Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers' Conference Call to discuss the fourth quarter 2020 financial results. Today, we have with us from Safe Bulkers, Chairman and Chief Executive Officer, Mr. Polys Hajioannou; President, Dr. Loukas Barmparis; and Chief Financial Officer, Mr. Konstantinos Adamopoulos.

[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 is being recorded today.

Before we begin, please note that this presentation contains forward-looking statements as defined by Section 27A of the Securities Act 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 vessel, 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 Dr.

Barmparis. Please go ahead sir..

Good morning. I am Loukas Barmparis, President of Safe Bulkers. Welcome to our conference call and webcast to discuss the financial results for the fourth quarter of 2020.

Starting our presentation, in slide three, I would like to express our gratitude to all our seafarers, hoping that within 2021 we will reach a point that all efforts of the global community to produce treatments and vaccines will conclude, and the pandemic will be controlled.

To that end, Safe Bulkers has become a signatory of the Neptune Declaration. We have joined this global coalition, signed by more than [600] [Ph] companies and organizations in the shipping industry, to share initiatives and actions compacting the crew change crisis and repatriation of our seafarers.

We are committed to the safety and wellbeing of our seafarers, while ensure a stronger maritime supply chain, and the uninterrupted flow of commerce around the world. As a general comment for 2020, despite the negative effect of COVID-19, the company is maintaining strong liquidity position that provides us with flexibility.

It is following a plan which, in the first place, is based on our high-quality Japanese fleet, 32 out of 42 vessels, with built-in advantage of environmental footprint compared to the global drybulk fleet, and further, is aiming to upgrade and gradually renew our fleet with certain views of our forthcoming environmental changes, and sensibly deleverage our balances, targeting to create value for our shareholders, and be leading quality drybulk company.

Management alignment with shareholding and the performance and trust built over the years are of the paramount importance in the success of this plan. Moving on to slide five, in the Industry Section, let us analyze the market conditions.

Recent COVID vaccine announcements brought optimism in the global trade markets, together with the underlying demand. The graphs present the development of the charter rates for Capes and Kamsarmaxes as published by Baltic Exchange. Both Capes and Panamaxes have recovered after the low first-half of 2020, which was mainly due to the COVID-19 outbreak.

For Kamsarmaxes, the market is trading above $10,000, since June 2020, and more impressively, is basically trading in the region of $17,000 or more, which is exceptionally strong given the seasonally low market during the first quarter of each year.

Similarly, for Capes, the market peaked three times after June 2020, with the most recent in January, 2021, when it reached $25,000 per day. Presently, the market is lower and is trading at about $11,000 for Capes. However, in the case of [FFAs, share to] [Ph] the market levels closer to $20,000 for the remaining of the year.

The [resumption] [Ph] of economic activity and the healthy volumes of iron ore, coal, grain are the major drivers of these sets on raise. COVID-19 is still a concern, although acceleration of vaccination will likely control this pandemic.

Turning to slide number six, we present certain aspects of Chinese activity, which are indicators of the charter market conditions. The iron ore imports of China have been the driving force of the Cape market, and that during the course of 2020, were up 9.3% year-on-year despite finishing lower towards the end of the year.

Regarding the thermal coal imports, as shown in the middle graph, we show a big surge of imports during the end of the year, a [indiscernible] increase of 1.4% for the whole calendar year of 2020. The high demand for thermal coal, especially towards the winter months, has been reflected in the Panamax and Kamsarmax charter market.

It is important to analyze the drivers of this big surge in the month for the thermal coal. As presented at the bottom graph, we see that the power generation in Mainland China, in December 2020, jumped by 13.4% month-on-month, and by 11.2% year-on-year.

Most importantly, the total China power generation was up 4% year-on-year, reflecting the overall economic development. The demand for Panamax and Kamsarmax is expected to remain firm as we are entering towards the grain season of exports [indiscernible] South America.

The grain harvest of this year is expected to be remarkably high and essentially the [amount of] [Ph] of Panamax and Kamsarmax vessel is also expected to be high.

