Ladies and gentlemen, thank you for standing by and welcome to the Safe Bulkers' Conference Call to discuss the First Quarter 2020 Financial Results. Today we have with us from Safe Bulkers, Chairman and Chief Executive Officer, Mr. Polys Hajioannou; President, Dr. Loukas Barmparis; Chief Financial Officer, Mr.

Konstantinos Adamopoulos; and Chief Operating Officer, Mr. Ioannis 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] I must advise you that this conference is being recorded today.

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 including 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 involve 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 are not limited to, changes in the demand for drybulk vessels, competitive factors in the market in which the company operates, risks associated with 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 thereto or any change in events, conditions or circumstances on which any statement is based.

And now, I pass the floor to Konstantinos Adamopoulos. Please go ahead, sir..

Good morning to all. I am Konstantinos Adamopoulos, CFO of Safe Bulkers. Welcome to our conference call and webcast to discuss the financial results for the first quarter of 2020. I would like to start by thanking our seafarers for their commitment and dedication throughout this harsh period and collectively we will continue to save our charters.

Moving to Slide 4, we have been active in all fronts operational, financial, and commercial, taking measures to ease the impact of COVID-19.

In the operational forefront, and in relation to our seafarers onboard, the company's COVID-19 Management Plan has been disseminated to the vessels incorporating measures to protect seafarers and ensure employees health and well-being, and to keep all our vessels sailing continuously servicing our charterers.

In our shore operations we have conducted remotely our businesses efficiently through 6th March 2020 and reopened our offices on May 4, 2020. So far zero COVID-19 incidents both onboard as well as on shore.

We have secured the normal supply of bunkers provisions and potable water at the main ports under specific procedures to avoid contact with port personnel.

All critical technical services are maintained and as all crew changes have been suspended we have developed a detailed plan of such exchanges in order to increase crew availability and meet replacement demand once the changes resume. We have been also active in our environmental investments as seen in Slide 5.

From the beginning of the year and until May 29, 2020, even during the peak of the COVID-19 pandemic, our program of dry dockings, ballast water treatment systems and scrubber installations have continued. We have concluded six dry dockings, five ballast water installations, four scrubber installations and had one recent newbuild vessel delivered.

In the financial program in Slide 6, following the refinancing concluded in early 2020, which provided us with $53.1 million of additional liquidity and drove down $10 million from our unsecured [indiscernible], we took a further step in close cooperation with our lenders to preserve our strong financial position by pushing back to 2022 and 2023 a total of $39.1 million of loan repayments scheduled for 2020 and 2021, and also by drawing down $36.4 million from our existing available facilities.

Moving to Slide 7, and as I mentioned programs, we have reached an agreement with a prominent charter for four period time charters of non-scrubber fitted Panamax class vessels.

Three five-year charters are the daily gross charter hires of $11,750 for the first two years and for the next three years at Baltic Exchange Kamsarmax rates 82 5TC times 97% less $2,150 starting in the third quarter of 2020.

And 1-year charter at a daily gross charter rate linked to the Baltic Exchange BPI-82 5TC Index times 109% starting in the third quarter of 2020, that’s front loading our future cash flows. We anticipate the aggregate gross revenue of these four charters is $54.7million until 2025, basis calculations of the current FFA curve.

Let’s move now into analyzing the market conditions. In Slide 9, we present the outlook of the market as of the beginning of June in terms of charter rates for Capes and [indiscernible] markets as well. So far the market is mainly driven by COVID-19 and its effect in global economies.

Most advanced economies have already announced stimulus packages to address the adverse effects of the pandemic. Another important driver so far in the US-China trade war and the long anticipated implementation of phase 1 deal, which was struck back in January.

Seasonality is a constant driver in the certain markets, setting the first quarter of every year as the weakest in terms of charter rates. Turning to Slide 10, we present our data on China which seems to be the first country to recover from the pandemic. Chinese economy contracted by almost 7% in Q1.

