Thank you for standing by, ladies and gentlemen. And welcome to the Safe Bulkers Conference Call to discuss the Second Quarter 2021 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.

At this time, all participants are in a listen-only mode. There will be a presentation followed by question-and-answer session. [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 this conference is being recorded today. Forward-looking statements. 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 that 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 Dr.

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 second quarter of 2021. We are happy to present the financial results for the second quarter of 2021.

In a synopsis, is profitability, fleet at the edge of the technology and we leveraging targeting to create shortly a company where its net debt is comparable to steel by your vessels, creating value for our shareholders.

The above are presented in Slide 4, we reached $81.6 million in net revenues, $50.2 million of EBITDA and $0.31 of adjusted earnings per share. We ordered eight vessels GHG -EEDI Phase 3 NOx-Tier III compliant, Japanese newbuilds with early deliveries, two in 2022, four in 2023 and two in Q1 2024 at very competitive prices ahead of our competition.

At the same time, we have sold six verses, three of which are yet to be delivered with $47.6 million outstanding sales process and acquired two second hand Panamax.

We believe that by 2024, we will be able to renew about above one fourth of the fleet to Phase 2 compliant newbuilds while substituting at the same time some older vessels with younger second hand vessels. In terms of deleveraging, we have a one $125.5 million decrease in debt from 607.7 of 2020 year-end to 482.2 as of July 23, 2021.

At the same time, we maintain our financial flexibility by preserving a strong cash position, $115.6 million in our ongoing borrowing capacity available under revolving reducing debt facilities to $67 million. All these actions we believe will position the company to a whole new level of competitiveness, well ahead of the competition.

We are here for the long run. In Slide 5, we show balance sheet analysis. The assets are presented of course in their book value, noting that presently we believe that asset value substantially exceeded the book value. Let's turn to Slide 7 to have a quick look on present charter market position.

As shown in the top graph, the capes market are year-to-date is outperforming 2020. Presently, capes are trading at about 32,000. The year-to-date average at about 24,800 as compared to 2020 average for the same period, which was 9600 tonne. Similarly, for Kamsarmaxes, the market remains strong throughout this year.

Presently trades at a region of 32,000 with a year-to-date average of 23,900 as compared to 7900 for the same period in 2020. Current market prospects with strong demand and balanced order book are reflected in the FHA guess, which is marked in healthy and sustainable levels. Turning to the next slide number 8.

We present the development on pricing of certain commodities, which are either indicators for the shipping. The continuous increase on prices during the last period is signifying the underlying demand.

The strong demand from China continues and the control of COVID-19 will lead to the opening normalization of other importing countries as for example, India. Several more leading countries such as United States and China have been preparing for post-pandemic plans to boost their economies.

These sparks are expecting to enhance in drybulk growth and altogether to boost the demand for drybulk cargo scrubber. On to Slide 9, we present the status of the seat in terms of values and expected supply. On the top graph, we present the values of five year old capes and Panamaxes as assessed by Baltic exchange.

During the last month, it is evidenced a sub increase of the vessel value. For capes in particular to values have surged more than 40% in the same year in 2020 and have gained about $31 million per vessel as seen the lows in 2016.

Similarly, for five years of Panamaxes, the values have gained about 45% seen same period in 2020 and have gained about $80 million per vessels seen 2016 lows. The above assessment is indicative for the average Baltic-type vessel. Japanese big vessels big and high specifications have increased demand and can achieve even higher value.

Our fleet consists of mostly Japanese big vessels with high specifications, and many commercial and operational upgrades. Looking on the other book on the bottom graph, we note that the growth of the fleet for both capes and Panama is minimal and it does not exceed the 3% on each year.

Taking to account the expected scrapping, we may conclude that the expected demand for drybulk vessels for the next years to come, will be significantly higher than the actual supply of vessels.

Under current market conditions, at CPS both in Japan and China, we do not expect that the order book may increase significantly for the next couple of years [indiscernible] with orders from other sectors such as containers and tankers. And there is no space for additional drive back orders.

