NEW YORK, March 07, 2023 (GLOBE NEWSWIRE) -- Capital Link hosted an interview of Dr. Loukas Barmparis, President of Safe Bulkers (NYSE: SB), with Mr. Nikolai Christopher Steckmest Sivertsen, Equity Research Analyst at DNB Markets, on Thursday, March 2, 2023. During the interview, which is part of Capital Link’s Deep Dive Webinar Series, Dr. Barmparis outlined the company’s newbuilding and fleet renewal programs, discussed its dividend policy, and commented on the state of the dry bulk market.
Full Interview
The full webinar interview can be accessed at: https://youtu.be/I5noh3ipAXk
Safe Bulkers operates a fleet of 44 dry bulk vessels, with an average age of 10.5 years and an aggregate capacity of 4.5 million dwt, 12 vessels being eco-ships built after 2014, with superior energy efficiency characteristics compared to past-2014 designs, and 3 vessels built 2022 onwards compliant with the most recent IMO GHG Phase 3 - NOx Tier III regulations. The fleet transports grain, iron ore and coal, primarily along worldwide shipping routes for some of the world's largest users of such services. Investing in environmental technologies and boosting fleet competitiveness is a key part of Safe Bulkers strategy. Besides implementing a program of environmental upgrades on the existing fleet, the company has a significant newbuilding orderbook. It took delivery of 3 IMO GHG Phase 3 - NOx Tier III newbuilds and expects the delivery of 9 more from Q2 2023 to Q2 2025. The Company’s common stock, series C preferred stock and series D preferred stock are listed on the NYSE, and trade under the symbols “SB”, “SB.PR.C”, and “SB.PR.D”, respectively.
Interview Highlights
Highlights from Safe Bulkers President Loukas Barmparis’ interview by Nikolai Christopher Steckmest Sivertsen include the following:
Dry Bulk Market Supply and Demand Dynamics
As Mr. Sivertsen noted, the dry bulk market, which has been soft, has recently gained some momentum amid higher iron ore, grain and coal volumes. Safe Bulkers expects this strength to continue, as Dr. Barmparis stated, “on the expectation of China’s improving performance with the opening of its markets.”
The Safe Bulkers President also stressed that the market’s softness was due, in part, to its seasonal nature. “Traditionally, the market is quite weak in January and February, and additionally it has been affected by the war in Ukraine, as well as by interest rate increases,” which have an impact on demand for dry bulk commodities, Dr. Barmparis expressed.
Global dry bulk demand is expected to grow by around 1% in 2023, with growth in ton-miles at around 1.5%. Dr. Barmparis noted that despite the fact that there are still problems in the Black Sea, a number of factors may contribute to a market rebound, such as the possibility that grains will support the market being the stronger performer of commodities, at about 4%, and that China’s reopening will likely improve the demand for steel.
Capital Allocation Strategy Balanced Between Shareholder Rewards and Fleet Renewal
Safe Bulker’s shares are up by about 50% since the end of September ($2.47 on September 30, 2022 - $3.73 on March 3, 2023). Responding to a question about what he believes is behind this performance, which has outpaced its peers and took place despite the market’s softness, Dr. Barmparis stressed that in the past, the share performance of Safe Bulkers had not been in line with its peers reflecting the fact that Safe Bulkers has a “reasonable quarterly dividend policy,” as compared to the company’s peers, which have “paid out substantial amounts.” He mentioned that at $0.05 per share per quarter, it still represents an attractive yield for shareholders, at 5% annualized based on the current share price.
The company’s dividend policy, Dr. Barmparis stated, was shaped according to two goals “to reward shareholders, and to finance our newbuilding program.”
“We are one of a few publicly traded companies that have an extensive new building program, and we don’t want to increase our leverage for that,” the Safe Bulkers President stated.
