Thank you for standing by ladies and gentlemen, and welcome to the Safe Bulkers Conference Call to discuss the Third Quarter 2023 Financial Results. Today, we have with us Mr. Polys Hajioannou, Chairman and Chief Executive Officer; Dr. Loukas Barmparis, President; Mr. Konstantinos Adamopoulos, Chief Financial Officer of the company; and Mr.

Donatus Antonacci [ph], Assistant Chief Financial Officer. 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 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 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 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 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 and 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'll 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 third quarter of 2023. During the third quarter, our financial performance was weaker aligned with the charter market as a result of global economic growth uncertainties.

Our newbuild order book with more efficient vessels in our environmental upgrades program on our existing fleet was complemented with the orders for two methanol dual-fuel newbuilds for the fourth quarter of 2026 and for the first quarter of 2027 marking a significant step towards decarbonization.

At the same time, we took delivery of our fifth and six newbuilds and rewarded our shareholders with a dividend of $0.05 per share of common stock. Our capital structure is conservative with significant cash and revolver capacity. Our CapEx requirements are adequately covered by our contracted future revenues and our balance sheet is strong.

After reviewing the forward-looking statements language on Slide 2, we may move to Slide 3. There has been significant volatility in the Cape market.

It's worth noting that all our eight Capes are period charter with an average remaining charter duration of above two years and another average daily rate of about $23,500, with a market currently at about $18,500. On the Panamax, with the charter market remains somewhat stable. Moving on to Slide 4.

We present the development of the CRB commodity index, reflecting the basic commodities future prices, which represent leading indicators for shipping including energy, agriculture, precious metals and industrial metals.

Commodity prices declined sharply over the past months according to the World Bank Energy Price Index, led by coal minus 12.5% or minus 3.4% and metal prices minus 2.7%.

We continue to witness the rise of economic fragmentation, intensification of geopolitical tensions, noting the Middle East region, an increase of interest rates as policymakers aim to fight global inflation.

Global headwinds will continue to persist and intensify due to the high global interest rates, geopolitical tensions and sluggish global demand. As a result, global economic growth is also set to slow down over the medium term, against a background of these combined factors.

The resilience that global economic, activity exhibited earlier this year might say, the October forecast of IMF raised margin in the projected global GDP growth for 2023 to 3% from 2.8% in April, as global inflation projections for 2023 stands at 6.9% due to the war in used prices, pressures on food and energy prices and the supply-demand imbalances According to BIMCO the forecasted global dry bulk demand growth stands at 3% increase in 2023.

Slowdown is especially citrated in advanced economies where high inflation is received soft landing, expectation of world economy. Growth is emerging markets and mainstream markets and developing economies remained stable at 4% for 2023 4.1% for 2024.

Battle against inflation is not yet won, with inflation expectations well anchored in major economies. In China, the IMF October projection for CPP growth was 5.1% even though there are signs that the consumption led recovery could slow.

China recovery seems to be losing steam due to persistent domestic difficulties such as, the elevated debt, weakness in property sector, structural factors such as staging, which weigh on growth with the Chinese GDP estimation for 2024 to stand at 4.4% leading to a weaker demand.

On the other hand India's growth is set remained resilient, despite global challenges underpinned by robust domestic demand, strong public infrastructure investments and strengthening financial sector as reflected in IMF's October projection for a 6.3% increase in GDP for 2023. Let's move now to the supply side, as presented on Slide 5.

The total dry bulk order book stands at single digits. We remain cautiously optimistic, about the medium-term to prospects of the trade market for the coming years, due to the relatively low order book.

About 25% of the medium-sized fleet is older than 15 years thus the effect of fleet aging and environmental regulations are expected to accelerate the scrapping. Japanese big vessels have more efficient designs.

80% of our fleet is Japanese build versus 40% of the global fleet, which means that our fleet can compete better in the forthcoming environmental-based charter market.

We are one of the very pure dry bulk companies with a Phase 3 order book ahead of our peers, time being placed at lower prices than the present values in the market, signifying our intention to compete on the base of operational and environmental performance.

As presented in Slide 6, we recently took an additional significant step towards decarbonization with a contract for two methanol dual-fuel newbuilds. This vessels when powered by green methanol will be able to produce close to zero greenhouse class emissions based on the life cycle assessment methodology well to propeller.

