Loukas Barmparis - President Polys Hajioannou - Chairman & Chief Executive Officer.

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

Thank you for standing by, ladies and gentlemen. And welcome to the Safe Bulkers Conference Call to discuss the Third Quarter 2016 Financial Results. Today we have with us from Safe Bulkers, Chairman and Chief Executive Officer Polys Hajioannou, President Dr.

Loukas Barmparis, Chief Financial Officer Konstantinos Adamopoulos, and Chief Operating Officer Iaonnis Foteinos. At this time, all participants are in a listen-only mode. There will be a presentation follow-up 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 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 dry bulk 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 I now 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 2016. Let's start our presentation from the development in our industry.

The charter market has somewhat recovered since the beginning of the year and there is shown in slide 3, $7,200 per day for Panamax and $10,500 day for Capes while the year-to-date average is substantially lower $4,700 for Panamax and $5,200 Cape. Asset values as shown in slide 4 have also somewhat recovered.

A five year old Cape cost now about $23 million compared to the low of $21 million earlier this year. And the five year old Panamax is now at about $14 million compared to $11.1 million low earlier this year. However, they remain close to the historical lows. In Slide 5, we see information about the net fleet change in Capes and Panamax.

It seems that the due to scrapping a balance is gradually being achieved. The important point in slide 6 is that excessive orderbook of the past year is substantially reduced after 2017. Some delays, delayed deliveries from past orderbook will be delivered in 2018 and 2019 but they are not new orders.

As a result, one of one scrapping affect to border vessels were never -- their market is very low, two, the additional effect of installation of ballast water treatment plant in all vessels after 2017 and please note that about 20% of the Panamax fleet is more than 15 years old and should install at ballast water treatment plant at least when they reach the fourth special survey within the next five years, And three, the general financing constitutional new orders so we believe that orderbook is not expected to grow.

Achieving a stable fleet size, the equation for a potential recovery is related directly to the global development with the demand for dry bulk services. In the next few slides, we show certain information in relation to demand. In Slide 7, we see certain important information in relation to iron ore trade.

China is a doing better and expected earlier this year. Iron ore substitution takes place and iron ore imports increase by 7% in the nine months of 2016 versus 2015. Also imports from Brazil increased by 9% compared to 2% from Australia which improves the ton-miles effect. In Slide 8, we see information in relation to grain demand.

Grain supports historically dry bulk transportation demand and with seasonality boost in a certain periods of its occurred rate. In Slide 9, we see information on bulk coal trade. Weakness of coal trade in China which was also one of the main reasons for this extremely low charter market of experience seems to reverse.

China, nine months 2016 China coal imports increased by about 18% versus for the same period in 2015 due to import substitution. India’s development related to coal has supported the demand for coal transportation in the last year. There are also reports about emerging Asian nations that they may also play a greater role in the coal market.

We will spend some time to show in slide 10 some additional information about China which has a very extensive five year development plan of several billion of RMB for infrastructure projects and further urbanization. Coal has been and is clearly the preferred energy fuel. 74% of electricity production is coal -derived.

Electricity production, a good indicator for China's economy is up by 8% in the nine months of 2016 versus the same period of 2015. In the middle figure, we see that the coal output in China was reduced by 12% as operating days in mines were reduced from 330 to 276. It is clear that the Chinese coal was substituted by coal imports.

In the lower figure we see the trends and expectations for closing down a large number of mines. And we need to know that China's imports are down for only 5% coal of consumption. In Slide 11, we see growth forecast of the major bulk commodities. We summarize all this information in slide 12 noting that excessive past order-book is exhausted by 2017.

No additional dry bulk orders take place. Financial squeeze in ship-owners and yards. Technological constraints in relation to Ballast Water Treatment Plant. Stabilization or decrease of dry bulk fleet. Sea born trade growth forecasts. China, a key player in dry-bulk transportation. Substitution of Chinese local production of Iron ore and Coal.

Chinese infrastructure projects. India and Emerging Asian nations may provide a growing market for coal imports. As a result any spike in demand will boost charter market after 2017. Let's see now in Slide 13 some information about our company and its financial performance in the quarter.