In response China has announced fiscal measures [indiscernible] to stimulate the economy back to growth territory and these include a fiscal stimulus package of almost 3.6 trillion Yuan that’s equivalent to about $0.5 Trillion.

A raise in the financial government bond, special bond quota of 3.75 Trillion Yuan, an issuance of 1 Trillion Yuan of central government special bonds targeted at COVID-19 relief, and finally business tax cuts and fee reductions worth 500 Trillion Yuan in total.

As evidenced in the bottom graph, Chinese industrial production indicators are rebounding signaling what seems to be hopefully a V-shaped market recovery.

The special purpose bonds should be the catalyst for boosting industrial production and consequently for the uplifting demand in marine transportation commodities with the conditions in China normalized. Slide 11, we analyze the developments on imports of the major dry bulk commodities.

As shown on the top graph, total iron ore imports to China in January to April period were up 5% versus the same period of 2019. Rapid spread of COVID-19 in Brazil has halted exports of iron ore which are down 17% year-on-year. This explains partially the depressed charter rates on Capes.

In the graph in the middle of the page, represents the thermal coal and lignite imports to China for the January through April periods which were increased by 46.6% versus the same period in 2019. And on the bottom graph, we see that soybean imports to China in the same four months with a marginal increase versus the same period of 2019.

We believe that the positive news coming from China and the gradual recovery of other importing countries worldwide will eventually increase demand for bulk. In Slide 12, we present the status of the order book on Capes and Panamaxes to post-Panamaxes.

Order book is declining after 2020 with slippage and cancellations due to COVID-19, creating extensive delays.

The combination of raising of fleets, low charter rates, and increased CapEx for complying with environmental regulations may intensify scrapping activity, which has diminished due to lockdowns of demolition countries like India and Bangladesh. Lastly we had ongoing environmental discussions for emissions and decarbonization do not favor new orders.

In Slide 13, we present the effect of the global lockdowns and mobility restrictions on demand for oil and fuel. As presented on the top graph, according to D&B the global oil demand is also expected to evolve on a V-shape. In the middle and bottom graphs we present the U.S. implied on demand and the gasoline demand.

We believe that as global lockdowns ease oil demand will continue to improve in the second half of 2020. In Slide 14 we present the price of the spread differential also known as Hi5 between the IMO2020 compliant fuel versus the heavy fuel oil, which is used now only for the scrubber fitted vessels in coordination with Brent prices.

Compliant fuel and distillate products are closely related to the opening up and recovery of global economies. The compliant fuel prices versus the Hi5 prices have shrunk. As evident from the graph, Hi5 spread is correlated with Brent prices.

We expect that at the end of the global lockdown will lift mobility restrictions, and hence the demand for oil and fuel. This probably leads to recovery of Brent prices and to wider Hi5 spread differentials.

Turning in Slide 15 in the context of – about environmental social responsibility, despite the tough environment, we have retrofitted 18 scrubbers and 25 ballast water treatment systems at an aggregate cost of $55.8 million. By the end of the third quarter of 2020 we will have completed our scrubber installation program.

On the bottom table we estimate that expected downtime days for Q2 and Q3 in 2020 so as to assist our analysts with their projections. Now let's summarize the key market takeaways in Slide 16. Seasonality patterns are repetitive intensified in middle year by the COVID-19 pandemic.

We believe the delays in Chinese shipyards, delays in ports, due to quarantine, diminished scrapping and excessive environmental investments will control the supply side. As China has introduced a fiscal stimulus package of about $0.5 trillion its industrial indicators are rebounding signaling what might possibly be a V-shape of the market recovery.

There is a declining order book from 2020 onwards. At the same time, discussions on emissions and decarbonization will not favor new orders. The combination of slippage and cancelations due to the COVID-19 pandemic may create extensive delays.

Furthermore the ageing fleet, low freight rates and increased environmental CapEx may enhance the scrapping activity. The global lockdown has adversely affected the demand for oil and distillate fuels. We expect the slow rebound of global oil demand in the second half of this year as global lockdowns is oil demand.

