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

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 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 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 second quarter of 2023. During the second quarter, the chartering market has weakened, which we believe is reflective of economic growth uncertainties.

In this quarter, we took delivery of our fourth newbuild, while our revenues were supported by past charter contracts. Our strong liquidity and comfortable leverage enable us to be flexible with our capital, and at the same time reward our shareholders with a dividend of $0.05 per share of common stock.

Our capital structure is conservative with significant cash and developed capacity. Our CapEx requirements are adequately covered by our contracted future revenues. Our balance sheet is strong. After reviewing the forward-looking statements language in Slide 2, we will move to Slide 3.

There has been volatility in the Capes market with capes at low levels. It's worth nothing that all eight of our capes are period charters with an average remaining charter duration above two years at an average daily rate of $22,000 with the market currently at 14,000, actually today it's 15,000.

On the Panamax side, the charter market remains very weak. Moving on to Slide 4, we present the development of CRP Commodity Index reflecting the basic commodity future prices, which represent [indiscernible] shipping, including agency, agriculture, precious metals, and industrial metals.

Commodity prices declined sharply over the past month, and according to the World Bank Energy Price Index, a drop of 21% is projected for 2023 after rising by 45% in 2022.

We continue to witness the increase of interest rates such as one yesterday by a quarter of a percentage point by the Federal Reserve as policymakers aim to fight global inflation, which is the result of the Russian War and the Chinese economy weakening.

The July forecast of IMF raised marginally the expected growth for 2023 of global GDP to 3% from 2.8% in April as global inflation projections for 2023 stands at 6.8% due to the war induced prices pressures on improved energy prices and on the supply/demand imbalances.

According to BIMCO the forecasted global drybulk demand growth stands at 2%, increased in 2023 and steel demand outlook remains positive at 2.3% for 2023. High inflation and recent financial sector turmoil receded soft landing expectations of world economy.

The underlying core inflation is projected to decline more gradually and the forecasts for 2024 inflation were revised upwards to 5.2%. In China, the IMF July projection growth for 2023 was stable at 5.2% even though there are signs that the consumption-led recovery could slow.

There are unresolved real estate problems with negative cross-border spillovers as the Chinese economy seems to be losing steam then leading to weaker-than-expected demand. The inflation maybe well below target and the central bank has cut interest rates.

Nonetheless, continued weakness in the real estate sector is weighing on investment, foreign demand remains weak and rising and elevated youth unemployment at 20.9% in May 2023 indicates future labor market weakness.

India's emergence and expectations reflects again in IMF's July projection were a 6.1% increase in GDP for 2023, an increase from 5.8% in April as a result of stronger domestic investment. The World Bank Commodity Price Index declined by 2% as the World Bank July 2023 projection forecasts a 21% drop in commodities for the whole 2023.

Let's move on to slide – to supply side as presented in Slide 5. The total drybulk orderbook stands at single digits. We remaining cautiously optimistic about the medium term prospects of the freight market in the coming years.

About 25% of the medium sized fleet is older than 15 years old as the effect of fleet aging environmental regulations are expected to accelerate in scrapping. Japanese build vessels like ours to have more efficient designs.

As we said, 80% of our fleet is Japanese built versus 40% of the global fleet, which means that our fleet can compete better in the – within the forthcoming environmental based charter markets.

We are one of the very few drubulk companies with the Phase 3 orderbook ahead of our peers signifying our intention to compete on the vessel operation and environmental performance. As in Slide 6, the majority of global fleet is out of any phase.

Safe Bulkers is owning today 44 vessels, has 12 eco-ships built after 2014, another book of 12 Phase 3 newbuilds, seven of which will have been delivered by the end of 2033, and at the same time, a major ongoing environmental upgrade program increasing the energy efficiency of existing fleets and has reducing the CO2 emissions on our vessels.

This program is also reflected in our increased OpEx as low friction preparation and paints are not capitalized, but are expensed. We're expected to complete upgrades in 20 vessels by the end of 2023. Furthermore, we are rising from time to time biofuels and monitoring the development of alternative fuels.

Concluding our market view in Slide 7 and during the first half of 2023, there has been an increased industry-wide volatility driven by geopolitical disruptions in tight monetary policies demand. Demand for our technological efficiency creates opportunities for those willing to invest as Safe Bulkers has done.

Such environmental efficient fleets may lead to two-tier market with differential in adding capacity of such fleets.

We believe that the combined effects of the aging of the fleet, the low orderbook and the new regulations will favor fleets compressing of efficient Japanese vessels and vessels delivered after 2014, tightening the markets even further. Let me present Slide 8, certain or key characteristics which differentiates us from our peers.

The key fundamentals are strong alignment of interest with vessel management ownership. The comfortable leverage of 35%, [indiscernible] the creation of increasing values throughout Phase 3 newbuilds and the environmental upgrading of our existing fleets.

We have already taken delivery of four Phase 3 newbuilds, which are the best performing vessels on the deadweight tonnage in the drybulk market globally. We intend to compete on the basis of global fuel consumption and environmental performance in the following years. Lastly, concurrently we're building the future of this company.

