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Safe Bulkers, Inc. Reports Third Quarter Profit Despite Scrubber Retrofitting on a Number of Ships

Safe Bulkers, Inc., an international provider of marine drybulk transportation services, announced its unaudited financial results for the three and nine month period ended September 30, 2019.

Management Commentary

Dr. Loukas Barmparis, President of the Company, said: “In the third quarter of 2019 we entered into charters at higher rates than the first half of 2019. As a result we had a profitable quarter despite the down time of several vessels due to scrubber retrofitting. We remain focused in implementing our environmental investments installing scrubbers on approximately half of our fleet and completing tank cleaning in the other half in anticipation of the effectiveness of the IMO sulphur cap regulations in 2020.”

Chartering our fleet

Our vessels are used to transport bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping routes. We intend to employ our vessels on both period time charters and spot time charters, according to our assessment of market conditions, with some of the world’s largest consumers of marine drybulk transportation services. The vessels we deploy on period time charters provide us with relatively stable cash flow and high utilization rates, while the vessels we deploy in the spot market allow us to enhance our profitability if we expect relatively stronger market conditions, or, maintain our flexibility in relatively low charter market conditions. Our contracted employment profile is presented in Table 1. Presently, for 2020, 11% of the fleet has contracted employment. Detailed employment profile is presented in Table 2.

Table 1: Contracted employment profile of fleet ownership days as of October 18, 2019

2019 (remaining) 53%
2019 (full year) 90%
2020 11%
2021 7%

Table 2: Detailed fleet and employment profile as of October 18, 2019

Vessel Name DWT Year Built Country of construction Daily Gross Charter Rate1 Charter Duration2
Panamax
Maria 76,000 2003 Japan
Koulitsa 76,900 2003 Japan $10,800 May 2019 December 2019
Paraskevi 74,300 2003 Japan $15,250 September 2019 December 2019
Vassos 76,000 2004 Japan $12,900 September 2019 March 2020
Katerina 76,000 2004 Japan $13,250 September 2019 November 2019
Maritsa 76,000 2005 Japan $10,325 March 2019 December 2019
Efrossini 75,000 2012 Japan $14,433 August 2019 November 2019
Zoe 75,000 2013 Japan $14,500 October 2019 December 2019
Kypros Land 77,100 2014 Japan $17,750 July 2019 November 2019
Kypros Sea 77,100 2014 Japan $13,850 May 2019 February 2020
Kypros Bravery 78,000 2015 Japan $14,615 September 2018 October 2019
Kypros Sky 77,100 2015 Japan $14,000 May 2019 February 2020
Kypros Loyalty 78,000 2015 Japan $13,850 March 2019 February 2020
Kypros Spirit 78,000 2016 Japan $19,904 October 2019 December 2019
Kamsarmax
Pedhoulas Merchant 82,300 2006 Japan $11,350 March 2019 April 2020
Pedhoulas Trader 82,300 2006 Japan $12,000 May 2019 May 2020
Pedhoulas Leader 82,300 2007 Japan $9,696 February 2019 October 2019
Pedhoulas Commander 83,700 2008 Japan $10,850 April 2019 June 2020
Pedhoulas Builder 81,600 2012 China $16,100 September 2019 October 2019
Pedhoulas Fighter 81,600 2012 China $15,900 August 2019 October 2019
Pedhoulas Farmer 3,6 81,600 2012 China
Pedhoulas Cherry 82,000 2015 China $13,650 October 2019 December 2019
Pedhoulas Rose 3 82,000 2017 China $13,000 October 2019 October 2019
Pedhoulas Cedrus 81,800 2018 Japan
Post-Panamax
Marina 87,000 2006 Japan $15,250 September 2019 November 2019
Xenia 87,000 2006 Japan $12,500 June 2018 October 2019
Sophia6 87,000 2007 Japan
Eleni 87,000 2008 Japan $17,000 October 2019 November 2019
Martine 87,000 2009 Japan $13,348 August 2019 October 2019
Andreas K 92,000 2009 South Korea $15,750 October 2019 November 2019
Panayiota K7 92,000 2010 South Korea
Agios Spyridonas 92,000 2010 South Korea $17,850 September 2019 October 2019
Venus Heritage7 95,800 2010 Japan $18,900   October 2019   November 2019
Venus History 95,800 2011 Japan $17,563 September 2019 October 2019
Venus Horizon 95,800 2012 Japan $21,500 August 2019 November 2019
Troodos Sun 85,000 2016 Japan $15,250 September 2019 October 2019
Troodos Air 85,000 2016 Japan $23,843 October 2019 November 2019
Capesize
Mount Troodos 181,400 2009 Japan $18,000 July 2019 January 2020
Kanaris 178,100 2010 China $26,5624 September 2011 June 2031
Pelopidas 176,000 2011 China $38,000 January 2012 January 2022
Lake Despina 181,400 2014 Japan $24,3765 January 2014 January 2024
Total dwt of existing fleet 3,777,000
Orderbook
TBN 85,000 1H 2020 Japan