Fuel price spread differential has shrunk for this reason during the first quarter of 2020, but Brent recovers then this spread might recover as well. Slide 17, the keynotes points are that liquidity was in excess of $127 million in the remark that we have done numerous slides talking already in line of our environmental investments.

As liquidity in this unstable environment provides us with flexibility, ability to produce long-term period charters despite market conditions are being front loaded with cash flows liquidity is a hard evidence of excellent relations with our charters.

Our ability to complete our environmental investments in the peak of the pandemic is evidence of technical expertise. And lastly, our smoothened debt profile for the next years while our leverage ratio is comfortably starts at 63% is an evidence of the trust and support from our lenders.

Let me continue with our liquidity in Slide 19 which as of May 29, this year 2020, $127.2 million consisting of $108 million. [Indiscernible] represent or the blue columns are the payment schedule on a pro forma basis taking into account the financing activities.

The new loan facility for our last new build was delivered and they are secured revolving credit facility versus the payment schedule as of March 31, 2020. [Indiscernible] which was completed in [indiscernible] provides us with an additional liquidity of $53.1 million. During the first quarter we drew down $10 million through our secured RCF.

In April, 2020 we drew down an additional $10 million available under this RCF.

In addition, in close cooperation with our lenders, we pushed back $39.1 million loan payments to 2022 and 2023 which were originally scheduled for 2020 and 2021, thus expanding the average tenure creating smoothened trading profile, while maintaining the same covenants of our debts. This resulted in increasing our flexibility during this period.

Overall following the quarter end, the company drew down $36.4 million and pushed back $39.1 million payments till 2020 and 2021. Moving to Slide 21, we present our quarterly daily OpEx, which stood at $4,771. This is our quarterly daily G&A stood at $1,371.

The aggregate figure for both numbers for Q4 2020/2019 was $6,142 and we are staging our focus on lean operations. We believe that this $6.1 thousand for both OpEx and G&A when comparing apples to apples is one of the industries lower.

Of the lowest, given the fact that we include in our OpEx all our dry-docking expenses and our gain in our G&A, our direct compensation and all expenses related to administration, while other companies may not include these numbers.

Moving on to Slide 22, we present our quarterly TCE which stood at $9,089 affected by COVID-19 which is our quarterly OpEx which stood at $4,771. Let's move to Slide 23 with our quarterly financial highlights for the first quarter of 2020 as the same period of 2019. Net revenues decreased by 5% to $45.7 million from $48.3 million.

Our time charter equivalent rate [indiscernible] decreased to $9,089 per day from $12,280 during the same period in 2019.

Daily vessel OpEx increased by 15% to $4,771 compared to $4,153 for the same period in 2019, whereas daily OpEx excluding dry-docking and pre-delivery expenses increased by 3% to $4,285 for the first quarter of 2020 compared to $4,150 for the same period last year.

Our adjusted EBITDA for the first quarter of 2020 decreased to $9.4 million, compared to $24.9 million for the same period in 2019.

Our adjusted loss per share for the first quarter of 2020 was $0.13 calculated on a weighted average number of 103.4 million shares compared to adjusted earnings per share of $0.03 during the same period in 2019 activated on a weighted average number of 101.6 million shares.

Closing my presentation on Slide 24, we present our quarterly fleet data and average daily indicators compared to the same period last year.

I would like emphasize that in this period, we have worked extensively despite the tough market conditions and we have contracted three five-year periods of time charters and one year period time charter adding front loaded cash flows. We have refinanced a large part of our debt and [indiscernible].

We took - expected to push back on the [indiscernible] loan repayments. We also drew down $36.4 million. And we installed 18 scrubbers with only two remaining. We have a strong balance sheet, comfortable leverage and smooth debt profile for 2022, 2020 and 2021and liquidity of $127.2 million.