Having analyzed the three important drivers of the demand, let's step now into slide seven, where we presented the Panamax order book as a percent of the existing fleet for the last 25 years. Present the order book for both Capes and Panamaxes is lowest since 2002. In combination with the 20% of world fleet being over 15 years old of age.

Moving on to slide eight, we see that the remainder for -- of 2021, the new orders are above 3% of the existing fleet of Capes, and 3.7% for the Panamax and Kamsarmaxes. Until 2021, the orders remain minimal. Taking into account the ageing of the fleet, it is highly possible that scrapping activity will increase.

It is also important to note that the [CPX] [Ph] capacity is presented covered with orders of other sectors, such as container ships and tankers. On top of that, the ongoing environmental discussions for emissions and decarbonization certainly do not encourage new orders. Turning into slide nine, we present the latest developments on the fuel markets.

During 2020, due to the pandemic and the worldwide lockdown, the demand for distillate products dropped dramatically. Towards the end of 2020 and year-to-date, there has been gradual reopening of the economies, which in turn has simulated the demand for oil and distillate products, leading to higher prices.

The futures market of bunkers indicate a sustainable spread differential between the IMO 2020 compliant fuel, very low sulfur fuel oil, and the 3.5% high sulfur fuel oil, the so-called Hi5.

As shown in the graph, and according to ICE Report Center, the spot price for the Hi5 is in the region of 130 ton per -- $130 per metric ton we use for the remaining of calendar '21, '22, and '23, is trading above $120.

This spread differential, of above $120 per metric ton for a Post-Panamax vessel [indiscernible] about 7,500 metric tons per year, it is scrubber-fitted, could be translated to a good gain of about $900,000 per year, or about $2,500 per day.

Let me remind you that our company invested on scrubbers, and has already retrofitted scrubbers to half of our fleet. The recovery of global economies, the restoration of mobility, and the recovery of crude oil prices may push this Hi5 differential to pre-COVID-19 levels. Let me summarize certain key market takeaways in slide 10.

We have experienced an exceptionally strong start of 2021, with healthy volumes of iron ore, coal, and grain trade, as the recent COVID vaccine use brought optimism in global markets, despite the trade tensions between China and Australia. The global lockdown as adversely affected demand for oil and distillate fuels.

We may have a slow oil demand rebound as global lockdowns ease [indiscernible], based on the mobility which eventually may lead to the recovery of Brent prices and lead to even wider of Hi5 spread differentials. We have the lowest order book, since 2002, as the ongoing decarbonization discussions do not favor new orders.

The ageing of fleet and the increased environmental restrictions for emissions may enhance the scrapping activity. And lastly, only few shipyards have developed new environmental efficient vessels. In slide 11, we present our fleet growth over the last years.

In the next context -- in the context of our fleet renewals strategy, we have entered into agreements to acquire two Japanese-built top design ships, which are designed to comply whether with the Energy Efficiency Design Index Phase 3 and the Tier 3 in relation to NOx emissions, with scheduled delivery dates first-half of 2022, and third quarter of 2022.

Presently, only a few shipyards have developed these new environmental efficient designs. At the same time, we have agreed to sell two of our older vessels, 2003 and 2004-built, replacing the one immediately with a 2011-built Japanese Panamax at a modest price differential. It is important to note that our growth is gradual.

The government [indiscernible] several orders have distorted the supply side. At same time, the government has skipped the rate of growth even at loss making market and has invested always in the forefront of the technology ahead of the competition.

Turning to slide 12, I would like to focus on our fleet mix and point out that 75% of our fleet is Japanese versus 46% of the world fleet, providing us with a lower environmental footprint, overall lean operations, and cost built-in advantage.

Furthermore, as seen in slide 13, currently only a small number of purchase compared to world's drybulk fleet is built with EEDI index. We believe that we can identify less efficient vessels on those that are not build in Japan, and [indiscernible] designs before 2010.

