Safe Bulkers postpones scrubber installations due to Covid-19 crisis

SafeBulkers

Safe Bulkers, an international provider of marine drybulk transportation services, announced its unaudited financial results for the three and twelve months period ended December 31, 2019.

Financial highlights
In million U.S. Dollars except per share data Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018 Twelve Months
2019
Twelve Months
2018
Net Revenues 53.2 50.7 45.5 48.3 52.6 197.8 193.2
Net income 3.6 5.2 1.8 5.4 9.5 16.0 27.7
Adjusted Net income [1] 3.5 5.9 1.7 5.7 9.8 16.7 28.4
EBITDA2 23.1 24.5 21.2 24.6 28.9 93.5 102.3
Adjusted EBITDA 2 23.1 25.1 21.0 24.9 29.1 94.1 103.1
Earnings/(loss) per share basic and diluted 3 0.01 0.02 (0.01 ) 0.03 0.07 0.04 0.16
Adjusted earnings/(loss) per share basic and diluted 3 0.01 0.03 (0.01 ) 0.03 0.07 0.05 0.17
Average Daily results in U.S. Dollars
Time charter equivalent rate 4 13,707 13,311 11,970 12,280 13,875 12,805 13,102
Daily vessel operating expenses 5 5,103 4,448 4,615 4,153 4,353 4,582 4,360
Daily vessel operating expenses excluding dry-docking and pre-delivery expenses 6 4,540 4,053 4,283 4,150 4,109 4,257 4,141
Daily general and administrative expenses 7 1,414 1,363 1,366 1,374 1,384 1,379 1,321
In million U.S. Dollars
Total Cash [8] 120.1 87.0 90.2 82.9 92.5
Liquidity 9 178.0 87.0 90.2 82.9 92.5
Total  Debt 10 601.0 563.8 568.5 563.5 574.7

Management Commentary

Dr. Loukas Barmparis, President of the Company, said: “We closed 2019 profitably, having retrofitted scrubbers on 15 out of 20 vessels in total, noting commercial and operational benefits. We have refinanced a large portion of our debt increasing our liquidity to over $170 million, positioned ahead of uncertainties and opportunities that markets may offer. During the first quarter of 2020 the charter market has shown weakness due to seasonality, intensified by the Novel Coronavirus outbreak, the full impact of which is not yet known. Our management is closely monitoring the evolving situation, having rescheduled the remaining five scrubber installations for the second quarter of 2020.”

Common stock Issuance and Repurchase program

In November 2019, the Company issued to an unaffiliated third party 3,963,964 shares of common stock to pay the second instalment of $6.6 million, as part of the purchase price of its Post-Panamax class vessel on order.

During the fourth quarter of 2019, the Company repurchased and cancelled 1,000,935 shares of its common stock.  As of February 21, 2020, the Company as part of an on going repurchase program, has repurchased an additional 844,871 shares of common stock of which 834,136 have been cancelled.

As of February 21, 2020, the Company had 103,434,531 shares of common stock issued and outstanding.

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 maintain our flexibility in low charter market conditions.

Our contracted employment profile is presented below in Table 1. The Company during the last quarter of 2019 has opted to maintain the majority of its fleet in the spot charter market.

Table 1: Contracted employment profile of fleet ownership days as of February 21, 2020

2020 (remaining) 26%
2020 (full year) 37%
2021 7%
2022 5%

Detailed employment profile is presented in Table 7. 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 7, or in cases where it can not be defined is not part of the stated daily charter hire.

Liquidity

As of December 31, 2019, we had liquidity of $178.0 million consisting of $106.4 million in cash and bank time deposits, $13.7 million in restricted cash, $11.5 million available under the sale and lease back transactions after the repayment of the relevant loans, $20.0 million available under the unsecured revolving credit facility and $26.4 million secured under a commitment from a bank for the post-delivery financing of a newbuild Post-Panamax class vessel.

As of February 21, 2020, we had liquidity of $174.4 million consisting of $113.8 million in cash and bank time deposits, $14.2 million in restricted cash, $20.0 million available under the unsecured revolving credit facility and $26.4 million secured under a commitment from a bank for the post-delivery financing of a newbuild Post-Panamax class vessel.

