of dividends; (iv) restrictive covenants in the Company’s existing and future debt instruments; and (v) global economic and financial conditions.
War in Ukraine
As a result of the war between Russia and Ukraine which commenced in February 2022, the US, the EU, the UK, Switzerland and other countries and territories have announced unprecedented levels of sanctions and other measures against Russia and certain Russian entities and nationals. We intend on complying with these requirements and addressing their potential consequences. While we do not have any Ukrainian or Russian crews, our vessels currently do not sail in the Black Sea and we conduct limited operations in Russia and Ukraine, we will continue to monitor the situation to assess whether the conflict could have any impact on our operations or financial performance.
Full ReportSource: Safe Bulkers