Furthermore, only a few shipyards have developed new environmental efficient designs, which together with ongoing environmental discussions where emission is expected to discourage new orders. Turning to the next Slide 10, we touched upon the current status of fuels and day pricing.

Our company has invested in the exhaust gas cleaning technology, which allows our ships fitted with scrubbers to comply with IMO 2020 regulations for sulfur emissions by burning high sulfur fuel oil instead of IMO compliant fuel, which is a very low sulfur fuel oil.

The differential in the price between very low sulfur fuel oil and the high sulfur fuel oil, so called high five is calculated to have a useful scrubber fitted vessels. Presently the high five differential in Singapore for example, sets at about $125 per metric tonne.

According to future markets, as shown in the graph on the bottom, these prices are sustainable through 2023. The scrubbers fitted post-Panamax, there is about 7500 gallons per year, this being scrubber gained to about 900,000 per year or about 2500 per day.

The recovery of global economies, the restoration of mobility and the recovery of crude oil prices may lead to even higher - wider high five differential. As shown in the top graph presently, the Brent price upgrading to pre-pandemic levels at the size of the last five years. Let's summarize all the key takeaways in Slide number 11.

The order book is minimal in its lowest level since 2002 as decarburization discussions not favor new orders. Most shipyards are preoccupied with containers and tanker orders until 2024. And only few shipyards have developed new environmental efficient designs.

We have experienced an exceptionally strong start of 2021 with robust volumes of iron ore coal and grain. Demand for commodities has been exceptionally strong during the first quarter. We have seen increased government spending on post-pandemic stimulus programs and continuing green of the global economy.

We have experienced Brent prices recovery, which may lead even wider high five spreads differential than that of today of about $120 per tonne. And lastly, gauging of the feet and the increased environmental restrictions where emissions may enhance the scrapping activity.

This gives us a support for our thought process in relation to the market positions that will prevail in the following quarters. Now let me pass the floor to our CFO, for our financial overview..

Thank you, Loukas and good morning to everyone. Let's get started with our top selling performance in Slide 13, where we present our quarterly PCE, which stood at $21,098 versus our quarterly OpEx which stood at $4874.

Moving on to Slide 14, we present our quarterly daily OpEx, which stood at $4874 and the quarterly G&A, daily G&A, which stood at $1448. The average figure over those two numbers is $6322, which demonstrates our focus on lean operations.

We believe that this number is one of the industry's lowest - if not the lowest, given the fact that we include in our OpEx all our drydocking and pre-delivery expenses. And in our G&A, our management fees directors and officer compensation in all expenses related to our administration. Moving on to our debt profile, as seen in Slide 16.

We present our repayment schedule as of the end of June this year. As of June 30, we have - turning now to liquidity. As of June 30, we have $127.4 million in cash, cash equivalents for time deposits and restricted cash.

We have another $67 million in undrawn borrowing capacity available under revolving reduced credit facilities, and $54.7 million available in secured commitments for loan and sale and leaseback agreements, in the relation to two newbuild vessels and the financing of existing vessels.

Furthermore, excluding the vessels committed for sale, which cannot be delivered yet. We have additional polling capacity in relation to one unencumbered existing vessel and three newbuilds upon their delivery. Slide 16 represent our debt amortization schedule versus the scrap value of our fleet.

We have smooth debt payment profile for the next few years, gradually delivering a company following considerable debt repayments, we have made this quarter. If you will now move to Slide 17, with our quarterly financial highlights for the second quarter of 2021, compared to the same period of last year.

As a general note, during the second quarter of 2021, we're operating in an improved charter market environment compared to the second quarter. With lower interest expenses while our net revenues of $81.6 million, compared to $48.3 million for the same period in 2020.

We're further increased by the earnings from scrubber fitted vessels in our reduced voyage expenses During the second quarter of 2021, we have time charter equivalent rate of $21,098 compared to $8094, for the same period in 2020.

The income from the second quarter of this year reached $32.4 million compared to a net loss of $13.9 million during the second quarter of 2020.

