Loukas Barmparis - President Polys Hajioannou - Chairman & CEO Konstantinos Adamopoulos - CFO.

Chris Wetherbee - Citigroup Magnus Fyhr - Seaport Global Securities Fotis Giannakoulis - Morgan Stanley.

Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers conference call to discuss the First Quarter 2017 Financial Results.

Before we begin, please note that this presentation contains forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, concerning future events, the Company's growth strategy and measures to implement such strategy, included expected vessel acquisitions and entering into further time charters.

Words such as expects, intends, plans, believes, anticipates, hopes, estimates, and variations of such words and similar expressions are intended to identify forward-looking statements.

Although the company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct.

These statements include known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the company. Actual results may differ materially from those expressed or implied by such forward-looking statements.

Factors that could cause actual results to differ materially include but not are limited to changes in the demand for dry bulk vessels, competitive factors in the market in which the Company operates, risks associated with the operations outside the United States, and other factors listed from time to time in the Company's filings with the Securities and Exchange Commission.

The Company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with respect to thereto or any change in events, conditions or circumstances on which any statement is based.

Today we have with us from Safe Bulkers, Chairman and Chief Executive Officer Polys Hajioannou; President, Dr. Loukas Barmparis; Chief Financial Officer, Konstantinos Adamopoulos; and Chief Operating Officer, Iaonnis Foteinos. At this time, all participants are in a listen-only mode.

There will be a presentation followed by a question-and-answer session. [Operator Instructions]. Following this conference call, if you need any further information on the call or any presentation, please contact Capital Link at (212) 661-7566. And I must advise you that this conference is being recorded today. I now pass the floor to Loukas Barmparis.

Please go ahead, sir..

Good morning. I'm Loukas Barmparis, President of Safe Bulkers. Welcome to our conference call and webcast to discuss the financial results for the first quarter of 2017. Let's start our presentation with the developments in our industry. In Slide 3, we present the Cape and Panamax Average 4TC.

Undoubtedly during the first quarter of 2017, we have seen signs of improvement of the charter market compared to historical lows set back in the first quarter of 2016. In the second quarter however market is correcting to levels, which are considered unprofitable.

Charter rates for Capes are now reduced to $12,000 a day and for Panamax to $7,700 per day. Asset values, as shown in Slide 4, have recovered and have not yet been influenced by the present correction of the rates.

A five-year old Cape is sold at about $33 million compared to the low of $21 million in March 2016, and a five-year old Panamax is sold at about $19.9 million compared to $11.1 million lows last year.

Asset values still remain lower than the 12-year historical averages, which include also the high values of the peak years of the previous cycle, as well as the recent historical lows. Let's move on to examine the status of supply/demand equilibrium. In Slide 5, we see the information about the net fleet change in Capes and Panamax.

Dark blue bars denote deliveries and light blue denote scrapping, while the number above represents the net increase. We observe in 2017 a marginal net increase, both in the number of Capes and Panamax compared to the total fleet size.

The excessive order book of the past years are shown in Slide 6 have certainly exhausted this year, especially for Panamax where most of our fleet operates. Minimal request for new orders encouraged by the improved charter market of the first quarter were frozen due to the charter market correction.

In any event discuss liquidity and the time lack between the placement of an order until the delivery, is clearly the basis for an improved market in 2018. We expect the technological constraints related to new regulations for ballast water treatment plan and for SOx emissions will also influence the market.

In the next few slides, we show certain information in relation to demand for dry bulk services, which is directly related to the global economic development. In Slide 7, we present certain data in relation to iron ore trade.

During the whole of 2016, China's iron ore imports grew in consumption with advances in consumption of volume by domestic steel mills. In March 2017, Chinese iron ore imports reached the record level that were 11% higher than the same month in 2016. The peak in demand has been correlated with the commodity prices and eventually with freight rates.

Brazil's exports increased during 2016 and miners' new infrastructures set prospects for further increases. In Slide 8, we present the development of coal demand. Chinese coal imports grew strongly during the first quarter of 2017. The pick in demand has been correlated with the commodity prices and eventually with freight rates.

The imports substitution in China is continually supported by Chinese government in an effort to reduce domestic capacity and control local inefficient coal miners. In addition, China relies heavily on coal, as it remains a strategic fuel for electricity production.

Demand for grain are shown in Slide 9, supports historically the dry bulk transportation. China's soybean imports set record high for April, continuing a full month in a row record of imports.