All time charter equivalent rate was $7,637 for the third quarter of 2016 as compared $8,843 for the same period last year. Our operating expenses were $3,617 as compared to $4,550. Our G&A expenses were stable as compared to last year.

We operated an average of 36.97 vessels for the third quarter of 2016 as compared to 35.98 vessels for the same period last year. As a result of weaker charter market experience, our net revenues declined at third quarter of 2016 to $27.1 million from a $33.5 million during the same period in 2015.

Our net loss for third quarter of 2016 was $24.5 million as compared to $7.5 million during the same period in 2015. Of course, this includes on cash impairment loss for the newbuilds novated or solved. Our adjusted net loss for the third quarter of 2016 was $9 million, as compared to $6.3 million during the same period of 2016.

Loss per share and adjusted loss per share for the third quarter of 2016 were $0.34 and $0.15 respectively as compared to loss per share of $0.13 and adjusted loss per share of $0.12 during the same period in 2015. Adjust loss per share remains stable compared to the previous quarter $0.15 and much improved compared to the worse Q1 quarter of $0.21.

Liquidity in a cyclical industry like ours is a key point and was shown in the next slide what we achieved. In Slide 14, we are focusing on our expense both OpEx and G&A including everything. Dry docking and initial supplies.

We manage to reduce the aggregate figure from $5,608 per day for the first nine months of 2015 to $4,864 for the first nine months of 2016. These represents $10 million annualized savings compared to out of four months of the last year. And about $22.8 million or $0.27 per share compared to the average expenses for about year.

In Slide 15, we show that the effect we have achieved by our cost cutting effort was sustainable during all three quarter of 2016. For us, it is important to be able to demonstrate that we have a positive operational cash flow.

In Slide 16, we have shown again the profile of loan repayment as is schedule earlier this year before Hanjin bankruptcy when additional difficulties will be posed by the banks and by ECB controls. This quarter we wanted to talk the capital expense requirements.

We did one resale and one novation and plus more expensive contracts in order to preserve liquidity. This was not done in the open market where price are subdued but was based on highest evaluation received by the special committee of our Board of Directors, supported by an independent council.

Two evaluations were received from two independent brokers and the highest was selected. The end result was that we manage to avoid $48.6 million of CapEx about half and both additional indebtedness. Of course, our CEO has waived management fees for these transactions.

The liquidity we preserve can be used more wisely at the beginning of the next shipping cycle. We are now left with only two newbuilds in orderbook. The first we just as shown in Slide 17, $8.8 million sale in lease back financing. In 2017, we need to strengthen [Technical Difficulty] CapEx from our liquidity.

In 2018, we have the second new big delivery. We've already agreed to issuance of [$16.9 million and 2.95%] [Technical Difficulty] dividend preferred debt with the financing, so we need to spend from our liquidity only $5.5 million, in total for both years we have $50.5 million in CapEx and we need to spend only $8.8 million from our liquidity.

As of October 26, 2016, our aggregate liquidity was $92 million. The last Slide 18, we are showing information about our nine months period 2016 cash flows. Although lower than same period last year, we had posted cash flow of $6.8 million from operations for the first nine months of 2016.

We maybe the only company among our peers in the lowest part of the shipping cycle to have positive operating cash flows covering all expenses and interest. We had posted cash flow from investment activities due to all the actions we did since the beginning of the year in relation to newbuilds contracts and vessel sales.

In relation to financing cash flows, we have returned money back to reduce our short-term debt and as agreed during our negotiation for deferring principal payments and way covenance. As a result of company with the liquidity of $92 million as of October 26, 2016 can be presented strong in the next shipping cycle wherever it starts.

Our press release presenting more detail outlined -- you may as well read. We wish to right now to thank you very much about this presentation. And take your questions. Thank you very much. .

[Operator Instructions] Your first question comes from the line of Chris Wetherbee from Citi. Please ask your question. .

Thanks and good afternoon, guys.