And we expect that such vessels will first include restrictions, an additional cost of carbon emission taxes making them less attractive to the following years.

As presented in Slide 14, Safe Bulkers in current provision of environmental social responsibility policies has invested ahead of competition and there are two significant environmental investments in new technologies and modern design and energy efficient vessels to a negative amount of $67.2 million as of December 31, 2020.

We have already retrofitted [indiscernible] scrubber violations with an additional scrubber order placed in 2021. And 30 of our vessels are already built with ballast water treatment systems. At the same time, [indiscernible] our fleet renewal strategy, we have placed two orders for a greenhouse gas EEDI Phase 3 newbuilds for 2022.

Now let's move to slide 16, where we have plotted a BPI index as a market performance [indiscernible] price. The correlation history has been very strong. In 2019, the correlation has weakened due to trade war and during 2020 we have [indiscernible] doubling due to COVID pandemic.

At present, we believe [indiscernible] levels are relatively lower than the chartering market performance. And now let's summarize our key points for Safe Bulkers. We are a huge drybulk play. We have to [indiscernible] we have a history of 16 years plus of uninterrupted presence in the drybulk market.

Our management team has more than 30 years of experience and continuous presence in the drybulk industry. We are here for the long run. We preserve our liquidity which provides financial flexibility, security in turbulence, and opportunistic asset acquisitions.

Our stock market exposure allows expansion of profits in [indiscernible] charter market conditions. We have locked a good 38% vessel of 2021 fleet days chartered under period end charters, 68% of which are index leased, enjoying the improving charter market conditions.

About 75% of our fleet is Japanese-built, providing us with lower environmental footprint, lean operation, and cost building advantage from scrubber-fitted vessels based increased fuel spread differential.

We have actively said the environmental preservation in the set of our competitive strategy by investing more than $65 million in 2019 and 2020, later fitting 50% of our fleet with exhaust gas cleaning devices scrubbers, which provide us with extra income capability in rising oil price environment.

Management team has stayed in the game that offers full alignment with shareholders. We have demonstrated our twofold fleet renewal strategy.

On the one hand, looking towards 2030, we are ordering greenhouse gas EEDI Phase 3 NOx-Tier 3 Japanese newbuilds, and on the other hand, capturing the present market by opportunistic secondhand acquisitions replacing older vessels at a modest price differential. At the same time, we continue to the delevering of the company.

Now, I will pass the floor to our CFO Konstantinos Adamopoulos for the analysis of our financial results..

Thank you, Loukas, and good morning to all. Let me start with our chartering performance in slide 18, where we present our quarterly time charter [indiscernible], which stood at $12,319 versus our quarterly OpEx for the same period which stood at $3,978.

Moving on to slide 19, we present our quarterly daily OpEx versus our quarterly daily G&A which stood at $1,469.

The aggregate figure for both OpEx and G&A for the last quarter of 2020 was $5,447 demonstrating our focus on operations, we believe that this number for both OpEx and G&A when comparing apples-to-apples is one of the industry's lowest, if not the lowest, given the fact that we included in this figure [indiscernible] delivery expenses and also in our G&A, our management fees and directors and officers compensation and all expenses related to the administration of our company as a public entity.

Moving on to our debt profile, as seen in slide 20, with debt prepayment schedule as of end of the year for 2020, our liquidity at the end of the year stood at $171.2 million consisting of cash and one-time deposits, restricted cash, contracted un-drawn capacity and the revolving credit facility and secured commitments including sale and leaseback financing.

In slide 21, focusing on our liquidity versus our CapEx commitments, as of February 12, we had liquidity of $184.3 million, which included cash and cash equivalents, time deposits, restricted cash, funds available after the sale and leaseback agreements, new term loan agreement and the revolving credit facility.

Our aggregate remaining CapEx for the acquisition of the two newbuilds as well as the second hand vessel were $64 million, of which $12.6 million is due in 2021 and the remaining $51.4 million in 2022. In slide 22, with our debt amortization schedule versus the scrap value of our fleet.