Finally we took measures to protect our seafarers and shore employees health and well being and kept all of our vessels sailing, continuously servicing our charters. Once again, we would like to thank all our seafarers for their commitment and dedication and efforts throughout this tough period.

Going forward, we'll maintain our determination to preserve our strong financial position in which we currently are, as we believe that the market signs are there for the market to rebound once the COVID-19 impact is fully underway. Our press release presents in more detail our financial and operational results. We're now open to take questions..

[Operator Instructions] And your first question comes from Chris Wetherbee..

Hey guys, good morning. This is James on for Chris. I just wanted to start with balance sheet and touch on some of the refinancing.

I just wanted to get a sense of where you were, are there additional refinancings that you'd like to pursue, are you comfortable with what you've done so far? Just kind of wanted to get a sense of what's sort of the – look at capital structure is right now or what goals you're sort of working towards and sort of to see where you are in that process?.

Yes this is Loukas. Look we have quite happy. We have concluded very quickly this refinancing of certain facilities of course the major job was done early – late last year.

And right now you can see the principal payment schedule for the following years and we feel quite comfortable because we sit on substantial liquidity which can cover the 2020 and 2021 principal payments. Having said that of course, we shouldn't forget that the debt to asset ratio is 63%, which is still quite comfortable.

And so the company, we feel that the management feels that we are very fine at this position..

Yes and kind of wanted to get a sense of the preferred within that context.

Is there anything that you think that you could opportunistically do there or is that actually something that you're also comfortable with?.

Could you repeat the question?.

Yes, just also wanted to touch on the preferreds, are you comfortable with them where you are or given the current environment is there something that you could do opportunistically they possibly repurchase at a discount or they are fairly high cost of capital? So just to get a sense of if there's anything you could do on that side of the capital structure as well?.

Yes, we are quite comfortable with preferreds and I think the preferreds have a played a very good, let's say substantial part of the equity of the company. And I think we should continue to maintain – our balance sheet for let’s say next periods..

Got it, and then looking at OpEx, and I knows it’s up about 3% of year-over-year as you said, just wanted to get a sense if that is the right run rate to think of moving forward or if you have any opportunities to move it down or if there's anything sort of one-time-ish in there, essentially trying to get a outlook for OpEx per day?.

Look the OpEx, I mean the OpEx that we always present is not comparable with several other companies that report differently the OpEx and the dry-docking expenses, we report everything together.

And if you see that, we should see that we did a large number of dry-dockings and installations during the first quarter, despite the fact that we had this COVID-19 outbreak, we did it without our people in China.

And while we are quite comfortable, in the next quarter something we're expect that this figure probably would go down because we have less dry-dockings. And the other thing is that we also we have a program of reducing OpEx during this period. So I think that we're quite happy and even in comparison with all our peers..

Got it. But – I think you had called out that OpEx per day, excluding dry-docking expenses was roughly $4,285..

Yes..

So if we look at that moving forward, what should we be thinking of that particular number being and then also your ability to reduce that through some of your initiatives? I'm just trying to get an ex dry-docking and ex delivery expenses, trying to get a sense of what that might do across the next couple of quarters?.

Yes, I think that we should look for a figure between $4000 and $4200. This is a reasonable assumption on our efforts. And on that then you need to top up with the dry-docking expenses as we said..

Got it.

And then if you're thinking about sort of the outlook at the moment, what is your expectation for rates? There is – do you think it will be slow and gradual and occur maybe mid next year or do you think it will be sort of sharp and pointed and you could actually see some level of recovery in this year, just trying to understand sort of the outlook for the sort of shape of recovery, if you will?.

Yes, this is Polys. So what we expect is the second half of this year to move towards breakeven level. So, slightly above breakeven levels, but as this uncertainty is still there with the pandemic and nobody knows how it will develop, if there's a second round coming or if there's a vaccine that may be produced, a lot will depend on that.

