Thank you for standing by, ladies and gentlemen. And welcome to the Safe Bulkers conference call to discuss the third quarter 2021 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.

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.

Before we begin, please note that this presentation contains forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended., concerning future events, the company's growth strategy and measures to implement such strategy, including expected vessel acquisitions and entering into further time charters.

Words such as expects, intends, plans, believes, anticipates, hopes, estimates and variations of such words and similar expressions are intended to identify forward-looking statements.

Although the company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct.

These statements involve known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the company. Actual results may differ materially from those expressed or implied by such forward-looking statements.

Factors that could cause actual results to differ materially include, but are not limited to, changes in the demand for drybulk vessels, competitive factors in the market in which the company operates, risks associated with operations outside the United States and other factors listed from time to time in the company's filings with the Securities and Exchange Commission.

The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company's expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. And now, I pass the floor to Dr.

Barmparis. Please go ahead, sir..

Good morning to all. I am Loukas Barmparis, President of Safe Bulkers. Welcome to our conference call and webcast to discuss the financial results for the third quarter of 2021. We are happy to report that our profitability has increased during the third quarter 2021 compared to the previous quarter.

As seen that as we move to year end, we are gradually nearing our targeted leverage, maintaining a healthy liquidity position and making significant progress on our fleet renewal strategy. We have also begun contracting period time charters to provide better visibility to our future cash flows.

The above are presented in more detail in slide number four. We reached $92.5 million in net revenues, $72.4 million of EBITDA and $0.40 of adjusted earnings per share.

We have on order eight newbuilds, the Green House Gas EEDI Phase 3, NOx-Tier III compliant, from Japanese shipyards with early deliveries, two in 2022, four in 2023 and two in first quarter of 2024 at very competitive prices ahead of our competition.

At the same time, we have sold seven vessels, two of which are yet to be delivered with $37.3 million outstanding sales process and $7.3 million outstanding debt. And we have acquired four secondhand, one of which yes to be delivered with $28.1 million outstanding CapEx.

We believe that by 2024, we will be able to renew about one fourth of the fleet with Phase 3 compliant newbuilds while substituting at the same time some older vessels with younger secondhand vessels. In terms of deleveraging, we have a $214.3 million decrease in debt from $616.2 million as of 2020 year-end to $401.9 million as of Oct. 29, 2021.

At the same time, we maintain our financial flexibility by preserving a healthy cash position of $92.2 million, $88.9 million in undrawn borrowing capacity available under revolving reducing credit facilities, $46.2 million in secured commitments from loan and sale and leaseback agreements and $29.3 million additional incremental revolving reducing credit facility upon the expected consummation of an agreed new credit facility.

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 five, we show balance sheet analysis. The assets are presented, of course, in their book value, noting that presently we believe that asset values exceed the book values considerably.

Let's turn to slide number seven to have a quick look on present charter market position. As shown on the top graph, the Capes market for year-to-date continues to outperform 2020. Capes lately have been volatile, driving by dynamics. We analyze the situation, reaching a high of $87,000 per day and currently trading at about $27,000 per day.

The year-to-date averaged about $53,800 as compared to 2020 average for the same period, which was $13,000. Similarly, for Kamsarmaxes, the market remains strong throughout this year. Building twice close to $40,000 per day presently trading at $26,000 with a year-to-date average of $29,200 as compared to $9,500 for the same period in 2020.

The prevailing energy crisis and the coal shortage in China coupled with the COVID-19 restrictions are likely o support the market. Turning to the slide eight. We present the development on pricing of certain commodities, which are leading indicators for the shipping.

We have seen a strong demand for commodities across the board during 2021 and the rapid surge in prices is followed by a recent correction.

In the case of iron ore, as presented in the top left, the excessive increase of prices which is now followed by a recent correction has been initially driven by the strong demand from China, while lately the seasonal trading are easing the market. In the case of coal, the shortage in stockpile and the need for coal raised the commodity prices.

Presently, an effort to control the market is evident in traders with deferred buying and shipping at cheaper prices, resulting in a short term raise of rates until prices fall until in line with expectation.

However, the forthcoming winter in Northern hemisphere in connection with the continued industrial production is expected to keep demand for coal robust. Soybeans 15-day first half of 2021 and are presently subdued but this is relevant to the seasonality of this trade which is normally picking after the first quarter of each year.

Lastly, what is noteworthy is that the price of copper presented in the bottom right graph has remained near its five-year highs for an extended period which has resulted in vessel growth backed by the post-pandemic economic recovery plans. On the slide nine, we present the status of the fleet in terms of values and future 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, a sharp increase of the vessel values has been evident. For Capes in particular, the values have surged more than 48% since the same period in 2020 and have gained about $26 million per vessel since the lows of 2016.