We have constantly been rewarding our shareholders with what we consider to be a meaningful dividend. Let's focus now on our liquidity, our cash flows and our capital structure as presented in Slide 9. By maintaining a comfortable leverage of about 35%, our debt of $453 million remains comparable to our fleet scrap value of $385 million.

Although our fleet is only 10.6 years old and will continue to be the same age in next two years as we take delivery of new vessels in our fleets. Our weighted average interest rates were slightly below 6% for our consolidated debt with a portion of €100 million being fixed at 2.95% coupon in a secured five year bonds.

We have paid $73.8 million for our capital expenditure requirements in relation to our orderbook of 8 newbuilds have already paid this amount and the remaining capital expenditure of $210 million in aggregate.

Our liquidity and capital resource stands strong at approximately $300 million, which together with the contracted revenue of $232 million provides flexibility to our management in capital allocation. Furthermore we have additional volume capital in relation to seven existing unencumbered vessels and fours newbuilds their delivery.

Let's move to Slide 10 where we analyze the investment rationale for Safe Bulkers. We have concluded a share buyback program having replaced about 10 million shares.

We declared a dividend of $0.05 per share over the last seven consecutive quarters, rewarding our shareholders while directing remaining cash flows to finance our newbuild program that will provide us with a distinct commercial competitive advantage in terms of fuel consumption and environmental performance.

The intention is to maintain a relatively comfortable leverage and a strong balance. We believe that Safe Bulkers' strong fundamentals offer finance flexibility to reflect market challenges and pursue opportunities.

We believe that the Safe Bulkers with each orderbook is among those companies that will navigate the environmental challenges of the energy transition under the ageing of dry bulk fleet by utilizing the qualities of our fleet and the efficiencies of our large scale environmental upgrading problem.

Before passing the floor to our CFO, Konstantinos Adamopoulos, for our financial review, let me here make a special note for the issuance of our 2022 sustainability report, which has been prepared in accordance with the standards provided in the new Global Reporting Initiative, GRI, the Sustainability Reporting Guidelines and the Sustainability Accounting Standards Board, SASB, recommendation for maritime transport, alongside additional indicators that are materially important to us and our stakeholders.

This report is available for download through our website, and I would like to invite you to have a look on it because we're doing a very good job there and we're trying to improve our environmental and social governance footprint. Konstantinos, the floor is yours..

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

We decreased revenues due to lower hires, decreased earnings from Scrubber fitted vessels, increased operating expenses, and higher interest expenses due to increasing interest rates. Slide 11, we have our quarterly financial highlights for the second quarter of 2023 compared to the same period of 2022.

Our adjusted EBITDA for the second quarter of this year stood at $33.3 million compared to $66.5 million for the same period last year.

Our adjusted earnings per share for the second quarter of 2023 was $0.12 calculated on a weighted average number of 117 million shares compared to $0.40 during the same period in 2022, calculated on a weighted average number of 122 million shares.

In Slide 12, we present our quarterly operational highlights for the second quarter of 2023 compared with same period of 2022.

During the second quarter of 2023, we operated 44.01 vessels on average, earning an average time-charter equivalent of $17,271 compared to 41.04 vessels earning an average time-charter equivalent of $25,050 during the same period of 2022. Concluding on Slide 13, we present our breakeven point for Q2 2023.

The global economy is experiencing multiple challenges. Inflation is higher than seen in several decades, tightening financial conditions in most regions with interest rates being at historical highs, and Russia's invasion of Ukraine all weigh heavily on the market outlook.

Based on our financial performance, the company's board of directors declared a 5% dividend per common share. We would like to highlight and emphasize that the company is maintaining a healthy cash position of about $96.7 million as of July 21st. And another 152.5 million in available RCF [ph] facilities and 80.7 million in undrawn borrowing capacity.

And combined liquidity and capital resources of $330 million that provide us with significant high power. Furthermore, we have contracted revenue from a non-con [indiscernible] in total about $212 million net of commissions excluding scrap revenue.

And we also have additional borrowing capacity on relation to seven debt-free existing vessels and four newbuilds upon that delivery.

We believe that a strong liquidity and our comfortable leverage will enable us to be flexible with our capital, be able to expand the fleet while rewarding our shareholders and taking advantage of possible opportunities that may arise.

Once again, just as a reminder, you may download our 2022 sustainability report from our website, which was just published, and now we're ready for the Q&A session..

Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Omar Nokta with Jefferies. Please proceed with your question..

Thank you. Hey guys, good afternoon. Just have a, yes, I have just a couple of questions as follow-up just in relation to the liquidity that you were just highlighting. But just maybe first on the share buyback. You've been very active for much of the past year, buying back shares.

You put it on pause for now at least just based off of the way the press release was reading. I guess the reasoning is probably the softer freight market that's developed here in recent months.

But just wanted to ask, what drove the suspension of the buyback and what are you looking for to give you confidence to restart it?.

Hey, Omar. Good morning to you. As you have seen the market the last quarter was not performing as per expectation, and we have many quarters in front of us to continue the buyback program.