Leverage, refinancing actions and repayment profile

As of December 31, 2019, our consolidated debt before deferred financing costs was $605.8 million and consolidated leverage11, was 60% versus 56% as of December 31, 2018. In December, the Company entered into sale and leaseback agreements with respect to eight vessels with financial covenants in line with the existing loan and credit facilities of the Company. The proceeds from the sale and leaseback financing transactions, which amounted to $158.3 million, were used to refinance loan facilities of $105.2 million with terms expiring between 2023 and 2025, and for general corporate purposes, resulting in additional liquidity of $53.1 million. Under these arrangements, two vessels were leased back, under bareboat charter agreements, for a period of six years and six vessels were leased back under bareboat charter agreements, for a period of up to eight years. Four of such arrangements contemplate a purchase obligation at the end of the bareboat charter period and purchase options commencing three years following commencement of the bareboat charter period, and the remaining four arrangements contemplate a purchase option five years and nine months following commencement of the bareboat charter period, all at predetermined purchase prices. The Company has recorded these transactions as financing transactions.

The repayment schedule of the Company on a pro-forma basis taking into account the sale and lease back transactions which were completed in January 2020, compared to the repayment schedule as of December 31, 2019, is presented below in Table 2.

Table 2: Repayment Schedule as of December 31, 2019, on an annual basis
(in USD millions)

2020 2021 2022 2023 2024 2025 2026 2027 TOTAL
Repayment schedule as of December 31, 2019 65.5 90.7 89.1 77.5 189.9 61.1 5.4 26.6 605.8
Pro-forma repayment schedule after refinancing 64.8 91.7 90.3 78.7 185.7 65.1 14.4 26.6 617.3

Order book
As of February 21, 2020, the remaining order book of the Company consisted of one Post-Panamax class vessel with scheduled delivery date in the second quarter of 2020.

Capital expenditure and financing requirements related to order book

As of February 21, 2020, the aggregate remaining capital expenditure in relation to the order book was $20.2 million, all payable within 2020, on delivery of the vessel. The Company has the option to pay up to $3.3 million of this remaining capital expenditure through the issuance of the Company’s common stock.  In addition, the Company has secured $26.4 million under a commitment from a bank for the post-delivery financing of the vessel.

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, the progress of which is presented below in Table 3. Our environmental investments as of December 31, 2019, were $51.9 million. The Company has postponed for the second quarter of 2020 the scheduled BWTS and Scrubber installations due to corona-virus outbreak affecting shipyards’ operations.

Table 3: Environmental investments schedule

Completed installations
until February 26, 2020
Expected installations in Q1 2020 Expected installations in Q2 2020
BWTS 20 0 8
Scrubbers 15* 0 5

* MV Martine, MV Venus Horizon, MV Venus History, MV Andreas K, MV Pedhoulas Cherry, MV Eleni, MV Venus Heritage, MV Pedhoulas Farmer, MV Panayiota K, MV Sophia, MV Marina, MV Pedhoulas Rose, MV Pedhoulas Fighter, MV Pedhoulas Builder, MV Agios Spyridonas.

Down time in relation to Dry docking and equipment retrofits

The estimated downtime in relation to dry dockings and equipment retrofits including scrubbers and ballast water treatment system in 2020 is presented below in Table 4.

Table 4: Estimated Downtime in relation to Dry dockings and equipment retrofits

Down time in days**
Q1 2020 Q2 2020
Number of vessels 3 8
Total down time 82 265

** Down time includes scheduled dry-docking or special surveys to be performed concurrently with scrubber installation where applicable.

Bunker fuel contracts

The Company enters, from time to time, into bunker fuel contracts, with the objective of reducing the risk arising from changes in the price differential between very low sulphur fuel oil and high sulphur fuel oil.

Dividend Policy

The Company has not declared a dividend on the Company’s common stock for the fourth quarter of 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 October 31, 2019 to January 29, 2020, which was paid on January 30, 2020 to the respective shareholders of record as of January 23, 2020.

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 October 1, 2019 to December 31, 2019, which was paid on January 6, 2020, was $0.1 million. The aggregate cash dividend declared for the Series A shares for the period from January 1, 2020 to March 31, 2020, payable on March 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.

 

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