We have a small debt repayment profile for the next two years, gradually de-leveraging our company. Let's now move to slide 23 with our quarterly financial highlights for the fourth quarter of 2020 compared to the same period of 2019.

As a general note, during the fourth quarter of 2020 we operated in a relatively weaker target market environment with lower operating and interest expenses compared to the same period in 2019 while our revenues were partly supported by the additional learnings from scrubber fitted vessels, the operation of one additional vessel which we took delivery back in April of 2020 and also from reduced voyage expenses.

The net effect is reflected in our TCE of $12,319 for the fourth quarter of 2020 compared to $13,770 during the same period in 2019.

Net revenues decreased by 2% from $53.2 million to $52.2 million, mainly due to the TCE because of weaker market partially offset by the additional revenues earned by our scrubber fitted vessels and the additional vessel delivered in 2020. Daily vessel operating expenses decreased by 22% to $3,978 compared to $5,103 for the same period in 2019.

This decrease is associated with reduced drydockings and provisional services and increased COVID [indiscernible] expenses due to the COVID pandemic. Daily operating expenses excluding drydocking and pre-delivery expenses also decreased by 13% to $3,955 for the fourth quarter of 2020 compared to $4,540 for the same period in 2019.

Our adjusted EBITDA for the fourth quarter of 2020 increased to $26.3 million compared to $23.1 million for the same period in 2019.

Our adjusted earnings per share for the fourth quarter of 2020 was $0.04 calculated in a weighted average of 100.2 million shares compared to $0.01 in '19, calculated the net weighted average number of 102.6 million shares.

On the table of slide 24, we provide an estimation of the expected downtime in Q4 2020 and Q1 2021 in order to assist an analyst with their projections. Turning our presentation in slide 25, we present our quarterly fleet data and average daily indictors compared to the same period last year.

We would like to emphasize that in this period, we have worked extensively despite the tough market conditions. And we have concluded the order of two Japanese modern design and technologically advanced newbuilds, with delivery in the first-half and third quarter of 2020.

We believe that impacts on our liquidity by agreeing 90% financing for the sale and leaseback agreement for one, and by committing term loan facility for the other one.

We have sold two of our oldest vessels, built 2003 and 2004, at attractive prices, and immediately agreed the acquisition of 2011 Japanese-built vessel [indiscernible] to two of our vessels, with limited impact on our liquidity.

We have a strong balance sheet with comfortable leverage, a smooth debt profile for this and the next year, and liquidity position of $184.3 million, as of February 12. And finally, we took measures to protect our seafarers, and so employees' health and wellbeing, and kept all of our vessels sailing, continuously servicing our charters.

Once again, we would like to thank our seafarers for their commitment and dedication throughout this tough period, [indiscernible] relieving and preserving the wellbeing of our seamen. [Indiscernible] more detail in our financial and operational results. And we are now open to take your questions..

Thank you very much. [Operator instructions] Our first question today is from Randy Giveans. Please go ahead..

Howdy, gentlemen, how is it going?.

Yes, hi, Randy..

Hey.

I guess a few questions, looking at first, the agreement for the acquisition of the 2011-built or the Panamax there, what are the thoughts behind that in terms of the ages, and also comparing that with the recent announcement for the two newbuilds over additional vessels on the water? So kind of comparing and contrasting a 10-year-old vessel and newbuilds?.

Yes, the 10-year vessel was found at the time when we sold two of the older ships of the company, the '03 and the '04 vessel. At a small premium, we managed to by an '11-built vessel, before prices start rising, in which case with a small increase we renew the age factor by eight years.

The newbuilds are more long-term investment in new regulations and the new energy efficiency environment there, and would be delivered in the middle of second and third quarter of 2022, which is [indiscernible] ahead of the game in order to have good delivery periods, because right now deliveries are fully booked until 2023.