Similarly, for five-years Panamaxes, the values have increased about 59% since the same period in 2020 and have gained about $22.5 million per vessels since 2016 lows. The above assessment is indicative for the average Baltic-type vessel.

Japanese big vessels, of course, built at high specifications have increased demand and can achieve even higher value. Our fleet consists mainly of Japanese big vessels with high specifications and many commercial and operational upgrades.

Looking at the orderbook on the bottom graph, we note that the growth of the fleet for both Capes and Panamaxes is minor. In case of Capes, the total orderbook is in the range of 4.5% of the existing fleet which is evenly spread until 2024.

For Panamax, total orderbook stands at 7.8%, which vast majority to be delivered in 2022 and minimal delivery thereafter. Under the current market ship building condition at shipyards both in Japan and China, we do not expect that the orderbook may increase significantly for the next couple of years.

The shipyards are occupied with orders from other sectors such as container and tankers and there is no space for additional drybulk orders. Presently, there is no availability for drybulk newbuild orders earlier than 2024. Therefore the orderbook is unlikely to increase further in the next two years.

In the next slide, the slide number 10, we present the age profile of the drybulk fleet in combination with the forthcoming IMO regulation for controlling the green house gas emissions and especially the vessel's energy efficiency.

From a recent study for the vessels under the classification of NK, about 86% of the drybulk vessels would require some kind of action or retrofitting to comply with upcoming EEXI regulation, such as reducing speed or retrofitting with innovative propulsion techniques or energy saving devices.

IMO has set the goal to reduce carbon intensity by 40% within the next decade up to 2030. As presented in the top left graph, about 60% of the Capesize and 53% of Panamax fleet is higher than 10 years of age.

By the time of full implementation of the IMO regulations, the remaining half of the Capes and Panamaxes can be above 10 years of age with [indiscernible] as non-commercially viable and comparable vessels. Excluding the supply of vessels needed will be an interesting scenario.

Let me remind you at this point that we have excellent outlook having obtained having ordered eight Green House Gas EEDI Phase 3, NOx-Tier III compliant Japanese newbuilds with competitive delivery times until 2024. Turning to slide number 11, we touch upon the current status of fuel and day pricing.

Brent, which is the main driver of fuel prices, has surged during the past period reaching levels of $85 per barrel.

Our company has invested in the exhaust gas cleaning technology, which allows our ships to be 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, the so called Hi5, is translated to revenues for the scrubber fitted vessels. Presently, Hi5 in Singapore, for example, starts at about $140 per metric ton.

According to future markets, as shown in the graph on the bottom, these prices are sustainable through 2023 in the region of about $120 per metric ton. The scrubbers fitted post-Panamax burns about 7,500 metric tons. This being scrubber gain to about $900,000 a year or about $2,500 per day.

The recovery of global economies, the restoration of mobility and the recovery of crude oil prices may lead to even higher, even wider Hi5 differential. Let me summarize the key market takeaways in slide number 12. We have experienced a strong start of market of 2021 with robust volumes of iron ore, coal and grain.

Demand for commodities has been exceptionally strong during the first quarter. Energy crisis is expected to lead to coal volumes and sustain robust Panamax market. Coal shortages in China together with COVID-19 restrictions maintain congestion in discharge ports. Legacy market levels suggests sustainability of healthy charter levels.

The orderbook is minimal as decarburization discussions not favor orders. Most shipyards are preoccupied with containers and tanker orders until 2024 and only a few shipyards have developed new environmental efficient designs.

We have seen increased governments spending on the both organic stimulus programs and continuing greening of the global economy. We have experienced brent prices recovery, which may lead even wider Hi5 spreads differential than that of today of about $120 per ton.

And lastly, aging of fleet and the increased environmental restrictions where emissions may enhance the scrapping activity. Now let me pass the floor to our CFO, Konstantinos Adamopoulos, for our financial overview..

Thank you Loukas and good morning to everyone. Let me start with our chartering performance in slide 14, where we present our quarterly PCE, which stood at $24,427 per day versus our quarterly OpEx which stood at $4,608 a day. Moving on to slide 15, we present our quarterly daily OpEx of $4,608 and our quarterly daily G&A, which stood at $1,590.

The average figure for both OpEx and G&A for Q3 2021 was $6,198, demonstrating 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 and directors and officer compensation and all expenses related to our administration of [indiscernible].

Moving to debt profile, as seen in slide 16. We present our repayment schedule as of September 30, 2021.

As of that date, we had $108.6 million in cash and cash equivalents backed by deposits and restricted cash, $88.9 million in undrawn borrowing capacity available under revolving reducing credit facilities and $46.2 million in secured commitments for loan and sale and leaseback agreements in the relation to two newbuild vessels.