We emphasize our strategy now on the environmental improvement of our 10-year old ships combined with the delivery of our new buildings as they come in the following couple of quarters, we have around five new buildings to get deliver in the next two quarters.

So we decided to suspend it temporarily, but not withdraw it to suspend it for the second quarter of the low performing. I think the market may start improving soon, and as soon as we see better freight rates this program will be reinstate.

I don't think that stock markets will react immediately on improving markets, but ourselves, we can revitalize this program earlier. It is more important, I consider this point, to continue the environmental investments even if the market is low, because the regulations are changing very fast.

No one is doing anything on this front for many competing owners, very few owners are doing these investments. The order book is very low. Yards are increasing their prices.

You have to remember that our 12 ships order book, eight ships order book and four ships delivered were ordered in the low 30s whilst the yards in Japan are running over four people comes on max. Now, still, despite that last quarter, the market are performing.

S&P prices which have dropped 20%, 700 ships, everyone is after a fine modern ships, but they cannot find in the market. So there's heavy competition for ships around 15 years old at the moment, and then a ship that's coming in the market like Capesize bulk carrier that they dropped their prices by 20% from the beginning of the year.

You have 20 or more buyers competing for this, simply because many owners of other type of vessels make good money and still making good money tankers and in the past years in containerships, and they're now investing heavily on bulkers.

So we will have the phenomenon that even if the market is low for this quarter or next, prices will not drop a lot. We're approaching the bottom of S&P prices.

So the best thing we can do right now is invest them on environmental efficiency of our products, who is giving us real returns and savings in fuel because no one expects the fuel price of $600 to come lower. Actually, the buyback program has been canceled for the time being, but this is a program that can be state at any given point..

Thanks for that. That's very helpful and detailed discussion on the market and also just on the buyback. Maybe just as a simple follow up and getting maybe a little deeper into the weeds, not, not too much, but just want to make sure we have it correct because you outlined having plenty of liquidity. I think it was 300 plus you had just highlighted.

In terms of the new buildings, you have eight that are due to deliver between second half and then into 2025. The total CapEx is expected at $210 million.

What's the amount that you have secured right now in terms of financing and what do you expect to finalize ahead of deliveries of the remainder that's not financed?.

Yes, Loukas will give you the details, but we have cash, $88 million as you said. We have RCF facility of 170 something. So only the cash on the RCF, so on the existing fleet is enough to pay for that program without adding debt on the remaining eight ships. So we're in a comfortable position.

We don't want to increase a lot on our leverage from the current levels, but of course, we will put some financing on this new ships, remember that there are many owners, especially in Asia, but we have a potential interest rate situation that they can do the so-called sale in this back without covenants and without other things that they are eager to finance some of our new building.

So we're very comfortable along this front.

I think the most important is to engage in this program of upgrading the 10 year old ships and be more competitive, because I sincerely believe that every consumption vessels in the environment of global warming and the environment of new regulations from me, you and other regions are going to hit us very soon.

People will get a big surprise of how fast things will be changing towards environmentally friendly vessels. So for the time being, most of the owners are pretending that this is not going to happen.

But I’m sure that events that are unfolding in front of us, especially in USA, Canada and Europe the last few weeks with overheating of the temperatures in Mediterranean and in southern countries in Greece, we have 46, 47 degrees temperatures, which we haven’t had for the last, I don’t know how many decades.

So all these things we’re pushing to faster implementation by European Union, and we have wildfires increase the last couple of weeks. So all these things will expedite what is happening now in Europe.

And I think owners who are investing on all these things ahead of the economic recovery that will come hopefully in the early part of next year when interest rates start easing off. If you have the proper shifts in that market, I think you’ll make the biggest returns for your shareholders. This is our policy for the time being..

In the Slide number 9, you can look, I mean a good summary of what Polys has just mentioned just before because the CapEx, as you said, is $210 million and the liquidity, which is also cash and undrawn revolving capacity is about $297 million. And also we need to point out the contracted revenues is $232 million.

So if we add all together, you can see that we are quite – we have the flexibility. We have already paid $73 million – $74 million in advances for these vessels.

And the question sometimes, if I may make an additional comment is how you allocate your capital, and we’re in a good position to have low level 35% and be able to allocate it in the most advantageous way for the future of the company, which as Polys said before, is that the environmental adaptation because things will change very, very quickly.

But I believe you have a look on Page 9, I think all the numbers are there..

Yes. Thank you. No, that’s helpful. Great. Well, I appreciate that. Nice to see the liquidity where it’s at, and obviously you guys are one step ahead of the regulation. I’ll turn it over. Thank you..

Thank you..

[Operator Instructions] Thank you. It appears we have no further questions at this time. I would now like to turn the floor back over to management for closing comments..

Thank you very much for attending our conference call. I would like to emphasize once more on the new regulations the FuelEU, and the EU ETS, which is coming in Europe, and all has come.

And also the regulations that will be adopted gradually by IMO that will be implemented worldwide and which will change the environment and the environmental impact of the shipping industry.

We would like to thank you all who attended our conference call, and we’re looking forward to discuss again with you in our next conference call for the Q3 results. Thank you very much..

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day..