Capital Link hosted an interview of Dr. Loukas Barmparis, President
of Safe Bulkers (NYSE: SB), with Mr. Nikolai Christopher Steckmest
Sivertsen, Equity Research Analyst at DNB Markets, on Thursday,
March 2, 2023. During the interview, which is part of Capital
Link’s Deep Dive Webinar Series, Dr. Barmparis outlined the
company’s newbuilding and fleet renewal programs, discussed its
dividend policy, and commented on the state of the dry bulk market.
Full InterviewThe full webinar interview can be
accessed at: https://youtu.be/I5noh3ipAXk
Safe Bulkers operates a fleet of 44 dry bulk
vessels, with an average age of 10.5 years and an aggregate
capacity of 4.5 million dwt, 12 vessels being eco-ships built after
2014, with superior energy efficiency characteristics compared to
past-2014 designs, and 3 vessels built 2022 onwards compliant with
the most recent IMO GHG Phase 3 - NOx Tier III regulations. The
fleet transports grain, iron ore and coal, primarily along
worldwide shipping routes for some of the world's largest users of
such services. Investing in environmental technologies and
boosting fleet competitiveness is a key part of Safe Bulkers
strategy. Besides implementing a program of environmental upgrades
on the existing fleet, the company has a significant newbuilding
orderbook. It took delivery of 3 IMO GHG Phase 3 - NOx Tier III
newbuilds and expects the delivery of 9 more from Q2 2023 to Q2
2025. The Company’s common stock, series C preferred stock and
series D preferred stock are listed on the NYSE, and trade under
the symbols “SB”, “SB.PR.C”, and “SB.PR.D”, respectively.
Interview HighlightsHighlights
from Safe Bulkers President Loukas Barmparis’ interview by Nikolai
Christopher Steckmest Sivertsen include the following:
Dry Bulk Market Supply and Demand
DynamicsAs Mr. Sivertsen noted, the dry bulk market, which
has been soft, has recently gained some momentum amid higher iron
ore, grain and coal volumes. Safe Bulkers expects this strength to
continue, as Dr. Barmparis stated, “on the expectation of China’s
improving performance with the opening of its markets.”
The Safe Bulkers President also stressed that
the market’s softness was due, in part, to its seasonal nature.
“Traditionally, the market is quite weak in January and February,
and additionally it has been affected by the war in Ukraine, as
well as by interest rate increases,” which have an impact on demand
for dry bulk commodities, Dr. Barmparis expressed.
Global dry bulk demand is expected to grow by
around 1% in 2023, with growth in ton-miles at around 1.5%. Dr.
Barmparis noted that despite the fact that there are still problems
in the Black Sea, a number of factors may contribute to a market
rebound, such as the possibility that grains will support the
market being the stronger performer of commodities, at about 4%,
and that China’s reopening will likely improve the demand for
steel.
Capital Allocation Strategy Balanced
Between Shareholder Rewards and Fleet RenewalSafe Bulker’s
shares are up by about 50% since the end of September ($2.47 on
September 30, 2022 - $3.73 on March 3, 2023). Responding to a
question about what he believes is behind this performance, which
has outpaced its peers and took place despite the market’s
softness, Dr. Barmparis stressed that in the past, the share
performance of Safe Bulkers had not been in line with its peers
reflecting the fact that Safe Bulkers has a “reasonable quarterly
dividend policy,” as compared to the company’s peers, which have
“paid out substantial amounts.” He mentioned that at $0.05 per
share per quarter, it still represents an attractive yield for
shareholders, at 5% annualized based on the current share
price.
The company’s dividend policy, Dr. Barmparis
stated, was shaped according to two goals “to reward shareholders,
and to finance our newbuilding program.”
“We are one of a few publicly traded companies
that have an extensive new building program, and we don’t want to
increase our leverage for that,” the Safe Bulkers President stated.
While its share price is increasing, Mr.