1. Charter rate is the recognized gross daily charter rate. For charter parties with variable rates among periods or consecutive charter parties with the same charterer, the recognized gross daily charter rate represents the weighted average gross daily charter rate over the duration of the applicable charter period or series of charter periods, as applicable. In case a charter agreement provides for additional payments, namely ballast bonus to compensate for vessel repositioning, the gross daily charter rate presented has been adjusted to reflect estimated vessel repositioning expenses. In case of voyage charters the charter rate represents revenue recognized on a pro-rata basis over the duration of the voyage from load to discharge port less related voyage expenses.
2. The start date represents either the actual start date or, in the case of a contracted charter that had not commenced as of October 18, 2019, the scheduled start date. The actual start date and redelivery date may differ from the referenced scheduled start and redelivery dates depending on the terms of the charter and market conditions and does not reflect the options to extend the period time charter.
3. MV Pedhoulas Farmer and MV Pedhoulas Rose were sold and leased back, in 2015 and 2017, respectively, on a net daily bareboat charter rate of $6,500 for a period of 10 years, with a purchase obligation at the end of the 10th year and purchase options in favour of the Company after the second year of the bareboat charter, at annual intervals and predetermined purchase price.
4. Charterer agreed to reimburse us for a fixed amount for the cost of the scrubber and BWTS to be installed on the vessel, which is recorded by increasing the recognised daily charter rate by $634 over the remaining tenor of the time charter party.
5. A period time charter of ten years at a gross daily charter rate of $23,100 for the first two and a half years and of $24,810 for the remaining period. In January 2017, the period time charter was amended to reflect substitution of the initial charterer with its subsidiary guaranteed by the initial charterer and changes in payment terms; all other charter terms remained unchanged. The charter agreement grants the charterer an option to purchase the vessel at any time beginning at the end of the seventh year of the charter, at a price of $39 million less a 1.00% commission, decreasing thereafter on a pro-rated basis by $1.5 million per year. The Company holds a right of first refusal to buy back the vessel in the event that the charterer exercises its option to purchase the vessel and subsequently offers to sell such vessel to a third party. The charter agreement also grants the charterer the option to extend the period time charter for an additional twelve months at a time at a gross daily charter rate of $26,330, less 1.25% total commissions, which option may be exercised by the charterer a maximum of two times.
6. Vessel installing scrubber.
7. Vessel installing scrubber and ballast water treatment system concurrently with dry-docking.


Order book

As of October 18, 2019, the remaining order book of the Company consisted of one Post-Panamax class vessel with scheduled delivery date in the first half of 2020.

Capital expenditure and financing requirements related to order book

As of October 18, 2019, the aggregate remaining capital expenditure in relation to the order book was $30.1 million, of which $6.6 million is payable within 2019 and $23.5 million is payable within 2020. The Company has the option to finance up to $13.2 million of the remaining capital expenditure related to the order book through the periodic issuance of the Company’s common stock.