Net revenues increased by 69% with the $1.6 million for the second quarter of 21 compared to $48.3 million for the same period in 2020, mainly due to the increase you see on our fleet as a result of improved market, assisted by the additional revenues and by our scrubbers fitted vessel. Daily vessel OpEx increased by 3% to $4874, compared to $4729.

This increase was a result of the combined effect of reduced drydockings and provisions of regular services. But increased crude saturation expenses due to the COVID-19 pandemic. Daily vessel OpEx excluding drydocking and pre-delivery expenses increased by 9% to $4568 for the second quarter of 2021, compared to $4270 for the same period in 2020.

Our adjusted EBITDA for the second quarter of 2021 increased to $54.1 million, compared to $6.3 million for the same period last year.

Our adjusted earnings per share for the second quarter of 2021 was $0.31, calculated in a weighted average number of 109 million shares, compared to a loss per share of $0.16 during the same period in 2020, calculated and a weighted average number of 102.7 million shares.

Closing our presentation on Slide 18 represent our quarterly fleet data, average daily indicators compared to the same period last year.

We would like to emphasize that the company's maintaining strong cash position of $115 6 million as of July 23 that provide us with flexibility to follow our plan, aiming to gradually renew our fleet with a view of forthcoming environmental changes and regulations, and further deleverage our balance sheet targeting to create value for our shareholders.

Once again, we'd like to thank our seafarers for their commitment and dedication throughout this tough period. Our press release represents in more detail our financial and operational results. And we are now ready to take your questions..

Thank you. [Operator Instructions] Your first question comes from the line of Ben Nolan from Stifel. Please go ahead. Your line is open..

Thank you. So I have a couple. Well, good morning or afternoon I guess first. My first question relates to the new building activity. Obviously, you guys have been sort of at the forefront of the innovations and design and have always had high quality equipment from primarily Japan.

But there is still conventionally fuel or use oil relative to some of the other designs that we see a lot now to be that maybe LNG or ammonia.

Can you maybe talk through the idea of how you decided on your propulsion systems versus some of the other would seem to be increasingly popular alternatives?.

I don't think that I mean, if you are assessing the actual situation, there are no presenting other alternatives. Ammonia or hydrogen or some of the fuels will be under assessment. And I strongly believe that this will be the case. And we have let's say - this shift towards the new fuels after about at least 10 years from now or even 15.

So we have followed a pragmatic approach. To tell you the truth the LNG, as you mentioned, is not actually a real solution. It could be an intermediate solution. But LNG has a steep path of methane, which is, I think about 100 times more greenhouse gas effective compared to CO2.

So it's not clear that if you order LNG, this LNG will be compatible with the new regulations after five or six or seven years. The second point is that the other fuels basically do not exist, they are under discussion.

And we know that because we are in the CPS, and we participate in such designs, also ourselves and probably say the first information. On the other hand, we have followed the pragmatic approach. And when we say Phase 3, I went I want to make clear the Phase 3 is applicable after 2025. It's not the vessels that are produced today.

Because today, we have Phase 2 not Phase 3 verses, which represents 20% reduction of emissions compared to 2008 and 30%, which is the Phase 3.

So a Phase 3 vessel that we ordered is a vessel that when we start its production between '25 and '30, before vessels - before the ship of new technologies, like I don't know, maybe ammonia or hydrogen, whatever it prevails, which will come towards the mid of 2030. So I don't believe that there's a question, whether you want to invest or not.

This is an investment, which is clear abundance to us. We believe we have the best vessels compared to the market. We can compete easy on the existing fleet with extremely low emissions compared to everybody else. And while the others will wait to see what the technology will come after 10 years from 2025..

Yeah, I appreciate that. Although we do sometimes see is people that order ships that maybe are fueled by whatever is the alternative, but have the ability to be converted relatively easily.

Is there any ability of the newbuilders that you have to convert to alternative fuels relatively easily?.

If you can give me one name and one ship that has designed, and we can discuss. So let's not say about white, let's say about the reality. So, I don't believe presently - in principle everything can be converted.

So LNG for example, can be converted, but it has shoot comes conventional, of course you need to have a different systems for storage et cetera. So we don't want to play this game of advertisement. We just to follow what is the best available technology after 2025 to 2030.