Following the extensive order book for 12 Phase 3 vessels which were placed timely at relatively low prices and the iron metal upgrade of the existing fleet we set a clear path towards the decarbonization of our fleet by placing these two additional orders for methanol dual-fuel vessels.

We believe that the company will have one of the most environmental competitive fleets the following years. Concluding our market view in Slide 7 there has been an increased industry-wide volatility, driven by tight monetary policies rising fears of geoeconomic fragmentation and growing signs of global economic losing momentum.

Demand for technological efficiency creates opportunities for those willing to invest, as [indiscernible] has done. Such environmental efficient fleets may lead to 2-tier market with differential in earnings capacity of such fleets.

We believe that the combined effect of the aging of the fleet, the low water book, lower selling speeds and the new regulations and the greenhouse gas targets will favor fleets comprising of efficiency Japanese vessels and vessels delivered after 2014 tightening the market.

Especially, we have as we said already about 14 vessels, newbuilds that will be brand new Phase 3 vessels that will be able to compete with any vessel out there. It is said that ESG adherence becomes increasingly important for the years to come. Let me now present in brief on Slide 8.

Our recent developments, which include the declaration of a $0.05 dividend per common share from the Board. The election of three directors of our – during our Annual Shareholders Meeting and the delivery of two Phase 3 newbuilds, as well as the order book – as well as the order of two dual fuel vessels.

In Slide 9, we present certain of our key characteristics which differentiate us from our peers.

The key fundamentals and our strong alignment of interest with a significant percentage of management ownership, the comfortable leverage, the ample liquidity and contracted revenues, our track record and of course the quality and competitiveness of our fleet.

Let's focus now on our liquidity, our cash flows and our capital structure, as presented in Slide 10. We are maintaining a comfortable leverage of 35%. Our debt of €449 million remains comparable to our fleet scrap value of €355 million, although our fleet is only 10.6 years old.

Our weighted average interest rate stood at 6.24% for our consolidated debt with a portion of €100 million being filled and 295% coupon in an unsecured five-year bond.

We paid – we have paid €71 million for our capital expense requirements in relation to our order book of eight newbuilds and the remaining capital expenditures are €233 million including the recent order of the dual fuel vessels.

Our liquidity and capital resources stand strong at approximately €280 million which together with contracted revenue of about €250 million provide flexibility to our management and capital allocation. Furthermore, we have additional borrowing capacity in relation to existing and dry bulk vessels and six newbuilds upon the delivery.

Before passing the floor to our assistant CFO Konstantinos Adamopoulos for our financial review, let me make a note about our strategy of directing cash flows to finance our newbuilds program which will provide us with a distinct commercial competitive advantage in terms of fuel consumption and environmental performance.

We expect that by maintaining a comfortable leverage and a strong balance sheet this creates the basis for rewarding our shareholders and positions bargains among those companies that will successfully navigate the environmental challenges of the energy transition and of the aging of the dry bulk fleet. Konstantinos, the floor is yours..

Thank you, Loukas and good morning to everyone. As a general note during the third quarter of 2023, we operated in a weaker charter market environment compared to the same period in 2022.

With decreased revenues due to lower hires decreased earnings from Scrubber-fitted vessels, increased operating expenses and higher interest rates due to increasing interest rates. Moving on to Slide 11, with our quarterly financial highlights for the third quarter of 2023 compared to the same period of 2022.

Our adjusted EBITDA for the third quarter of 2023 stood at $30.9 million, compared to $66.9 million for the same period in 2022.

Our adjusted earnings per share for the third quarter of 2023 was $0.08, calculated on a weighted average number of 111.6 million shares, compared to $0.39 during the same period in 2022, calculated on a weighted average number of 120.4 million shares.

We present in Slide 12 our quarterly operational highlights for the third quarter of 2023, compared to the same period of 2022. During the third quarter of 2023, we operated 44.13 vessels on average, earning a TCE of $14,861, compared to 43.25 vessels ending an average TCE of $23,403 during the same period in 2022.

The company's net income for the third quarter of 2023 was $15 million, compared to net income of $51 million during the same period in 2022. Concluding on Slide 13 we present our breakeven point for Q3 2023.

It is evident that the global economies experience multiple challenges inflation higher than seen several decades, tightening financial conditions in most regions Russia's war, in Ukraine and the crisis in the Middle East all weigh heavy on the market outlook.