With record Brazilian soybean harvest real, farmers are holding part sales of their production with only 61% of 2017 crops sold through the first four months of 2017, the lowest ratio of exports to harvested crops since 2010. The key takeaways are presented in Slide 10. Excessive past order-book will be exhausted mainly in 2017.

Minor additional dry-bulk orders have been placed. Stabilization or decrease of dry bulk fleet. General financing constraints remain, which means the market still faces scarce financing. Present correction creates hesitation for the future prospects.

China is a key player in dry-bulk transportation through development plants for infrastructure projects and urbanization substitution of Chinese domestic production. And the projects for global growth, which have been enhanced recently, all this factors lead basically to improved market conditions and improving asset values.

Before we go to our CFO, Konstantinos Adamopoulos, for our quarterly financial, let's highlight certain details about tender offer concluded in April in Slide 11.

As market improved in last quarter, our immediate response was to attempt to reduce financial outflows with exchange of about $27.7 million in face value of Preferred B Shares spending $24.9 million of our liquidity, plus issuing 2.2 million of common stock.

We expect that annualized benefit in our cash breakeven is about $160 per day per vessel from the payment of 8% preferred dividends in this Preferred B Stock, which was withdrawn. The outstanding portion of Series B Preferred Shares now is about $9.5 million.

Konstantinos?.

Thank you, Loukas, and good morning to all. Let's see, now move in Slide 12 with our quarterly financial highlights for the first quarter of 2017 compared to the first quarter of 2016. Net revenues increased by 35% to $33.3 million from $24.7 million, mainly due to an increase in charter rates.

Our time charter equivalent rate per vessel increased by 48% to $9,417 per day from $6,355 per day during the same period in 2016. Daily vessel operating expenses decreased by 2% to $3,596 compared to $3,653 for the same period in 2016.

Daily G&A expenses, which include daily management fees payable to our managers and daily costs incurred in relation to our operation as a public company, were reduced by 4% to $1,156 for the first quarter of 2017, compared to $1,201 from the same period last year.

We still remain unprofitable, however, our adjusted loss per share for the first quarter of 2017 was $0.07 calculated in a weighted average number of 99.3 million shares, reduced as compared to $0.21 during the same period in 2016, calculated on a weighted average number of 83.5 million shares.

In Slide 13, we present our quarterly fleet data and average daily indicators compared to the same period last year. Liquidity in a cyclical industry like ours is a key point and I will show you in the next slide what we have achieved. In Slide 14, we focus on our expenses, both OpEx as well as G&A.

We manage to reduce the aggregate figure from $4, 854 per day in the first quarter of 2016 to $4,752 for the first quarter of 2017. This 2%, or about $100 per day reduction, represents $1.4 million approximately in annualized savings and about $22.4 million, or $0.22 per share, in savings compared to the average expenses of our peers.

Our OpEx includes all items like dry-docking and initial supplies. In Slide 15, the light blue bars show that the effect we have achieved by our cost-cutting efforts were sustainable during all four quarters of 2016 and continues in the first quarter of 2017.

The dark blue bars present our TCE and show the improvement of the market from its lows during early 2016. At this point, we would like to emphasize that we have positive operational cash flows and we have controlled the financing investment cash flows.

The liquidity we preserve helps us grow through this cycle and can be used to reduce financial obligations, as we have demonstrated through our recent exchange offering of Series B Preferred Shares.

As shown in Slide 16, we have only one remaining new build in our order-book, which is scheduled to be delivered next year, which we have again to finance through an issuance of $16.9 million of preferred shares, or the owning company of this vessel, to a non-related investor at dividend of 2.95% per annum.

In total, we have $31.9 million in outstanding CapEx and we need to spend only $15 million from our liquidity for against that. As of May 12, 2017, following the successful exchange offering of about 75% of our Series B Preferred Shares, our liquidity was $92.8 million. Moving on to Slide 17. We show information about our quarterly cash flows.

For the first quarter of 2017, we achieved positive operating cash flows of $10.2 million as a result of the better market observed and supported by our low operating expenses, with a negative cash flows for investment activities due to two new build vessel deliveries, one of which was sold up on delivery.

In relation to financing cash flows, we have entered into a sale and leaseback transaction for one of this new builds, which resulted to positive cash flows.

Overall, we believe that the company has a liquidity of almost $93 million, with positive cash operations and controlled outflows for investing and financing activities, as we have only new build remaining, is well positioned to take advantage of the improved market conditions, if and when the market turns sustainable.

Our Press Release presents in more detail our financial and operating results. And we now open to take questions. Thank you..

[Operator Instructions]. Sir, we do have a question from Chris Wetherbee from Citigroup. Chris, your line is open sir..