Liquidity

As of October 18, 2019, we had liquidity of $92.8 million consisting of $82.1 million in cash and bank time deposits and $10.7 million in restricted cash. In addition, we have secured a commitment from a bank for the post-delivery financing of our newbuild Post-Panamax class vessel in an amount of up to $26.4 million.

Leverage and repayment profile

As of September 30, 2019, our consolidated leverage9, representing total consolidated liabilities divided by total consolidated assets, was 59%, compared to 56% as of December 31, 2018, mainly due to prevailing market conditions affecting vessels’ market values. The repayment schedule of our total debt is presented in Table 3.

Table 3: Repayment Schedule as of September 30, 2019, on an annual basis

2019 2020 2021 2022 2023 2024 2025 2026 2027 TOTAL
Repayment schedule 5.0 65.0 90.7 89.0 73.7 196.2 32.9 1.3 14.4 568.2

Environmental Social Responsibility – Environmental investments

In the context of our Environmental Social Responsibility policies the Company is undertaking environmental investments mainly by retrofitting scrubbers in 20 vessels and ballast water treatment systems (‘BWTS’) in 38 vessels in total, the progress of which is presented below in Table 4. The aggregate cost of our environmental investments is expected to be in the region of $70 million, having incurred and capitalized $35.5 million as of September 30, 2019.

Table 4: Environmental investments progress and schedule

Expected installations by October 31, 2019 Remaining expected
installations within 2019
BWTS 16 3
Scrubbers 9* 6

* MV Martine, MV Venus Horizon, MV Venus History, MV Andreas K, MV Pedhoulas Cherry, MV Eleni, MV Pedhoulas Farmer, MV Venus Heritage, MV Panayiota K.

The expected scheduled scrubber installations until the completion of the project and the expected down time is shown in Table 5 on quarterly basis.

Table 5: Expected Scrubber Installation and related down time per quarter

Scrubbers Q4 2019 Q1 2020
Total Scheduled installations 9 5
Expected down time in days** 315 175

** Down time includes scheduled dry-docking or special surveys for 9 vessels to be performed concurrently with their scrubber installation.

Dividend Policy

The Company has not declared a dividend on the Company’s common stock for the third quarter of 2019. The Company had 101,287,990 shares of common stock issued and outstanding as of October 18, 2019.

The Company declared a cash dividend of $0.50 per share on each of its 8.00% Series C Cumulative Redeemable Perpetual Preferred Shares (NYSE: SB.PR.C) and 8.00% Series D Cumulative Redeemable Perpetual Preferred Shares (NYSE: SB.PR.D) for the period from July 30, 2019 to October 29, 2019, payable on October 30, 2019 to the respective shareholders of record as of October 22, 2019.

A Company’s subsidiary declares a cash dividend on a quarterly basis on each of such subsidiary’s 2.95% Series A Cumulative Redeemable Perpetual Preferred Shares (‘Series A shares’) to the respective shareholders of record, presented under the caption “Mezzanine Equity” in the condensed consolidated balance sheets. The aggregate cash dividend declared for the Series A shares for the period from July 1, 2019 to September 30, 2019, which was paid on September 30, 2019, was $0.1 million. The aggregate cash dividend declared for the Series A shares for the period from October 1, 2019 to December 31, 2019, payable on December 31, 2019, is $0.1 million.

The declaration and payment of dividends, if any, will always be subject to the discretion of the Board of Directors of the Company. The timing and amount of any dividends declared will depend on, among other things: (i) the Company’s earnings, financial condition and cash requirements and available sources of liquidity; (ii) decisions in relation to the Company’s growth and leverage strategies; (iii) provisions of Marshall Islands and Liberian law governing the payment of dividends; (iv) restrictive covenants in the Company’s existing and future debt instruments; and (v) global economic and financial conditions.

Full Report

Source: Safe Bulkers, Inc.

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