Wanted to ask first about some of the vessels that you -- new building vessels that you no longer contracted for, when we think about the cycle, I guess I just wanted to get a sense of are these vessels that we think specifically could come back at some point? Obviously you guys have done good job over the last year or so adjusting the debt schedule, the CapEx schedule.

And when we think about these ships to the extent that in the next several years we see the beginning of a potential cycle these are kind of ships that would be sort of first in line potentially to come back to the fleet.

I just wanted to get a rough sense of sort of the related nature of Polys I think in your company that owns these now [Technical Difficulty] how that might work going forward?.

Yes. To reply this question one where a new cycle will start is basic to take decisions reinvest surplus liquidity most likely on young ships like up to five years old.

At the point -- at this point of time I mean we have to preserve liquidity because despite we believe a new cycle could start in 2018, there is no guarantee so at this point we have to preserve company's liquidity and when the new cycle starts, so of course our intent to invest in reasonable priced assets not necessarily resale but up to five years old.

.

Okay.

And with regards to the last two newbuilds, do you think it makes sense to hold on to these or should we maybe consider the potential that these could also be either sold or cancelled out? And I guess I am just trying to get a sense of whether make sense to hold any of newbuilds exposure as it stand to capital exposure going forward over the course of the next year and half or so just given where rates are?.

The one that 2017 one is already agreed in a sale and lease back transaction so it is likely being sold with the company right to have precious option on it after year two and the other one in 2018 already we have an investor to participate 50% in the equity of that ship. So it's no planning to add new debt on that vessel.

So it's good assumption to say that these two ships will be kept in the fleet. This is a planning as of now. .

Any prospect for turns in the time charter or debts to the time charter market, obviously where rates are we are not expecting you guys to lock-in for extended period at extraordinarily low rate but what is sort of the dynamic we chartering in the market as it stands today.

I mean are we seeing any signs of life, any signs of interest there just kind of curios do you have that playing out?.

Yes, look, well the last fixture we have done the last 20-30 days in the spot market, they all start with a nine so despite the BPI of $7,300 our fleet being more modern and acquaint some of them bigger than Panamax like Post Panamax or Kamsarmax who are receiving figures in the nine in the spot market between 9 and high 9.

So this -- it is a good sign. On the other hand we are not seeing many fixtures on period 6 to 12 months simply because charter, they are holding back and they are talking very low level still in the seven or one year period.

We feel this is a bit short and this is not company's -- to company's level, we prefer to get the extra revenue and wait little bit longer before we start committing ships to 6 or 12 months period. I think that the majority of good charters are holding back still up at the moment.

I think November; we should start seeing things developing on that front. .

Okay. That's helpful. I appreciate that. And then last question just kind of curious you shared the OpEx and G&A numbers and they are certainly down through the first nine months on year-over-year basis, I look at the G&A side of it and it looks like you maybe had about 4% inflation in those numbers on nine months basis.

Can you give us some sense and maybe how -- what's driving the inflation in that number and is your ability to kind of get that piece under control too? I know it is a smaller of the two piece but it looks like you have sort of on target for about a $2 million increase on G&A obviously with cash flow constraint I guess every sort of dollar count.

Just kind of get senses what's driving the 4% inflation in that number. .

Yes, look, it is a good question.

We were wondering the same and I guess at difficult times you have to employ more fees with all people lawyers all these people, I mean there is a more work being done in the office and it is a small increase, I mean $40, I mean our main focus is within this $3,600 or $3,700 of running expenses to include all our drydocking cost and allow our other expenses of running the ships.

I mean the company is fully focused on keeping this number because it is a never ever ending you know work managed to keep this number over a period of time and no charge two or three quarters.

So other than 4% these things associated I guess with the running the various things going on you've seen sale in lease back transaction, you've seen other things like preferred equity deal so this involved a lot of people and lot of bills coming on that front. .

Okay.

So is it fair to say that maybe if we go through a period where you kind of the fleet and the newbuilds where you need them you kind of have the financing laid out for what you need going forward maybe that number could come in a little bit, is that sort of the way to think about it?.