Based on our financial performance the company's Board of Directors declared a $0.05 dividend per common share.

We would like to emphasize that the company is maintaining a healthy cash position of about €67 million as of November 3rd, 2023 and another €158 million in RCF and €53.5 million in undrawn borrowing capacity and combined liquidity and capital resources of €278.6 million.

Furthermore, we have contracted revenue from our non-cash of sport and period time charter contracts of €233 million, net of commissions and before scrap revenue. And additional borrowing capacity in relation to eight unencumbered existing vessels and six newbuilds upon their delivery.

We believe our strong liquidity and our comfortable leverage will enable us to expand the fleet whilst we recording our shareholders. We are ready now for your questions. Thank you..

[Operator Instructions] And our first question comes from the line of Chris Wetherbee with Citigroup. Please proceed..

Hi, guys. Good morning. This is Matt on for Chris. Thanks very much for taking the question. First, I wanted to just take some time to see what you might be hearing in the market from some of your customers.

How are they looking at dry bulk and the rate environment moving into year-end? And further sort of thinking more so in 2024 particularly as it relates to the sustainability of increased Chinese import activity and as that should be a key business driver moving forward. Just any details there I think would be very helpful..

Yes. Good morning to you. I'm Polys. Look the Chinese activity the imports -- the imports we have seen that have been increasing lately on or more -- and we think that this should be supported to the market.

On the other hand, we see a lot of activity to India there are a lot of cargos into India from all over the world not only from a nearby countries like Indonesia or Australia, but even from the Atlantic basin, which is giving more support to the market albeit at low levels.

For 2024, the expectation is that we will see better demand that we had in 2023. We don't have big surprises on the geopolitical events that are happening in the various parts of the world. So we expect demand to do better. And we expect the capacity utilization to be better than it was in 2023.

Now this means in trade rates, it's quite possible and we will see later market. But again we don't expect something that anywhere near to the levels were in 2021 or 2022. Overall, because of the order book is at comfortable levels of 2024 and 2025 in and we don't expect the apps to undoubtedly survive for these two years.

Showing any kind of boost of on-demand is going to give a positive surprise. But the thing is very vague because of all the things that are happening very fast at the moment..

Fantastic. Yes, no, thank you very much for the detail. Certainly, very helpful on that front. And then -- so it looks like your contracted revenue took a nice step up in the quarter versus 2Q.

Could you just touch a little bit more on what is driving that amid the market weakness and sort of how you see that backlog moving into 2024?.

Yes. Look contracted revenue mainly we have from our Capesize Bancaria. Capesize is when the market is moving higher to fix for three years or more. As a pay camp response its not the same on Panamax. You're giving a good market that Panamax set market response over the next three or four quarters.

So it's not enough to secure long-term charters with increased activity. So we have some Capesizes that they are still fixed until in 2025. We have one vessel that is fixed until 2031. This is giving us conduct revenues for the year to come.

Our new buildings are easily fixing one-year TC rates their demand because they are very economic shifts and we're very optimistic also from next year when we will have AU EPS start applying about [indiscernible] vessel with very low consumption will be in a good demand for European cargo fleet in a charter will be trying to fix these Phase 3 vessels into European business.

At the moment, it's not happening because still no one is paying attention to the EPS. But we are prepared and we expect for next coming quarters to start seeing increased activity for the modern ships sailing into Europe..

Great. Yes really helpful. Very insightful detail.

And then just for my last question given the developments going on in the Middle East currently with international turmoil have you noticed this impacting specific trade lanes that you operate in? Or do you see it impacting? Any areas that you operate in? Just trying to get a little bit of a better understanding of how that could be potentially impacting international trade routes?.

It's prudent to get any change of trade patterns because of the -- whats happening in the Middle East. I think but also during the Russian conflict with Ukraine it took some time before we see that we show the changes on the trade lanes and it was mostly because of sanctions that created to extra per miles and extra cargos for the tanker owners.

In the middle east there's not so much capital going into Israel. It's not affecting a lot of dry bulk movement or very limited cargos going into there because Israel also sustained -- self sustained on electricity and not so many own old cargoes as in the past five or 10 years.

The conflict of [indiscernible] there is one concern, but we don't know how each should there is there is connection of what is going on in Israel and we hope there won't be, but we don't if there is a movement for people.