Sivertsen noted that, “Still, Safe Bulkers stands out as a stock
that is heavily discounted to NAV, at around 50%, compared to other
dry bulk peers that trade close to or at NAV.” When asked how the
company plans to act to help reduce this discount, Dr. Barmparis
stressed that factors such as the company’s strong balance sheet,
competent management, industry footprint dealing with major
charterers and vision for the future should contribute to achieving
over time a share price closer to NAV.
Dr. Barmparis pointed out that Safe Bulker’s
strategy aims to combine sustainable returns to shareholders while
enhancing the competitiveness of the company for the long
term.
“Investors realize that, by investing in Safe
Bulkers, they are investing in a company which has low leverage—we
have a leverage of about 35%—we didn’t increase our leverage
because of our newbuilding program, we’ve maintained this range,”
he said.
The company’s low leverage, along with its
“substantial liquidity,” provides the company “opportunities to be
flexible,” Dr. Barmparis said, allowing it to act quickly on any
deals which may arise and execute its new building and
environmental upgrades program.
Boosting Fleet Competitiveness Through
Investing in Environmental TechnologySafe Bulkers has
recently placed an additional order for a Kamsarmax newbuild and is
expecting a total of 9 newbuilds in the future. “In terms of our
newbuild strategy, we were quite pragmatic. Most people said that
they would not order anything because they don’t know what the
alternative fuels will be,” Dr. Barmparis stated.
“We feel that these alternative fuels will
probably be available at the beginning of the next decade, which
means that we can not lead with our existing fleet for the next ten
years.” Currently, the company’s fleet has an average age of 10.5
years and will remain stable for the next 2 years.
For this reason, Dr. Barmparis noted, Safe
Bulkers invested in a series of newbuilds and has disposed of some
of its older less efficient vessels. During the last two years,
Safe Bulkers sold 8 vessels of $125.7 million sale proceeds, 0.63
million dwt and 14.6 years average age and acquired 7 second-hand
vessels of $187.0 million acquisition cost, 0.97 million dwt and
9.2 years average age. In parallel, the environmental upgrades are
continuing involving application of low friction paints and
installation of energy saving devices, scheduling to having
upgraded 20 existing vessels by the end of 2023. “The most
important thing is that the average price of the newbuild vessels
is close to 33 million per vessel,” the company’s president said.
The vessels are all modern, environmentally efficient, and mainly
Japanese-made. In an earlier interview, Dr. Barmparis had stressed
that “the early timing of newbuilding orders translates into
optimal cost, capital appreciation, and enhanced revenue generation
as newbuildings command higher charter-hire due to lower fuel
consumption.”
In an earlier interview, Dr. Barmparis had also
noted that only 30% of the global dry bulk fleet is expected to
comply with EEXI regulations without requiring modifications or
upgrades. “A two-tier marker will be developed,” he commented,
“which will boost companies that have invested in environmental
technologies and will prevent companies that have not invested in
such technologies from remaining competitive. Targeting to reduce
the environmental impact of our operations, and increase the
sustainability of our business over time, we’ve placed ESG in the
heart of our corporate strategy and undertaken significant
investments and successfully meet society’s expectations as to our
proper role,” and “which in light of investors’ increased
focus on ESG matters will create value for our shareholders, as new
regulations, restrictions and taxation are being
introduced,” and “we are prepared for all market conditions
with comfortable leverage, substantial liquidity and hands on
operational efficiency, ready to assess new opportunities, we
remain cautiously optimistic for the future prospects of the
market.”
The full interview provides more details
on the company’s fleet upgrade and renewal program, including
additional scrubber installations, as well as on its chartering
strategy.
CAPITAL LINK –
DISCLAIMERCapital Link is the investor relations advisor
to Safe Bulkers (NYSE: SB). Capital Link is hosting a series
of webinars and podcasts where the Senior Management of listed
companies share their insight on the company’s business
development, strategy, growth prospects and overall sector outlook,
as well as on broader industry topics. These webinars and
podcasts are strictly for informational and educational purposes.
They do not constitute an offer to buy or sell securities or
investment advice or advice of any kind and should not be relied
upon. The views expressed are not those of Capital Link, which
bears no responsibility for them.
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