Safe Bulkers, an international provider of marine drybulk transportation services, announced its unaudited financial results for the three month period ended March 31, 2021.
|In million U.S. Dollars except per share data||Q1 2021||Q4 2020||Q3 2020||Q2 2020||Q1 2020|
|Adjusted Net income/(loss)1||16.7||7.7||3.5||(13.3||)||(10.2||)|
|Adjusted EBITDA 2||34.6||26.3||22.3||6.3||9.4|
|Earnings/(loss) per share basic and diluted3||0.18||0.04||0.00||(0.16||)||(0.12||)|
|Adjusted earnings/(loss) per share basic and diluted 3||0.14||0.04||0.00||(0.16||)||(0.13||)|
|Average Daily results in U.S. Dollars|
|Time charter equivalent rate4||15,567||12,319||12,575||8,094||9,089|
|Daily vessel operating expenses5||4,702||3,978||4,896||4,729||4,771|
|Daily vessel operating expenses excluding dry-docking and pre-delivery expenses6||4,358||3,955||4,459||4,207||4,285|
|Daily general and administrative expenses7||1,440||1,469||1,418||1,374||1,371|
|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 income, loss on vessels held for sale , loss on inventory valuation and gain/(loss) on foreign currency. See Table 4.
2 EBITDA is a non-GAAP measure and represents Net income/(loss) 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 income, loss on vessels held for sale 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 and Liability directly associated with assets held for sale, net of deferred financing costs.
Dr. Loukas Barmparis, President of the Company, said: “During the first quarter of 2021 we increased our profitability and strengthened our balance sheet. We intend to continue our efforts to gradually renew our fleet through selective sales of older vessels and new acquisitions. We are focused on our environmental performance and will continue to invest to improve our operations in this area. We believe our environmental investments will contribute to sustained operational and financial advantages.”
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 during the first quarter, due to higher crew and related costs of about $0.6 million. 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 new waves of the pandemic and any new potential restrictions imposed as a result of the virus, new information which may emerge concerning the severity of the virus and/or actions taken to contain or treat its impact, including distribution and effectiveness of the vaccines, as well as political implications that could further impact world trade and global growth.
The COVID-19 pandemic has had a significant impact on the shipping industry and seafarers in general, as port lockdowns were imposed globally during 2020 and 2021. The Company has worked extensively to find solutions focusing on effectively managing crew changes despite the ongoing port closures and 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 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 April 23, 2021, the Company had sold 4,555,320 common shares under the ATM Program with aggregate net offering proceeds to the Company of $12.7 million.
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.
In December 2020, at the request of the charterer, the Company agreed to the early termination of an existing charter of the Capesize-class vessel Lake Despina, which was contractually due to expire in January 2024. In exchange for the early redelivery of the vessel, the charterer paid the Company cash compensation of $7.6 million. The vessel was redelivered in February 2021, on which date the total termination cash compensation net of accrued revenue, was recognized as early redelivery income. The vessel was subsequently deployed under a new period time charter with a different charterer for a duration of 12 to 14 months at a gross daily charter rate linked to the 5 TC Baltic Exchange Capesize Index (“BCI-180 5TC”) multiplied by 119%.
During the first quarter of 2021, we operated 42.27 vessels on average earning a TCE11 of $15,567 compared to 41.00 vessels earning a TCE of $9,089 during the same period in 2020. 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. Please refer to table 5: fleet data and average daily indicators for TCE equivalent rate reconciliation.
Table 1: Contracted employment profile of fleet ownership days as of April 23, 2021
|2021 (full year)||67||%|
The detailed employment profile is presented in Table 6.
The Company’s orderbook consists of two Japanese dry-bulk newbuild vessels, one Kamsarmax class, 82,000 dwt and one Post-Panamax class, 87,000 dwt, with scheduled deliveries within the first half of 2022 and the third quarter of 2022, respectively. The vessels are designed to meet the Phase 3 requirements of Energy Efficiency Design Index, (”EEDI Phase 3”) related to the mandatory reduction of green house gas emissions, as adopted by the International Maritime Organization, (“IMO”) and also comply with the latest NOx emissions regulation, NOx-Tier III (IMO, MARPOL Annex VI, reg. 13).
Vessel sales and second hand acquisition
In the framework of fleet renewal the Company has acquired a 2011 second-hand Panamax vessel and has sold a 2003 Panamax vessel and has agreed to sell a 2004 Panamax vessel as further described below.
In March 2021, the Company acquired the 2011 built Panamax class MV Paraskevi 2, built in Japan, at a price of $14.1 million before commissions. The vessel is a sister vessel with two other vessels owned by the Company, and her acquisition was funded from available cash. She has been chartered for 11 to 14 months at a gross daily charter rate of $13,800.
On January 21, 2021, the Company signed an agreement to sell the Panamax class MV Paraskevi, built 2003, at a price of $7.3 million before commissions. The vessel was classified as held for sale. The sale transaction was consummated in April 2021.
On January 28, 2021, the Company signed an agreement to sell the Panamax class MV Vassos, built 2003, at a price of $8.7 million before commissions. The vessel was classified as held for sale and the associated loan facility with a balance of $5.8 million before deferred financing costs was classified as liability directly associated with asset held for sale, as of the end of the first quarter of 2021. The loan facility was fully repaid in April 2021. The sale is expected to be consummated in May 2021.
As a result of the agreed sale transactions, our debt has decreased by $9.8 million and our liquidity will increase by $5.7 million.
Refinancing and mezzanine equity redemption
During the first quarter of 2021, the Company completed the documentation for the refinancing of a $22.0 million outstanding term loan facility maturing in 2022 secured by an existing vessel, by entering into a $30.5 million sale and lease back agreement which provides for a seven-year bareboat charter with a purchase option in the Company’s favor five years and six months following commencement of the bareboat charter period, at a predetermined purchase price. The Company has assessed that this agreement meets the criteria of a financing transaction. The transaction was consummated in April 2021, providing additional liquidity of $8.5 million.