Furthermore, excluding the two vessels that are committed for sale, which have not be delivered yet, we have additional borrowing capacity in relation to three debt-free existing vessels and six newbuilds upon their delivery. In slide 17, we present our debt amortization schedule versus the scrap value of our fleet.

We have a smooth debt payment profile for the next two years, gradually deleveraging our company following considerable debt repayments we have made in the previous quarters. Let's now move to slide 18 with our quarterly financial highlights for the third quarter of 2021 compared to the same period of last year.

As a general note, during the third quarter of 2021, we operated in an improved charter market compared to the first and second quarters of this year with lower interest expenses while our net revenues of $92.5 million during the third quarter of 2021, compared to $51.9 million for the same period in 2020.

The revenues were further increased by the earnings from scrubber fitted vessels and the reduced voyage expenses During the third quarter of 2021, we had a time charter equivalent rate of $24,427 compared to $12,575 during the same period of last year.

The net income from the third quarter of 2021 reached $55.4 million compared to $3.3 million last year.

Net revenues increased by 78% to $92.5 million compared to $51.9 million for the same period in 2020, mainly due to the increased time charter equivalent rate as a result of improved market and also assisted by the additional revenues and by our scrubbers fitted vessels.

Daily OpEx decreased by 6% to $4,608 compared to $4896 for the same period in 2020 and that was affected by reduced ownership days by 3% due to vessel sales, no drydockings during the third quarter of 2021 and increased crew repatriation expenses due to the COVID-19 pandemic.

Daily vessel OpEx expenses excluding drydocking and pre-delivery expenses increased by 3% to $4,608 compared to $4,459. Our adjusted EBITDA for the third quarter of 2021 increased to $67.7 million, compared to $22.3 million for the same period in 2020.

Our adjusted EPS for the third quarter of 2021 was $0.40, calculated on a weighted average number of 119.9 million shares, compared to zero during the same period in 2020, calculated on a weighted average number of 102.2 million shares.

Closing our presentation on slide 19, we show our quarterly fleet data and average daily indicators compared to the same period last year.

We would like to emphasize that the company is maintaining a healthy cash position of $92.2 million as of end of October 2021 will provide us with flexibility as we move to year-end nearing our targeted levels making significant progress in our fleet renewal strategy and contracting period time charter to provide better visibility to our future cash flows.

Our press release presents in more detail our financial and operational results. We wish now to take your questions..

[Operator Instructions]. We will now take the fast question. This is from the line of Chris Wetherbee from Citi. Please go ahead..

James Monigan, on for Chris. Hi guys. Good morning..

Hi. Good morning..

Hi..

I just wanted a better understanding of your view around sustainability at the current rate and also vessel values. Just vessel values have obviously come up off the bottom. But just how much of that do you think is driven by the --.

Can you go bit slower?.

I am sorry guys..

Yes, better..

Yes. I just wanted to ask first off about vessel values. The have obviously come up off the bottom which is good to see. But like how much of that do you think is driven by the input prices versus stronger sort of market sentiment around your longer term outlook.

I am just trying to get your understanding of where you think sort of the perception of like the long term -- [indiscernible] long term in the market at the moment?.

Yes. The sound is very bad. So we didn't get the question.

But anyway, I presume you are asking about the long term prospects of the markets?.

And it get reflected in the vessel values or reflects just essentially commodity pricing in the vessel value at the moment..

Look, the commodity prices are only recent. We see that there is demand for commodities because recently we have seen drops in coal prices with Chinese government intervention to cool down that part of the market.

And iron ore price as well have slowed down in the last two months because of reducing the steel output for environment reasons before the Olympics. I think overall the demand for commodities, especially the minor ones is very healthy.

And we see it from the rates that are being enjoyed by this smaller size of vessels but since, Handysize and Supramaxes as well as Panamaxes that the demand is very strong. So we believe commodities, including oil, will be kept at strong levels. And most likely only prices also will increase further..

Got it. But just given sort of the strength of the market, it seems that the vessel values aren't necessarily reflecting --.

Please, sorry. There is [indiscernible] in your sound which makes is very difficult. So please speak slowly..

I will turn the call. I will follow-up separately and just turn the call over so that someone else can ask questions given the difficulty..

Thank you. We will move to the next question. And the next is from the line of Magnus Fyhr from H.C. Wainwright. Please go ahead..

Yes. Good afternoon. This is Magnus Fyhr from H.C. Wainwright. Just you secured some time charters here in the last year and also you have been pretty active in the S&P market.

With the current volatility and some uncertainty going forward, do you see more opportunities for you to potentially secure time charters or potentially make acquisitions? Or do you think the volatility has created less opportunities?.

Look, the last a couple of weeks, the market has been very strong lately. We have seen big volatility which also resulted from big increase of Capesize rates approaching $100,000 a day. So there has been a correction that is looking as huge.