Thanks. Good afternoon, everybody..

Hello..

Hi. Wanted to ask about commodity pricing in the market, so you highlighted a couple of charts there and we've seen iron ore prices come in, as well as coal prices come in.

I just want to get a sense of how you feel incremental demand as we move towards the second half of 2017 is going to look for these commodities? Is this something where we would expect to see a pickup at some point, or is it really price-dependent on the commodity end-markets? Just trying to get a sense of view of demand in the second half 2017?.

Look, the demand is expected to be stronger in the second half of 2017. Traditionally as we enter the summer and before the fourth quarter, always demand is picking up in the second half of the year.

We believe that commodity prices corrected from $90, I don't know, corrected down to low 50s, but now it's picking up slowly, slowly at $61 per metric ton. And the same we observe in the last few days on the oil price recovering to $53 for the Brent from the low level of $45, $46.

So we believe that commodity prices has a big correlation to the freight markets, so we need to see higher commodity prices before freight rates pickup again. So we closely monitor this commodity prices.

Of course when the commodity prices fully recover again, there is nobody can know for exact, but we expect to be higher from the current levels as we enter into July and August..

Okay, that's helpful. And then another industry question. Just thinking about the situation in Brazil and certainly a devaluation of the currency yesterday and we'll see where that plays out.

But can you just walk us through your thoughts on what may be the immediate impacts maybe from an export perspective? I would guess some commodities, particularly grain, maybe more competitive in the global market from a Brazil export perspective but I'm not sure your view on that, as well as the iron ore markets, given the turmoil in that country?.

Yes, look, the thing we know for sure is that the crop is higher than the previous season.

And at this point is lagging - exports are lagging from last year, and it's very characteristic the fact that this time last year we had a congestion in South American ports around 190 ships waiting to load, which creates positive conditions for the market, whilst this year - at the same time this year, it's only 90 ships waiting in all South American ports to load.

So this clearly shows up the flow of the cargo is not fully developed yet. It happened in previous years like this and we've seen in such cases uptaking of our exports in June and July. So if this is going to happen in June and July, we expect to see strong South American season over the summer months and then the export grain season from U.S.

Gulf starts, and these two combined together and we have flows from both South America and the U.S. Gulf in September, we expect this to help to be positive for the market. So the volumes are there.

Now when the farmers will sell the cargo and when the currencies they consider it profitable enough to sell their commodities and the margins are at optimum level, this of course they will decide. But at a certain point the grain will have to flow..

Okay. That's helpful. I appreciate that.

And then if we were to take an assumption that modestly better rates in the back half of the year and think about the cash flow generated by the company, how much - can you build cash? I guess, my question is can you build cash in that scenario of modestly better rates in the second half of 2017? Will you be in net cash positive scenario?.

Yes, we've shown that we have a positive cash flow this quarter and previous quarters, so every $1,000 of higher market, our positive cash flow is around $10 million. So it all depends on the market.

What I believe that because we have reduced our operating expenses and we are managing our ships in-house from two locations, one in Greece and one in Cyprus, we managed to keep our expenses under very, very tight control.

And this is a beauty of running an in-house management company and not outsourcing, and not outsourcing the operations and the running of the ships. So I believe that roughly for every $1,000 better market, we will see a surplus of $10 million from - on an annual basis, I mean, from our operations..

Okay. That's very helpful. Polys, thanks for the time. I appreciate it..

Thank you..

Thank you very much. [Operator Instructions]. And your next question comes from Magnus Fyhr from Seaport Global. Magnus your line is open..

Yes. Good afternoon, gentlemen. Just I had a question on your chartering strategy going forward. It seemed like you locked in quite a few vessels here at attractive rates into late 2017, early 2018, with the rates being little softer here going into the summer months and you have vessels coming up for renewal.

What's your take on forward on those vessels coming up for renewal during the summer period?.

Yes, it all depends on the freight market. You know we were happy not to look in some one-year rates at above $10,000 in March when the market was performing. We are refraining at the moment to continue because there is a correction in the spot market by around 40%, so we are holding back.

I believe that if in late June or July we see better market, we will continue this policy when we have market back at $11,000 or $12,000 a day. Definitely above that level is worth looking some charters for one year is respectively believe for quarter of the year will be strong and even stronger than this numbers.

So I think that we will continue this policy. Of course we have put a pause now for this month, and May is not a good month in the freight market. But I believe that we will have plenty of opportunity during the third quarter and especially the fourth quarter..