It should. I mean the company fights for every dollar. So I mean we are the last ones to pay big bids without hard negotiation. .

Yes. That's fair. You guys have good track record for that historically. All right, guys. Well, thank you very much for time. I appreciate it. .

Your next question comes from the line of Magnus Fyhr from Seaport Global. Please ask your question..

Yes. Hi. Just a quick question on chartering strategy going forward. You have about 28% locked for 2017.

How do you think about that going forward? What should we expect kind of mix once we get into next year?.

Look, we will start shifting into little bit of period fixing if rates pick up in that period fixing, if there is a $2,000 gap between the spot market and the period market, we still prefer to work the spot market because it is fixed, rather fixed so you are gathering the revenue.

So we need to see rate above $8,000 on period fixture to start locking in period fixture. I think at the moment only second rate in charter is up or they have to pay the extra dollar.

The good charter, they are still holding for the bit lower number which I think it's the company should not be fixing those lower numbers yet but I think maybe things will start moving in November on the period front. .

And also the ships are $6,000 to $8,000 a day, anything -- I mean that sort of Kypros Sky and Venus Heritage were $12,000 and $10,000 respectively.

Were these signed recently? Can you provide some color on those two fixtures?.

Yes. These are mostly ships that we are positioning in the Atlantic and this is trip out which was in the higher figures. So it is reach being done in a front whole base, that's why they are higher than the others.

As I tell you right now we are fixing ships in the Pacific in round voyage spaces in the nine so this is a good sign because that was around 7 and 7.5 above the month ago.

So there is an improvement on the spot market, the company is outperforming the BPI which is $7,300 because the ships are little bit larger than Panamax and eco consumption and modern fleet. So if you see higher numbers it means they are mostly on front whole reach that's why they are at $10,000 or $12,000..

Thanks. And lastly just in your presentation you mentioned the coal market has surprised somewhat over the last couple of months. Do you see any changes now I think there is talks about restarting some of these mines that have been phased out which could reverse I guess coal imports, you guys seen the signs there yet or is it too early.

We don't see signs but it should happen because when the coal reaches say $100 per ton you should expect this will start and it will take time.

I mean mines -- they are about close to reopen, the coal to take over from imports, it will take some time but we all follow the commodity price and then out of it we understand what is going to happen with the movement of coal. The more the commodity rises the more likely piece that certain mines will start reproducing.

But for the time being it looks like there is decent coal movement not only from China which is increasing but also in India and South East Asia. So this is helping a lot of Panamax market. .

Yes.

And do you think talking about India, do you think they are I guess the government have made noise there about phasing out imports I mean I guess is that something you would expect here or do you see any other signs in the market to the contrary?.

Look, India I think for the next five years it will big on coal imports. I don't think I mean the central decisions take time in India to be implemented and it is a vast country and the infrastructure is not as great as in China. So it will take time.

I think India is a very, very important market for Panamax and Post Panamax and I don't see their coal imports being reduced in the next five years. So the contrary I see small increase in their import for next five years. .

Your next question comes from the line of Fotis Giannakoulis from Morgan Stanley. Please ask your question. .

Yes. Hi, gentlemen. And thank you. Polys, I want to follow up on the question of Magnus about coal trade and you indicated on slide 10 that the decline of domestic production and closure of number of Chinese coal mine.

Putting aside the potential as for the next few months of China to bring the prices down, where do you expect the coal imports kind of grow as a result of this closure of mines over the next five years from the kind of 60 million tons that they are today?.

Look, we cannot be specific with numbers and I mean we always comp that the data always surprises us so we cannot be -- I mean cannot have prediction of where the imports will be, where they will reach. I think the higher the commodities go so the more is expected to see that there is will be domestic production.

On the other hand we have to remember that the imports of China all is only a very, very small percentage of what they actually consume. And again we don't know how the central government will play in future. I mean so it is very difficult to make predictions on what will be the imports of China in coal..