Of course, if we would exclude these extra $30,000, $40,000 achieved on the Capes for two or three weeks in the spot market, the rest of the market, we can say that has been fairly stable because we still enjoy after the correction rates of around $30,000 a day on all class of vessels.

So for us, this is healthy market and it is good that we have a correction and we call it a correction when the market reaches $30,000 a day. So I don't expect ship prices to be affected by this volatility because owners of vessels, they are not going to let them cheaply, because they have seen what earnings you can make in the last nine months.

And right now you see it other sector which they have very low freight rates that ship prices are going up for many reasons. One of them is the steel prices and other one is expectations that the market will change in other sectors. We have seen what is happening on the containerships in the container market.

Also drybulk marked is really healthy and very strong. I don't expect there are surprises to correct to give us opportunities to step in and buying vessels like in the first quarter of 2021. So I guess it may not go higher but I don't expect them to go down..

Okay. So from a capital allocation standpoint, your balance sheet looks very good. You are going to generate a lot of cash flow here at current market rates.

What is the priority going forward? Reduce debt or potentially buyback stock or some kind of dividend to shareholders?.

If we see on page 17, we put the projection of the debt for the end of the yea and for the following couple of year which shows exactly that deleveraging policy, our deleveraging policy, will almost be ended by the yes. And then we will go to the formal principal repayments.

So the debt will be about $350 million next year compared to the scrubbed value of the vessels which is $378 million according to the pricing today of the fleet. This makes us to fee very comfortable about the leverage of the company because the debt that we have basically reflects what is the sale value per vessel.

Having done that and also having completed the renewal strategy in terms of ordering, what we have ordered most of what we could do. And in terms of secondhand vessels, there might be some opportunities still. However we have done the big volume. I think in terms of CapEx and in terms of leverage priorities are becoming lower.

So the new cash that is generated in the future, I think will give opportunities in the next year also to be able to reward our shareholders. However we need to point out two things.

We want to be to building our cash flows which can be established through time charter and we want the markets to continued to be in comfortable levels as it is, let's say, today..

Okay. So you have done a couple of three-year charters.

Is there an appetite there for more of those from your side and from the charter side?.

Look, these charters were available in early October when the freight market was hitting levels of $50,000, $60,000 per day on the Capes. So charters came along with these proposals with these charters. We considered it prudent to secure this business at that time.

So right now, we don't see three-year charters available because of the recent volatility of the last weeks. But I am sure that this will come back in the market when things settle down. As I said before, spot market of around $30,000 n all sectors is not an uncertain market. And we wish this stays for the whole of next year..

Yes. I hope so too. That's all I had. Thanks for answering my questions..

Thank you..

Thank you..

Thank you. We will now take the next question. This is from the line of Randy Giveans from Jeffries. Please go ahead..

Hello gentlemen.

How is it going?.

Hi. I am fine..

All right.

So I guess just following up on some of the recent refinancings, what is now your kind of expected interest expense and maybe weighted average interest rate for next year and then your debt amort for 2022?.

Debt amortization, I think, we are showing on slide number 16. Basically, we have very low interest rates. As you know, we have kept it short at very good levels, almost 85% of all of our debt. So we are immune against a probable increase of interest rates. We have 84% on telematics maturing some of that up to 2026.

So I think that the numbers are very comfortable for next year. The principal repayment is only $35 million which is increased in 2023 to $63 million. So we understand that these are very comfortable numbers of the company. So the exact calculation, we can send it to you after this call. On page 16, if you see page 16, you can follow-up the numbers..

Got it. Okay. And then just for the remainder of the ATM, I think there's $28.5 million remaining.

Do you plan on using this eminently? And how is that decision made? Is it based on a kind of NAV basis? What would be reason to or not to further execute that ATM?.

Look, we execute the ATM from time to time. We don't necessarily do the ATM continuously or at any price. So you may see us coming out in the market and sell some portion. We have started the ATM last year and this continuation figure is substantial amount of, as you said, about $25 million which we have not executed.

We don't know exactly, based on the market conditions and the pricing of the stock and how well we perform, because we really have the cash liquidity and cash reserve. And we don't feel in a rush to execute the ATM at any price..

Got it. Well, that's it for me. Thanks so much..

Thank you..

Thank you. [Operator Instructions]. There are no further questions coming through, sir. We have one question. One moment, please. Our question has been withdrawn. In that case, there are no further questions and I will hand back to the speakers now. Thank you..

Thank you to all. And we are very happy to discuss again with you today. And we are looking forward to discuss again once more in our next quarter for our results. Thank you and have a nice day..

Thank you. That does conclude the conference for today. Thank you for participating and you may now disconnect..