In addition to that, we are happy to lock certain charters for longer periods, which provide of course for visible cash flows because all these charters that you may see in our list are above our cash breakeven point and that's why also we have, of course [ph] bigger from cash flow operations and this is a very important comparative factor with other companies that we can start producing cash, and of course in the future when the market recovers well, we'll be the first to be in the profitable region..

Right. Yes, you've been very good in reducing your operating cost. Is there much more you can do that or - you took it down $100 over, I guess, the last - $100 per day over the last 12 months.

Is there more to do there, or is this a good run level - running level going forward?.

It is not only that. Of course the operating expenses were reduced and we have done a lot of - a very good job basically on the experience that has been accumulated over so many years in shipping and with certain times some, let's say, people would like to penalize but we are very happy to have this low operating expenses.

But on the other hand, we are working, and you may see the Slide 11, where we did something about another important part of our cash outflows, which is a financial cash outflows.

So our idea, as we were able to accumulate some cash from operations, we were happy to do this tender offer, which basically reduces our breakeven point and cash breakeven point of course by $160.

So we will continue to drive to do - to target such parts of our outflows, I don't believe in terms of what else you can do more, but in terms of financial outflows we may be able to do something more..

Okay, thank you. Just one last question, I guess, on the S&P market. There has been a lot of activity here in the last year. Asset values have moved up.

How do you guys view the market currently? Are there still opportunities there and how close are we to start seeing new build orders coming on? What are the yards telling you guys?.

Yes, look, there'll always be ships in the second-hard market to buy. We can talk about what our company is planning to do, not what other companies will do. We strongly believe that new buildings should be added in the fleet only if they are in a responsible place and when these ships are really required.

At this moment the new building ships are not required because the market is not yet at a healthy position. And when this healthy position comes, hopefully in 2018, we believe that the public companies at least should not rush into new buildings until they have recovered the losses they have made in the previous years.

That will be the healthy situation. So not place more orders until you recover the loss, and this is what we plan to do. If we want to buy the old second-hand ship, we can always go and buy the older more than second-hand ship. But new buildings I think, is not for - neither for this year and not for next year..

Okay. I hope everybody stays prudent as you and they will have a good market next year..

Yes. So we cannot control this, I said..

Thank you. And your next question comes from Fotis Giannakoulis from Morgan Stanley. Your line is open sir..

Yes. Hi, gentlemen, and thank you. I want to ask you about the recent damage that we saw on a VLOC of Polaris.

How does the safety of the very large ore carriers are viewed by the market after this incident, and what are the implications in terms of supply over tonnage and the impact on charter rates, both for Capes and Panamax?.

Yes, these ships I think they shouldn't have been in the market in the first place. I think it was conversion from VLCCs into ore carriers done at the peak market of 2006 and 2007.

I think this idea has problems because it's no matter how much the enforcement you are doing on the ships, when the ship is constructed for another purpose and then converted to another purpose, always there will be problems. Of course a good management should be able to deal with those problems.

Sometimes though we see that accident can be tremendous, and as far as I'm concerned I believe that this ship being - that had the accident being 24 years old, shouldn't really been in the service at that point of carriage. Let alone after a conversion.

So I believe that slowly these VLOCs will have to be phased out and will be replaced of course by the new VLOCs, the Valemax that Vale has ordered for 2019 or 2020.

I believe the fact that this company in Korea puts more into a focus the situation because there is a big public outcry for the people lost and I think that we will see a faster outpace out-phasing of these VLOCs, i.e. before the Valemax is coming to the market in 2019 or 2020.

So this is only positive for the market, and this could for safety in general, I think these ships shouldn't have been in the water after 20 years old..

Polys talking about safety and the scrutiny [ph] that operations have to face, can you give us an update on what is happening in terms of the new regulations, the ballast water.

How are you dealing with this issue? How many vessels do you have to install in the ballast water treatment system, and by when? And what kind of implications this has to the market?.

Okay. Hi Fortis. It's Loukas. What we have done is scheduled here and we are monitoring very carefully.

We all know that a number of - basically all the vessels and many companies have taken exceptions for the first dry-dockings which are due in 2017 and most part of 2018 basically because only three systems have been approved till now and quite substantial questions about it.

What we believe and as we expand towards 2019, we believe that the systems, the ballast water systems would be installed in all ships for dry-dockings in 2019 and onwards, so we'll have, say, an implementation phase from '19 to, say, '22, '23.

I don't think after 2018 and 2019, there will be additional exemptions because most systems will be approved by U.S. Coastal [ph]. Now what would be the implications of such systems, basically cost - they have a range of about, say, the equipment is about $0.5 million, $400,000, $600,000 depending on the technology that you're using.