So it's a different -- it's a -- the fleet renewal is a two-fold renewal, it's partly selling older ships and replacing them with younger ones, and partly replacing them with brand new technology vessels..

Got it, okay.

And then I guess also looking at the repurchasing of the Series A, right, what is the kind of thought process around that, and the savings with that? Would you look to maybe start a dividend or what is your thoughts around that incremental capital that's not being paid out now on the Series A?.

Look, that was a financing for the newbuild that Pedhoulas Cedrus, which was done three years ago. So we thought it was the time to call it to redeem it. And in its place we have refinanced the vessel through a sale and leaseback transaction, increasing also our liquidity.

And as a result, I mean, this is -- I mean, according to our strategy to increase our liquidity and be more flexible in the market. Now, having the strategy, we have substantial liquidity that provides us flexibility in -- for other acquisitions, for future orders, I mean, for whatever.

So this is the thought process for redeeming the Preferred A Stock that was issued by one of our subsidiaries..

Got it.

And then in terms of maybe potential dividend at some point, are we still maybe too early in the appraisal?.

Yes, in case of the potential dividend, there is a -- I mean there are two real truths. First of all, the management has about 50% of company, so the basic target of the family is to create -- of the management is to create a value for shareholders, and to be able to restore the dividend.

The second point is that, we first -- I mean we have come out of a several years of bad markets, and even the last year, it is profitable at the end, but it was overall not profitable.

And so we need to see, let's say, the development of the market, and to be able to, let's say, more sustainable good markets in order to consider additional dividend, which always is, at the end of the day, the target of which one that invests in any company, including our management..

Basically, the fourth quarter of 2020 was the first profitable quarter after a very bad first-half of 2020, and the breakeven quarter in Q3. The company saw that both its profits and its stock price is bouncing back after the -- after freight rates reversed.

So we are adjusting very fast to the new environment, and turning the losses of COVID-19 into profits. So if things develop like we expect in 2021, we will have more profitable [corpus] [Ph], and then will be more likely to consider how we distribute the funds..

Yes, that completely makes sense. We're expected many more profitable quarters, so we can have some patience on the dividend. Thanks so much..

Thank you..

Thank you..

[Operator Instructions] The next is from Ben Nolan from Stifel. Please go ahead..

Yes, hi. This is Frank Galanti on for Ben.

For my first question, I just wanted to ask, given, I guess the sales and the buyback or between the three transactions and then the ordering of the new vessel, how much dry powder do you think you have in order to grow the fleet without tapping the ATM?.

There is some dry powder, and there is more to be created by possibly selling late in 2021 a couple of more of the older ships, replacing them a younger [indiscernible]. But the most important is to see to how much the profits of Q4 will be developed, now that the market is developing in a nice way.

As freight rates start increasing meaningfully for -- in the first two months of this year, we believe that our profits will strengthen, but we have to bear in mind that also the company [wants to do] [Ph] deleveraging because that results in a long-term sustainable profits and dividends for the shareholders, and not -- to making a two or three quarters of dividends and then to stop when the market changes.

So, we want to, at the same time, deleverage. And one of the ways is to deleverage through as the market increases, selling the older ships and replacing then with newer ones, so that will be debt-free.

The plan right now for the new acquisition is to remain debt-free, that's why we will -- and thus contribute to the earnings as much as the two older ships where contributing at the same time. So, it'll be a combinational factor that we'll decide the things.

We are very optimistic as things stands at the moment, because the drybulk market is getting out over very bad situation. We have the depression of 2015, 2016, then we have the trade war in 2018, when the market starts improving then in 2020 we'll have the COVID-19. So it's three major events in the last six years.

Right now, we are happy that as I said in the past that there's not a bad thing without a good thing coming. All this crisis resulted into very little ordering of new ships. We have one of the lowest order books of the last 20 years.

This I believe is a key point that we'll drive the profits higher and we'll drive the drybulk market to very, very profitable levels. The order book is below 6%. We haven't seen this order book for wages. And you have to remember in the previous commodity booming of 2015, 2014. We have the order books of 45% to 50%.