And between 2025 and 2030 we may order over the technology that will be available for the next decade. But if you give me a design, I can tell you whether what you say is correct, or we don't believe that the designs are creatable right now or even exist..

Gotcha. Okay, that's helpful. And then lastly for me. You guys have been pretty active, very active under that ATM program that you have. Can you maybe talk through the thinking behind that? I mean, obviously you are ordering new ships, but you're also selling older ships and making a lot of money on the existing fleet.

It doesn't look like you really need the money at the moment.

What's the thinking behind the activity on ATM program?.

Look, the idea is very simple. We have design tech company that wants to create value for its shareholders. And I tell you that the majority shareholders is families that owns our management and has young family. So a design, we have described how we look at companies.

And will be able to be very profitable in the future and also, at the same time be able to pay dividends to the shareholders. We don't want the company which is over levered. So this is the one point. We want a company which has low leverage about say, 30% 35% of the assets.

Second, we don't want a company which has a fleet an old that after 2023 and the following - I mean 2025 et cetera, we have to pay the best is will not be able to compete.

Especially when you have Chinese vessels, we not be able to compete in the market and have to pay an environmental purchase either in Europe or United States or have to do - to withdraw your fleet if it's in a category E or you have to do additional investments within three years, if it's in category D.

And those all such vessels, we have substantial programs. We want a company that has basically its backbone has surely Phase 3 vessels. We have also about 10-11 Echo-ships, which were both in the previous after 2015. And so this is the second point.

So if you have a company with a low interest, low leverage, low interest expense, young fleet, Japanese fleet, durable company, solid company, low emissions, this company will be able to generate the best profits after one year from now. And then we'll be able to pay also dividend at certain point of time.

We don't want to create a company or the levers and pay dividend now for do that. On this respect, we are doing two things. The one is selling older vessels which you see this is a replacement, a newer strategy. So we have sold a few vessels and the price in which we sell are very good.

And the second point that we are doing is that we have also the ATM, which are at the end at the back of our minds at certain point of time, both companies from time-to-time, access the public markets one way or the other. So it's a big deal for us to have some equity in our balance sheet, which basically is not dilutive.

Because as you can see the profits, we always pick the profits, because the market is very good. And with a new technology shifts, we will continue to do that. So basically, this is an investment for the future of the company.

And of course, when we do this job in the right way as we have designed, then we will be able to continue, then we will be able to do - also to work with our shareholders in the future?.

Okay, that's helpful. And since you brought it up, you talked about wanting to pay dividends. How close are you to that at this point? I mean, you're making money and again, the balance sheet is stronger.

Is that something that you think is 12 month or less kind of an event?.

I cannot say how close or how far we are. Because a year before we were very far. But now we could be closer.

The issue is that as you can see, we have the leverage – yes, Poly?.

If I may add here. If I may, the good market has started only six months ago, around February. We are still six months into a good market. It's most important for the company to deleverage and renew its fleet first, and then to consider the dividends. Because now we have work to do and this is what we're doing. And we're not staying still.

We prove it quarter after-quarter of the deleveraging policy and then fleet renewal policy. So, there will come a time of the dividend will come for the benefit of all shareholders..

Hello?.

Yes.

Did you hear that?.

Yes..

The good market is only six months old. We expect this market should last a year or two more. And the order book is so small in drybulk. All the yards are fully booked until the first quarter of '24 with a major activity in containers. And before that we had major activity in tankers. But we have no activity in bulkers.

So we expect a strong market with all the regulations that are coming in front of us to prevail for more years, one or two years more from now. So a company to reinstate the dividend has to do it after you finish off with your deleveraging priority and your fleet renewal priority..

Thank you for that..

Yes, thank you..

Thank you. Your next question comes from the line of Randy Giveans from Jefferies. Please go ahead. Your line is open..

Gentlemen, how's it going?.

Thank you. Fine..

I guess two questions for me here. Looking at your chartering strategy. You clearly have a lot of your days already booked for the back half of the year.