If things get normalized, we expect that we will have a very strong 2021 because the supply of new buildings will be much less than what is this year and demand will be back on track. So we believe that we should have a good next 18 months if we don't have new surprise from the pandemic..

Got it, okay, well that's it from me. Thank you..

Thank you..

Your next question comes from Reggie Gibion [ph]..

Hi gentlemen, how's it going?.

Yes, fine. Thank you..

Excellent, we have two questions from me. So looking at the kind of – the share issuances you repurchased I think it was like 3.3 million shares.

What is the average price of that? And then are you looking to be more conservative now or are you still looking at share repurchases at these levels?.

Look the management is very comfortable with the company and that's why from time-to-time we have repurchase programs. And I think that in the future according to our assessment, we may continue to do such repurchase programs either opportunistically or to support the stock price..

Sure and the average price for the shares of repurchase?.

Could you please repeat?.

The average price for the shares that are going to be repurchased?.

We have not reported that, but it's quite close to what the levels, I mean it's below the levels of the stock today..

I think it’s around [indiscernible]..

Around what, I think?.

It’s around - no this is the price of 81 or 110 I think..

Okay, so similar to the price you've offered for the year on vessel.

But okay, can you provide some color on the recent jump in the rates for Capesizes and kind of your expectations of this kind of going forward?.

Capesizes rates are improving in the last two or three weeks. We expect very soon the market to get over $15,000 a day the spot market. Thereafter a lot depends on how also the trend of the pandemic is developing in Brazil.

If there is no big surprises there and we can maintain the safety of the workers in the mines, we don't get any big surprises from that place, we think that there will be an increased volume of Brazilian iron ore moving to China. We see that the demand is there. You see that the price is going up of iron ore is more than $100 a ton.

So we expect the volume of Brazilian iron ore to help the market substantially. I think the market is already improving. So basically the usual pickup in demand that was in the past starting after the Chinese New Year usually in April.

This year because of the pandemic in the western hemisphere it’s delayed and we see now in June, so it’s a two months delay from other years. So I expect to see a very strong July to December period for the iron ore grade..

Sure.

Okay and then I guess last question with all that in consideration now that we're in almost mid June, can you give some guidance on the second quarter compared to the first quarter in terms of that daily TCE? I know for the first quarter you had 9100, where do you kind of view the second quarter?.

Yes, we don't give guides as such, but we expect that the second quarter will be better than the first quarter..

Okay, better than the first quarter sounds good. Well, thanks so much..

Yes thank you..

Your next question comes from Richard Diamond..

First, great job in a difficult environment. And you know when the market is hot, it's easy to look good, but this is a true demonstration of character. My question is – my impression is that mining involves, by its very nature, social distancing and the people are wearing masks and they're far apart.

So, it looks like the mines should be able to reopen in Brazil. But I wondered if you could just give us some commentary what you see happening on the ground in Brazil? Thank you..

When you mean on the ground, you mean in the various spots around the world?.

No, on the ground in Brazil, what's happening today? What is your position today?.

I mean, I mean, we saw the reports over the weekend that there was some closure of mines in Brazil because of some increased COVID-19 hits by some workers there. But I don't think this will last very long.

Already while they gave reassurances of their production will not be affected maybe there will be a little bit of shortage of pellets for the local market. So as far as exports are concerned, I don't think we will see any great deal of change of what was planned for export.

So we are reasonably optimistic and with also the improvement of the far eastern market, Capes will not balance in volumes towards Brazil – some of them they are staying busy in the Pacific. This will give a chance the long-haul rate to help boost the market.

So last year, the second half of last year, we enjoyed rates of $35,000 per day on the Capesizes. This year, we'll be happy this is even we average around $20,000 at the peak of Q3, we will be very happy with these numbers..

I share your sentiment. Thank you very much..

Thank you..

Gentlemen, there are no further questions. I will turn the call back over to you..

So, and this concludes our conference call for the Q1 earnings. Thank you very much for your participation and we look forward to seeing you. Thank you..

Thank you. Goodbye..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..