So at that time we couldn't carry on with a sustainable market. Right now I think that the part that everyone is missing is this recovery. If it develops way and of course nobody knows, but if it develops a way we are thinking and the most of the people are thinking if it will develop along with a commodity boom.

It will coincide with two or three years of low order book, which coupled with the aging of the fleet and de-carbonization and the requirement for some of the ships slowdown in order to meet the greenhouse gases restrictions. I believe that this will give a major boost to the vessels up are well prepared for that face of the market..

If I may add on that, if you consider the slide 21, where we show our liquidity, reached about $94 million against our capital expense requirements about $60 million, I think one point to say is that looking the future and the present market environment, we can say that by for each $1000 that the time charter equivalent increases.

The profit of the company will be about $15 million. So the liquidity, we foresee that the liquidity will increase in the following, let's say quarters, from the markets which is very important and very wanted..

Okay, great. That's really helpful. Then I guess I want to ask about the Lake Despina, the Capesize have the contract terminated early.

Can you give us a bit more context on why that transaction was completed and if you'd be interested in doing the same for other vessels?.

Look, the Lake Despina was made a washout agreement with charter of the vessel on their request. They have to pay the differential between the market at the time and what was the charter rate for the ship? The ship has around three years remaining on here charter of $24,800 a day. We made that confirmation which came out to $8 million compensation.

We received already this money and now the ship has redelivered. We decided that we should keep this ship, because a premium ship in the spot market and fix it on the index link, like we have done a big part of our period vessels. So we have done this one at the 19% above the Baltic Cape Index.

We believe the Baltic Cape Index will start performing a little better of course in January it was almost 70,000 of the Baltic Cape Index. Right now the Chinese New Year it's a drop, but I think that in the next couple of months we'll see a multi-Capesize index above 20,000.

And I think that it's a good call from the company because the spot market on the multi-Capesize index grows back to 20,000, which is -- it's not the big events these days. The company will be receiving the money towards receiving on the original charters. So, we have this flexibility.

We took a decision on in the last quarter of last year, any periodic business we were fixing to keep it index-linked, because we believed in the market, and we wanted to enjoy [indiscernible] as soon as it will happen. We have around seven Panamax vessels and two Capes in index-linked.

So, even ships with all three or all four now that ensuring rates of $17,000, $18,000 a day on their period of charters. So, I think that was good opportunity for us towards all these charter and also it was good for our charters, which were first-class, they performed brilliantly for seven years and they paid you the compensation.

Now, on the other contracts, we never had the hints about the respective charters, who want to make anything like this. The one ship that as a long-term period remaining of another 10 year, so they last 11 years. The charter that makes an investment on the ship of environmental investment, I think scrubber and things like that.

So, I mean, their intentional is to maintain the ship and perform as the charter [indiscernible] big company conglomerates. So, we will never have a problem in the first 10 years of the charter.

So, we don't expect any more contracts to be treated that way, but at the same time, we are very happy with standard of our counterparties, and because when we fix ships, we think that this is most important element.

Our long experience is to with whom we fix, and not only the rate, but also the reputation of the charter and the security-centric and the guarantees we got for those long-term charters. So, it's looking good at the moment, but I mean we have to wait and see how the market develops.

Right now, we are seeing in the middle of Chinese New Year, ships earning $25,000 a day in the Atlantic, or $18,000 in the Pacific. So, it's really looking good, because last time I remember this sort of market in the first quarter was 2011. So, I think something similar is happening at the moment..

Okay, great. Thanks very much..

Thank you..

[Operator Instructions] Okay, there are no further questions coming through. I will now hand back to management for closing remarks. Thank you..

Thank very much for attending this presentation and our quarter results, and we are looking forward to discuss with you in about three months for our first quarter results. Thank you to all, and have a nice day..

Thank you very much. Ladies and gentlemen, that does conclude the call. Thank you everyone for joining. You may not disconnect..