While its share price is increasing, Mr. Sivertsen noted that, “Still, Safe Bulkers stands out as a stock that is heavily discounted to NAV, at around 50%, compared to other dry bulk peers that trade close to or at NAV.” When asked how the company plans to act to help reduce this discount, Dr. Barmparis stressed that factors such as the company’s strong balance sheet, competent management, industry footprint dealing with major charterers and vision for the future should contribute to achieving over time a share price closer to NAV.
Dr. Barmparis pointed out that Safe Bulker’s strategy aims to combine sustainable returns to shareholders while enhancing the competitiveness of the company for the long term.
“Investors realize that, by investing in Safe Bulkers, they are investing in a company which has low leverage—we have a leverage of about 35%—we didn’t increase our leverage because of our newbuilding program, we’ve maintained this range,” he said.
The company’s low leverage, along with its “substantial liquidity,” provides the company “opportunities to be flexible,” Dr. Barmparis said, allowing it to act quickly on any deals which may arise and execute its new building and environmental upgrades program.
Boosting Fleet Competitiveness Through Investing in Environmental Technology
Safe Bulkers has recently placed an additional order for a Kamsarmax newbuild and is expecting a total of 9 newbuilds in the future. “In terms of our newbuild strategy, we were quite pragmatic. Most people said that they would not order anything because they don’t know what the alternative fuels will be,” Dr. Barmparis stated.
“We feel that these alternative fuels will probably be available at the beginning of the next decade, which means that we can not lead with our existing fleet for the next ten years.” Currently, the company’s fleet has an average age of 10.5 years and will remain stable for the next 2 years.
For this reason, Dr. Barmparis noted, Safe Bulkers invested in a series of newbuilds and has disposed of some of its older less efficient vessels. During the last two years, Safe Bulkers sold 8 vessels of $125.7 million sale proceeds, 0.63 million dwt and 14.6 years average age and acquired 7 second-hand vessels of $187.0 million acquisition cost, 0.97 million dwt and 9.2 years average age. In parallel, the environmental upgrades are continuing involving application of low friction paints and installation of energy saving devices, scheduling to having upgraded 20 existing vessels by the end of 2023. “The most important thing is that the average price of the newbuild vessels is close to 33 million per vessel,” the company’s president said. The vessels are all modern, environmentally efficient, and mainly Japanese-made. In an earlier interview, Dr. Barmparis had stressed that “the early timing of newbuilding orders translates into optimal cost, capital appreciation, and enhanced revenue generation as newbuildings command higher charter-hire due to lower fuel consumption.”
In an earlier interview, Dr. Barmparis had also noted that only 30% of the global dry bulk fleet is expected to comply with EEXI regulations without requiring modifications or upgrades. “A two-tier marker will be developed,” he commented, “which will boost companies that have invested in environmental technologies and will prevent companies that have not invested in such technologies from remaining competitive. Targeting to reduce the environmental impact of our operations, and increase the sustainability of our business over time, we’ve placed ESG in the heart of our corporate strategy and undertaken significant investments and successfully meet society’s expectations as to our proper role,” and “which in light of investors’ increased focus on ESG matters will create value for our shareholders, as new regulations, restrictions and taxation are being introduced,” and “we are prepared for all market conditions with comfortable leverage, substantial liquidity and hands on operational efficiency, ready to assess new opportunities, we remain cautiously optimistic for the future prospects of the market.”
The full interview provides more details on the company’s fleet upgrade and renewal program, including additional scrubber installations, as well as on its chartering strategy.
CAPITAL LINK – DISCLAIMER
Capital Link is the investor relations advisor to Safe Bulkers (NYSE: SB). Capital Link is hosting a series of webinars and podcasts where the Senior Management of listed companies share their insight on the company’s business development, strategy, growth prospects and overall sector outlook, as well as on broader industry topics. These webinars and podcasts are strictly for informational and educational purposes. They do not constitute an offer to buy or sell securities or investment advice or advice of any kind and should not be relied upon. The views expressed are not those of Capital Link, which bears no responsibility for them.
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