In this Israel will take some steps into reducing the amount of commercial ships passing through Suez Canal, situation market for the months to come. Again we hope that this does not happen because that is not nice to see happening.

But everything is uncertain, I think we need the next two, three months to understand how this conflict will be resolved because one way or another has to be resorted for humanitarian purposes, the solution must be found. And hopefully things will not escalate the process against humanity.

But at the moment it's too early to give any clear opinion or context..

Understood. Understood. Got it. Okay. Thank you very much for the detail and I will turn it over on that note..

Thank you..

[Operator Instructions] And our next question comes from the line of Climent Molins with Value Investor's Edge. Please proceed..

Good morning. Thank you for taking my questions. I wanted to start by asking about the order for two methanol dual fuel comes from access.

Could you provide some commentary on the main drivers behind the decision to offer methanol instead of say LNG or ammonia dual fuels? And secondly, have you seen a lot of interest from potential charters for these kind of assets?.

I will take -- Yes, I may take this response Its Loukas. Look first of all the first part we discussed about ammonia or methanol. Basically ammonia is not well developed yet. There is -- it has as so it needs more development. We cannot discuss at this stage availability up of ammonia ships out there.

Maybe this can happen after two, three, four, five years while methanol ships are there they are real.

The question about methanol ships is whether -- at the end of the day, we will be able to find green methanol instead of brown methanol that will -- which means that if we are able to use green methanol the vessel will operate closely to zero greenhouse gas emissions propeller.

Now, the second -- another part which is interesting is that that's why we need to have dual fuel methanol ships and not only methanol ships because in the first period we expect that the vessels were done with fuel as all the other ships and there will be Phase 3 as the other ships that we have already ordered.

And the important thing for us is that -- in total, we have about 14 ships -- 14 vessels, which are Phase 3.

And just think a fleet I mean after a couple of years two, three, four years from now a fleet which is of a size of between 40 million and 50 million or -- 40,000 and 50,000 vessels that will consist of 14 Phase 3 ships and two -- and 12 eco ships about 36% of the fleet out of 40, 45 vessels will be very modern to compete.

We will have one of the most young and modern fleet able to tackle all new environmental regulations. Why we need to go towards, let's say an alternative fuel the question is simple. Back in 2019-2020, we started ordering ships for Phase 3 which is basically our ships that will be the -- they have the design after 2025. That was the first step.

And of course, we upgraded our fleet environmentally. And so by the end of this year, 20 vessels will be upgraded with low friction pains and have a substantially better efficiency. This is a logical step to assess study and conclude an alternative design which leads to decarbonization.

So it's not something which is peculiar for us, because we are always in the forefront of technology. We want to be the most advanced dry bulk company. And we couldn't -- I mean, miss the target of start ordering methanol ships which is a real solution, while ammonia is not.

And one other point that, I want to make is that sometimes some people may ask about our about our OpEx. And I want to just again once more clarify that in OpEx, we include the cost of pains because they are not amortized their expense immediately.

So that's why sometimes we have we are showing some additional OpEx because of the large number of dry dockings, which include environmental upgrades..

Your fleet will indeed be very modern.

I actually also wanted to ask about operating expenses which declined significantly quarter-over-quarter ex drydock what were the key drivers behind the decline towards more normalized levels? And looking ahead should we expect them to remain at a level similar to this quarter?.

You mean the OpEx?.

Yes..

Got it. Yes. I think that, according our budgets we are about there. We expect to have a similar OpEx let's say the -- I mean, we cannot say about quarter-to-quarter because sometimes we do more drydock in one quarter so they can go higher.

But during a period of a year I think we have a similar amount of dry docking scale for next year as it was before. So we expect starting in our OpEx..

I think they also implied to this is that sometimes some quarters are more OpEx intensive. And then the other quarter is less intensive. Sometimes it happens like this, but you should see there the average for the year..

Thank you. I'll pass it over. Thank you for taking my question..

Yes. Thank you..

Thank you. Ladies and gentlemen, there are no further questions at this time. I'd like to pass the call back to Dr. Barmparis..

Thank you very much for attending this conference call once more. And we are looking forward to see you again and discuss again with you in the next quarter. Thank you very much and have a nice day..

Thank you. Bye..

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..