In April 2021, the Company agreed in principle to the refinancing of a $16.3 million outstanding term loan facility maturing in 2024 secured by an existing vessel, by entering into a $24.3 million sale and lease back agreement which provides for a ten-year bareboat charter with purchase options in the Company’s favor after the third year following commencement of the bareboat charter period and a purchase obligation at the end of the bareboat charter period, all at predetermined purchase prices. The Company has assessed that this agreement meets the criteria of a financing transaction. The transaction is expected to be consummated in the third quarter of 2021 and will provide additional liquidity of $8.0 million.
In February 2021, a Company’s subsidiary redeemed all issued and outstanding Series A cumulative redeemable perpetual Preferred Shares, previously recorded as mezzanine equity (the “Mezzanine Equity”) in the condensed consolidated balance sheets, with a redemption price of $17.6 million, including accrued dividend. The Mezzanine Equity was issued in 2018 to a third party investor in relation to the financing of the vessel Pedhoulas Cedrus. At the same time, the Company consummated a sale and lease back transaction for an amount of $24.3 million providing for a ten-year bareboat charter agreement with a purchase obligation at a predetermined price on termination, and purchase options after the third year in the Company’s favor. The gross proceeds of $24.3 million were used for the redemption the Mezzanine Equity and for general corporate purposes. The increase of our liquidity from this refinancing was $6.7 million.
Liquidity and capital expenditure requirements
As of March 31, 2021, we had liquidity of $191.4 million, consisting of cash, cash equivalents, bank time deposits, restricted cash and includes $61.2 million available under sale and lease back agreements, a new term loan facility and a revolving credit facility. As of March 31, 2021, the Company had an existing fleet of 43 vessels and two newbuild vessels on order. The aggregate remaining capital expenditure requirements for the acquisition of the two newbuilds amounted to $52.0 million in the aggregate, of which $0.6 million is payable in 2021 and $51.4 million payable in 2022. In addition, the committed capital expenditure requirements in relation to one exhaust gas cleaning device (‘Scrubber’) and ballast water treatment systems (‘BWTS’) retrofits were $3.2 million in the aggregate, with scheduled payments of $2.3 million in 2021, and $0.9 million in 2022.
As of April 23, 2021, we had liquidity of $209.6 million, consisting of cash, cash equivalents, bank time deposits, restricted cash and includes $66.2 million available under sale and lease back agreements, a new term loan facility, a revolving credit facility as well as $24.3 million available under a sale and lease back agreement, agreed in principle, for the refinancing of a $16.3 million outstanding term loan facility, providing an additional net liquidity of $8.0 million. As of April 23, 2021, the Company had an existing fleet of 42 vessels and two newbuild vessels on order. The aggregate remaining capital expenditure requirements for the acquisition of the two newbuilds amounted to $52.0 million in the aggregate, of which $0.6 million is payable in 2021 and $51.4 million payable in 2022. In addition, the committed capital expenditure requirements in relation to one Scrubber and BWTS retrofits were $3.2 million, with scheduled payments of $2.3 million in 2021, and $0.9 million in 2022.
As of March 31, 2021, our consolidated debt before deferred financing costs was $607.6 million. The loan repayment schedule of the Company as of March 31, 2021, is presented below in Table 2.
Table 2: Loan repayment Schedule
(in USD millions)
|Ending December 31,||2021||2022||2023||2024||2025||2026||2027||2028-2031||Total|
|March 31, 2021||60.1||117.8||118.0||170.2||68.7||18.0||43.5||11.3||607.6|
During the first quarter of 2021, the Company entered into bunker fuel contracts for 12,000 tons for calendar 2022 to sell the spread differential between the price per ton of the 0.5% and 3.5% sulfur content fuel, with the objective of reducing the risk arising from a lower spread differential, which is related to the additional revenue from the operation of scrubbers in scrubber fitted vessels.
In February 2021, the Company entered into a pay-fixed, receive-variable interest rate derivative contract commencing February 2021 and maturing December 2025, at a fixed rate of 0.745% and for a notional amount of $30,000. As of March 31, 2021, the aggregate notional amount of outstanding interest rate derivative contracts was $273.6 million or about 45% of the aggregate debt outstanding at that date.
Environmental Social Responsibility – Environmental investments
In the context of our Environmental Social Responsibility policies, the Company has completed the installation of 20 scrubbers and is continuing the retrofit of ballast water treatment systems on the remainder of its vessels. As of March 31, 2021, 31 of our vessels were fitted with ballast water systems. The aggregate cost of our environmental investments as of March 31, 2021 quarter end was $67.4 million. In February 2021, the Company entered into an agreement for an additional scrubber installation on one of its Capesize class vessels, scheduled to take place during the fourth quarter of 2021.
The scheduled number and estimated down-time days for dry-dockings and environmental investments as of March 31, 2021 until the end of this year is presented in Table 3.
Table 3: Scheduled number and estimated down-time for dry-dockings and environmental investments.
|Down time in Days|
|Q2 2021||Q3 2021||Q4 2021|
|Number of vessels||3||0||2|
|Total down time||90||0||50|
The Company has not declared a dividend on the Company’s common stock for the first quarter of 2021. The Company had 106,765,086 shares of common stock issued and outstanding as of April 23, 2021.
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 January 20, 2021 to April 29, 2021, which was paid on April 30, 2021 to the respective shareholders of record as of April 23, 2021, was $2.75 million. Following redemption of all Mezzanine Equity in February 2021, no issued and outstanding shares of Series A Preferred Shares exist as of March 31, 2021.
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.