What I think important is here that China depends greatly on coal and the 74% of the production of electricity comes from coal. And only 5% is imported. So whatever happens here I think the overall trade to China will continue to be strong in the next following years. .

I want to follow up a little bit and ask you if coal is the bigger while --for the dry bulk market in Europe, how important is going to be the steel trade, the steel production in China and iron ore import, where do you see these imports growing and if the recovery comes and the stronger demand for dry bulk vessels comp, is it more depended on the decline of coal production and higher import or do you think that there is further room for iron ore import to increase driven by the increasing steel production?.

Look, the iron ore is very important and because this is what will keep the big ships up and in order for Panamax and Post Panamax to enjoy decent market, we definitely need cape size market to be higher. I don't think that we can -- I mean we wouldn't expect iron ore imports into China to be reducing in the next couple of years.

But on the other hand I think that will drive the market is will be the balancing between supply and demand that is well known to most of our -- at least on numbers, it is going to happen sometime in 2018.

So I mean when we get rid of the last year of the orderbook which is 2017, I think that will be the most critical and not if China imports 20 million more or less of iron ore in a year. I still believe they will be importing around the same number of million tons in the 2017 like in 2016 and to the year following.

But I think that the market will benefit because of the lack of any new ships entering the market after 2018, double of course would be aging of the fleet which means that certain ships will be going to the scrap yard. And the implementation of all these new regulations that we all read about.

So to be honest with you the iron ore important is important but and we don't need a great movement or and above the current levels to see better market. If we keep steady and we keep of the same numbers and so long the orderbook stays flat, this will dictate the market. .

And one last question about the demolition activity. We have seen that scrapping has significantly declined with the improvement of charter rate, if based on the classical numbers the last four months is quarter of where it was the previous four months.

How do you see scrapping developing and then also if you can comment on the situation of the lending market if you see more pressure from lenders to the weaker ship owners that could potentially result in a higher scrapping. .

Look, scrapping of course has slowed down in the summer month because of the monsoon season. So it was irrelevant of the freight market but after September that we expect scrapping in bad market to be resumed.

This was not happening because we have been increased -- see increasing levels on the Panamax from $5,000 to $7,000-$8,000 a day and even more on the cape size $12,000 -$14,000 a day on the spot market. So everyone is holding back on their ships to work a few good porters and postpone the scrapping to a later date.

But of course the fleet is aging and you cannot play with time and even if you have an old ship and you can keep it for another six months there will come a point of time that you will need to scrap that. Now regarding the second part of the question on the -.

On the banks and the lending activities --.

The lending, yes, on the banks I think the situation is getting tighter every quarter.

We see banks are more skeptical, they are under test by European Central Bank and it is not only the weaker owners and the smaller owners who have the problem which will have the problem, also the bigger companies have less options these days as far as financing is concerned simply because banks have lost money from shipping in the last year or so.

And they have many nonperforming sectors like containership and other sectors keeping up them at the same time. So I expecting to get tighter on the lending and this can only be good on the long term for the prosperity of the market that they will not be speculative ordering should take market keeps improving.

So this is bad thing initially but a good thing in the end. So I think it's getting tighter. Of course this we've been saying the last year also but I think going forward the next three or four quarters we will see bigger restriction by banks and less appetite to lend money. .

Do you see banks taking more action because we haven't seen arrest of vessels or forced sales at least not in public at this point? Do you think that there is a risk of wider push from the banks towards the weaker owners could result in mass sales?.

Look, there cannot be massive action but there will be some action. On the other hand as the market slightly improving, banks are holding back and they are not taking immediate actions in that front -- of this moment.

But I think overall they will be selectively some action if on the other side there is no signs of performance or signs of operational or lack of ability to cooperate then banks will start moving on to certain launch but I think that the banks in general under more scrutiny and this in the long run is good for the market..

[Operator Instructions] There seems to be no further questions. Please continue..

So thank you very much for attending this presentation. And we would like to thank you and looking forward to discuss again with you in our next quarter result presentation. Thank you to all. .

That is concludes our conference for today. Thank you for participating. You may all disconnect..