I think that - I don't expect that this will go further down because there will be substantial demand and there will be - and this will push the price or will maintain the price. Maybe the implications are two-folds.

So for example for vessels that will implement such systems, they may need 15 to 30 days in dry-docks to change - to install such equipment.

On the other hand for vessels which are closer to the 20th anniversary, and sometimes if you have, let's say, a new vessel from a relatively new shipyard like Chinese shipyard, which started building many ships in 2005, '06, '07, '08, '09, you may find out that there would be a question whether you want to install in all the ships or for technology ships this equipment.

The second point which comes is what happens in 2020? And basically we have the implementation of SOx regulation in 2020. This means that ships may be forced to install either sooner or later either scrubbers or to use MGO.

At this stage ships which are relatively young and basically that are designed like the [indiscernible] ships in 2021, 2022 will gain a balance compared to, let's say, heavy Chinese or Korean ships. And I think this will be another role, so what we - I mean, overall our picture is following.

We've seen, let's say, initially as we move towards the end of 2017, we see a market being pulled - somehow being stabilized and pulled somehow higher from the demand side. In 2018, well, we have the influence of the supply side. The following years, we will have also the influence of technical constraints.

So there are certain parameters that can found in the new sleeping cycle after 2018..

Thank you very much, Loukas, for this very detailed response. I want to ask about what Polys has mentioned earlier feel encouragement towards his fellow ship-owners to buy second-hand vessels. I know that the company has been very skeptical in buying in the past second-hand vessels.

I think that couple of years ago, it was - there were a few acquisitions but relatively to the size of the fleet, very few of the vessel that you own come from second-hand purchases.

Are you willing right now to come back to the second-hand market in order to expand your fleet? Is new buildings out of question at this point? And then also if you can give us some color on how the S&P market is right now? I remember in the previous call, you were mentioning that there are lot of owners are expecting vessels at the same time.

Is this the same situation right now?.

Yes, look, my belief is that as the market improves, the company may focus on second-hand acquisitions. Right now, since we have one more new building to be delivered in 2018, we are not in a rush to do something more.

Definitely as I said before, we don't plan to go into new buildings in '17 or '18, simply because we want to go back into profits and then consider new buildings. So I believe the second-hand prices are still very attractive. It's at the same levels like they were in the end of 2012.

When we consider that market at a low of 20-year cycle, and if we exclude the extreme prices of first quarter of 2016, I think that second-hand prices are still attractive where they stand today. Of course companies should also consider its liquidity position and be conservative on the approach.

So as the liquidity position will improve, given the more positive cash flow from operations, and as we then slowly into a better market, yes, the most probable is for our company to focus on some selective acquisition of modern second-hand tonnage..

Polys, compared to a year-ago, your balance sheet looks significantly stronger. If I calculate, well, loan to value ratio is around 60% right now. You mentioned earlier about profitability - returning to profitability is an important milestone for you.

At what point shall we expect the return into a dividend policy, given the fact that you also do not plan to make any major acquisitions in the near-term?.

The dividend is very far away at this point. If we don't see profits and if we don't see that we start looking in profitable charters above the breakeven level, we cannot plan for dividend. Dividend must be supported by profits.

So as soon as we see two or three profitable quarters, and if this is the decision of the board to reward shareholders for the company that in the past we paid dividends between 2008 and 2015 uninterrupted despite the Lehman shock.

Now we stopped in the - I think in the third or fourth quarter of 2015 when we saw extreme conditions in the freight market. So as soon as the company turns profitable, one of the ideas will be put on the table is the reinstatement of some dividend. But I think this is not this year's discussion..

Okay.

But let me understand that will you expect to see two or three quarters of profitability before, or at the moment that we will see a profit and your charter your vessels above $11,500, which is your breakeven - your EPS breakeven, we will be able to expect a dividend payment?.

No, we have to see a few quarters because it has to be sustainable. The dividend you cannot pay for two quarters and then stop again. You have to see a sustainable recovery in the market. Two or three profitable quarters, and then the board will sit down and consider the excess liquidity could be returned to the shareholders.

But I think this is not this year's discussion..

Thank you very much for your answers..

Thank you..

There are no further questions at this time. Sir, please do continue. Gentleman, there are no further questions. Please do continue..

So thank you very much for attending this conference call. We are looking forward to discuss again with you the financial results of our next quarter. Thank you to all, and have a nice day..

Thank you. That does conclude your conference today. Thank you all for participating. You may all disconnect..