Safe Bulkers, an international provider of marine drybulk transportation services, announced its unaudited financial results for the three and nine months period ended September 30, 2020.
|In million U.S. Dollars except per share data||Q3 2020||Q2 2020||Q1 2020||Q4 2019||Q3 2019||Nine Months 2020||Nine Months 2019|
|Adjusted Net income/(loss)1||3.5||(13.3||)||(10.2||)||3.5||5.9||(20.0||)||13.2|
|Adjusted EBITDA 2||22.3||6.3||9.4||23.1||25.1||38.1||71.0|
|Earnings/(loss) per share basic and diluted3||0.00||(0.16||)||(0.12||)||0.01||0.02||(0.29||)||0.04|
|Adjusted (loss)/earnings per share basic and diluted 3||0.00||(0.16||)||(0.13||)||0.01||0.03||(0.28||)||0.04|
|Average Daily results in U.S. Dollars|
|Time charter equivalent rate4||12,575||8,094||9,089||13,707||13,311||9,940||12,513|
|Daily vessel operating expenses5||4,896||4,729||4,771||5,103||4,448||4,799||4,406|
|Daily vessel operating expenses excluding dry-docking and pre-delivery expenses6||4,459||4,207||4,285||4,540||4,053||4,318||4,162|
|Daily general and administrative expenses7||1,418||1,374||1,371||1,414||1,363||1,388||1,368|
|In million U.S. Dollars|
1 Adjusted Net income/(loss) is a non-GAAP measure. Adjusted Net income/(loss) represents Net income/(loss) before gain/(loss) on derivatives, early redelivery cost, loss on inventory valuation and gain/(loss) on foreign currency. See Table 4.
2 EBITDA is a non-GAAP measure and represents Net (loss)/income plus net interest expense, tax, depreciation and amortization. See Table 4. Adjusted EBITDA is a non-GAAP measure and represents EBITDA before gain/(loss) on derivatives, early redelivery cost, loss on inventory valuation and, gain/(loss) on foreign currency. See Table 4.
3 Earnings/(loss) per share and Adjusted Earnings/(loss) per share represent Net Income and Adjusted Net income less preferred dividend and mezzanine equity measurement divided by the weighted average number of shares respectively. See Table 4.
4 Time charter equivalent rate, or TCE rate, represents charter revenues less commissions and voyage expenses divided by the number of available days. See Table 5.
5 Daily vessel operating expenses are calculated by dividing vessel operating expenses for the relevant period by ownership days for such period. See Table 5.
6 Daily vessel operating expenses excluding dry-docking and pre-delivery expenses are calculated by dividing vessel operating expenses excluding dry-docking and pre-delivery
expenses for the relevant period by ownership days for such period. See Table 5.
7 Daily general and administrative expenses are calculated by dividing general and administrative expenses for the relevant period by ownership days for such period. See Table 5.
8 Total Cash represents Cash and cash equivalents plus Time deposits and Restricted cash.
9 Liquidity represents Total Cash plus contracted undrawn borrowing capacity under revolving credit facilities and secured commitments including sale and lease back financing.
10 Total Debt represents Long-term debt plus Current portion of long-term debt, net of deferred financing costs.
Dr. Loukas Barmparis, President of the Company, said: ”Our financial performance gradually improved in parallel with the chartering market during the 3rd quarter. At the same time, we focused on developing a plan for renewing our fleet with modern designs that adhere to the new environmental regulations. Due to market uncertainties, we remain cautious and we believe that our liquidity position which exceeds $130 million provides us with the required flexibility.”
Update on COVID-19, company’s actions and status
There has been a negative effect from the COVID-19 pandemic on the Company’s results of operations and financial condition year to date, due to lower demand which resulted in relatively lower charter rates, and higher crew and related costs. Any future impact of COVID-19 on the Company’s results of operations and financial condition and any long-term impact of the pandemic on the dry bulk industry, will depend on future developments, which are highly uncertain and cannot be predicted, including a potential second wave of the pandemic and any new potential restrictions imposed, new information which may emerge concerning the severity of the virus and/or actions taken to contain or treat its impact, as well as political implications that could further impact world trade and global growth.
The COVID-19 pandemic has had significant impact on the shipping industry and our seafarers as port lockdowns were imposed globally and certain ports that had opened have subsequently closed again for crew changes. The Company has worked extensively to find solutions focusing on effectively managing crew changes despite the ongoing travel restrictions imposed by governments around the world. The Company has also taken measures to protect its seafarers’ and shore employees’ health and well-being, keep its vessels sailing with minimal disruption to their trading ability, service its charterers and mitigate and address the risks, effects and impact of COVID-19 on our operations and financial performance.
At-the-market equity offering program
In August 2020, the Company filed a prospectus supplement with the Securities and Exchange Commission (“SEC”), under which it may offer and sell shares of its common stock (“Shares”) from time to time up to aggregate gross offering proceeds of $23.5 million through an “at-the-market” equity offering program (the “ATM Program”). As of November 6, 2020, the Company had not offered to sell and has not sold any Shares under the ATM Program.