Has your charting strategy changed at all, given the kind of current market strength? And then also, what are your quarter-to-date spot rates achieved thus far? It seems like the vast majority of your third quarter is already bought.

So just trying to compare 3Q'21 versus the $21,000 a day you earned in 2Q'21?.

Yes. Look, first of all, regarding the period of charters. As I said in previous calls, the period of charter is for the time still controlled by the major charterers the so called FFA, the Forward Trade Agreements. And which for the four years are not satisfactory levels for '23 or '24.

So you cannot really utilize three or four or five year charters that lie within our own container business. So the company prefers to work in the spot market or short period or up to one year. Because you can get the maximum benefit during those periods.

I expect as the spot market improves in the following quarters, but charters will come out and meet the higher freight rates for two or three year periods. The moment we only see sensible numbers, one of the up to 12 months period. Beyond that, if you start talking for two year period, the charterers has asked heavy discounts.

So I don't see what is the point for the company to invest in two years, when you are doing the year one, let's say at the high-20s and the year two of the low-teens. No point to say, the year to up low-teens and make average of $21,000- $22,000 a day. Because you can get it done the year one and then keep shooting the spot market.

So we don't believe there will be order book in '22 or '23 to spoil the party from that point of view. And we still believe the supply will be strong. Because we see Handysize rates are $30,000 a day, we'll see Supramax rate of $30,000 a day. We see Kamsarmax are the same and Capesize are the same.

We never before remember Handysize earning $30,000 a day even in the good times of 2010-2011 that we have strong market. The Handysize will earning $16,000 or $17,000. So it means now the minor bulk is moving and is moving with the bulk carriers and open containers. And this is boosting a lot the base of the market and the strength of the market.

So I believe that the two or three years' charters will have to wait a little bit longer before it goes down. As far as the other question you said about the third quarter. The numbers are increasing. This is true, but the market, the levels have increased from Q1.

So it's normal to expect that the numbers will be higher in the third quarter as it looks now. We are only through the first month of the third quarter. But it's higher than what it was in the second quarter till now..

Got it. I was just saying, I know with your recent chartering activity, almost 100% of the third quarter already booked.

But looking at your balance sheet, you have obviously a robust cash balance $115 million, plus all the cash available from the asset sales? Are you looking at kind of current fleet in terms of renewal looking at further acquisitions, more divestitures with the older decimals? What are your plans on that in the coming months?.

Yes, we have a new buildings. We have sold six older vessels. So these are coming in as replacement for the older vessels. I don't expect we can find reasonably priced new buildings from now on. It will be very difficult the type of ships we want from Japan. So we'll mostly concentrate on modern second hand acquisitions.

So we are to sail a vessel built in '04 or '05. We'll try to replace it with a 10 year younger vessel built in 2012-13-14 that sort of period. So from now on, we tend to concentrate on second hand acquisitions. We have a couple of war deals under negotiations, are going to conclude in the next few weeks.

I mean, I think it's a proven strategy to continue that way. Because also on the shipyards to see that their cost has gone up, their steel prices going up, or they are increasing their prices. So for us also, deliveries of these two and a half years away now is looking a bit far away for us. So we have to wait for new ships.

And also for now some time for new technologies to evolve, this may be in hydrogen vessel or ammonia vessel for other things or LNG, I don't know. No one knows what fuel will prevail and what technology will prevail. So we're happy, we've got this eight vessels to replace ships we already sold.

And the priority for us is to keep renewing the fleet and to deleverage the company. And we are doing that very fast as we have demonstrated in our last two quarter earnings. We have surely profits is looking good.

Let's make the company as attractive as possible for investors to join in and enjoy the good retention in the next quarters that are coming..

Yeah. Well, that's it for me. Thanks again..

Thank you..

Thank you. [Operator Instructions] So those are the questions at this time. I will hand the call back to you..

Thank you very much for attending this conference call where we presented our quarterly results. And we're looking forward to discuss again with you in the next quarter. Thank you very much again and have a nice day..

Thank you. That does conclude today's conference. Thank you for participating. You may now disconnect..