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. Our customers represent some of the world’s largest consumers of marine drybulk transportation services. The vessels we deploy on period time charters provide us with visible and relatively stable cash flow, while the vessels we deploy in the spot market allow us to maintain our flexibility in low charter market conditions and provide an opportunity for a potential upside in our revenue when charter market conditions improve.
During the third quarter of 2020, we operated 42.00 vessels on average earning a TCE11 of $12,575 compared to 41.00 vessels earning a TCE of $13,311 during the same period in 2019. Our contracted employment profile is presented below in Table 1.
11 Time Charter Equivalent (“TCE”) rate represents charter revenues net of commissions and voyage expenses divided by the number of available days.
Table 1: Contracted employment profile of fleet ownership days as of November 6, 2020
|2020 (full year)||95||%|
The detailed employment profile is presented in Table 6. Scrubber benefit for scrubber fitted vessels is calculated on the basis of fuel consumption of heavy fuel oil and price differential between heavy fuel oil and compliant fuel cost for the specific voyage and is either presented as part of the daily charter hire in Table 6, or in cases where it can not be estimated is not part of the stated daily charter hire.
Orderbook and financing
In October 2020, the Company planning a gradual fleet renewal with modern vessels, entered into an agreement for the acquisition of a Japanese-built, dry-bulk, Kamsarmax class, 82,000 dwt, newbuild vessel with a scheduled delivery within the first half of 2022. The vessel is designed to meet the latest requirements of Energy Efficiency Design Index to Green House Gas, GHG emissions, and ‘EEDI Phase 3’. It will also comply with the latest NOx emissions regulation, NOx-Tier III.
At the same time, the Company entered into a sale and lease back through a bareboat charter agreement with a third party for 90% financing of this acquisition, minimizing impact on liquidity. The bareboat charter to be consummated upon delivery will have a duration of ten years with a purchase obligation at a predetermined price on termination and purchase options commencing three years following the commencement of the bareboat charter period in the Company’s favor.
As of September 30, 2020, we had liquidity of $109.7 million, which included cash and cash equivalents, restricted cash and funds available under our unsecured revolving credit facility and no capital expenditure requirements in relation to newbuild vessels.
As of November 6, 2020, we had liquidity of $136.0 million, which included cash and cash equivalents, restricted cash, funds available under our unsecured revolving credit facility and sale and lease back financing of the newbuild Kamsarmax class vessel and aggregate remaining capital expenditure in relation to the orderbook of $27.3 million.
Debt Profile – Leverage
As of September 30, 2020, our consolidated debt before deferred financing costs was $613.7 million and our consolidated leverage12 was 66% versus 68% as of June 30, 2020.
The loan repayment schedule of the Company as of September 30, 2020, is presented below in Table 2.
12 Consolidated leverage is a non-GAAP measure and represents total consolidated liabilities divided by total consolidated assets. Total consolidated assets are based on the market value of all vessels owned or leased on a finance lease taking into account their employment, and the book value of all other assets. This measure assists our management and investors by increasing the comparability of our leverage from period to period.
Table 2: Loan repayment Schedule
(in USD millions)
|Ending December 31,||2020||2021||2022||2023||2024||2025||2026||2027||Total|
|September 30, 2020||11.2||72.4||113.6||120.0||171.9||66.8||16.2||41.6||613.7|
Interest rate derivatives
During the third quarter of 2020, the Company entered into eleven pay-fixed, receive-variable interest rate derivative contracts commencing in the third quarter of 2020 with maturities ranging from August 2024 to August 2025 and at fixed rates ranging from 0.322% to 0.40% for an aggregate notional amount of $107.0 million. As of September 30, 2020, the aggregate notional amount of interest rate derivative contracts entered into by the Company was $244.6 million or about 40% of the aggregate debt outstanding as of that point in time.
Environmental Social Responsibility – Environmental investments
In the context of our Environmental Social Responsibility policies, the Company is undertaking environmental investments mainly in scrubbers and ballast water treatment systems. As of September 30, 2020, the Company has completed the installation of 20 scrubbers and continues the project of retrofitting BWTS in all vessels of the Company’s fleet, having installed 30 systems to date. The aggregate cost of our environmental investments as of quarter end was $66.7 million.
The scheduled number and estimated down-time days for dry-dockings and environmental investments as of September 30, 2020 for the subsequent two quarters, is presented in Table 3.
Table 3: Scheduled number and estimated down-time for dry-dockings and environmental investments.
|Down time in Days|
|Q4 2020||Q1 2021|
|Number of vessels||2*||2*|
|Total down time||20||40|
* Partial completion.
The Company has not declared a dividend on the Company’s common stock for the third quarter of 2020. The Company had 102,174,594 shares of common stock issued and outstanding as of November 6, 2020.
The aggregate cash dividend of $0.50 per share declared by the Company 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, 2020 to October 29, 2020, which was paid on October 30, 2020 to the respective shareholders of record as of October 22, 2020, was $2.75 million.
A Company’s subsidiary declares a cash dividend on a quarterly basis on each of its 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, 2020 to September 30, 2020, which was paid on September 30, 2020, was $0.1 million. The aggregate cash dividend to be declared for the Series A shares for the period from October 1, 2020 to December 31, 2020, payable on December 31, 2020, 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.