Safe Bulkers Posts Strong Q4 Results

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Safe Bulkers, Inc., an international provider of marine drybulk transportation services, announced its unaudited financial results for the three and twelve month periods ended December 31, 2023. The Board of Directors of the Company also declared a cash dividend of $0.05 per share of outstanding common stock.

Management Commentary

Dr. Loukas Barmparis, President of the Company, said: “The last quarter of the year we operated in an improved charter market environment compared to the previous quarter. The Company continues to maintain a strong capital structure while implementing its strategy of gradual fleet renewal that leads to decreasing fleet average age. Our ongoing efforts to upgrade our existing vessels coupled with our fleet renewal, will enable us to remain competitive while reducing our carbon footprint.”

Formation of Environmental, Social and Governance Committee

In November 2023, the Company announced the formation of a Board of Directors’ committee to focus on Environmental, Social and Governance (the “ESG Committee”). The ESG Committee shall support the Company’s overall ESG strategic direction, providing executive management and the Board of Directors with ESG insights on significant ESG trends. The ESG Committee consists of six members of the Board of Directors, four of whom are independent directors. The President of the Company has been assigned to lead the management team on ESG matters and report to the ESG Committee. The ESG Committee shall review the Company’s ESG performance and ensure governance oversight by the Board of Directors of the Company’s ESG strategy and implementation, consistent with the priorities outlined in the Company’s sustainability report. The formation of this new ESG Committee comes as a result of the additional specific focus required by the Board of Directors on the overall ESG strategy of the Company. The Company implements its ESG strategy as articulated in the latest sustainability report, taking steps towards decarbonization.

Environmental investments – Dry-dockings

The Company is gradually renewing its fleet with newbuilds designed to meet the most recent International Maritime Organization (the “IMO”) regulations related to the reduction of greenhouse gas emissions (the “IMO GHG Phase 3”) and the reduction of nitrogen oxides emissions (the “IMO NOx Tier III”), and selectively selling older vessels. The newbuild program consists of 16 vessels in the aggregate, of which 12 are Japanese-built and four are Chinese-built, including contracts for two methanol dual-fueled Kamsarmax newbuilds. Nine of such newbuild vessels have already been delivered to us. The aggregate capital expenditure of the newbuild program is approximately $579.5 million, of which $206.1 million is remaining to be paid as of February 9, 2024.

Furthermore, the Company is continuing the environmental upgrade program of its existing fleet, targeting increased energy efficiency and lower fuel consumption, which is expected to reduce GHG emissions. As of February 9, 2024, 21 vessels in total have been upgraded. The low friction paint applications that are part of the environmental upgrades are recorded as operating expenses, while energy saving devices are capitalized and recorded as capital expenditures.

During the fourth quarter of 2023, the Company completed environmental upgrades on two vessels, namely the Zoe and Xenia. During the first quarter of 2024 and as of February 9, 2024, the Company completed environmental upgrades on two vessels, namely the Agios Spyridonas and the Venus Harmony, with 50 down-time days and has further scheduled environmental upgrades on three other vessels, including an exhaust gas cleaning device (“Scrubber”) installation on the Capesize class vessel Stelios Y, with an estimated 90 down-time days. The Company continues to use biofuels in certain voyages, targeting a lower CO2 emission factor and lower environmental impact.

Recent Newbuild Contracts

The Company, during the fourth quarter of 2023 and as of February 9, 2024, has entered into the following newbuild contracts for the acquisition of four IMO GHG Phase 3 – NOx Tier III vessels:

  • In October 2023, for the acquisition of two methanol dual-fueled, 81,200 dwt, Kamsarmax class dry-bulk vessels, with scheduled deliveries in the fourth quarter of 2026 for the first vessel, and the first quarter of 2027 for the second vessel. When powered by green methanol they can produce close to zero GHG emissions based on well-to-propeller life cycle assessment methodology.
  • In December 2023, for the acquisition of one Japanese, 81,800 dwt, Kamsarmax class dry-bulk vessel with scheduled delivery within the first half of 2026; sister to newbuilds recently delivered to us.
  • In January 2024, for the acquisition of one Japanese, 81,800 dwt, Kamsarmax class dry-bulk vessel with scheduled delivery within the third quarter of 2026; sister to newbuilds recently delivered to us.

Fleet Update

As of February 9, 2024, we had a fleet of 48 vessels, one of which was held for sale, consisting of 10 Panamax, 12 Kamsarmax, 18 Post-Panamax and 8 Capesize class vessels, with an aggregate carrying capacity of 4.8 million dwt and an average age of 9.9 years. Twelve vessels in our fleet are eco-ships built after 2014, and nine are IMO GHG Phase 3 – NOx Tier III ships built 2022 onwards.

Orderbook

As of February 9, 2024, we had an orderbook of seven IMO GHG Phase 3 – NOx Tier III Kamsarmax class newbuilds, two of which are methanol dual-fueled, with scheduled deliveries, one in 2024, two in 2025, three in 2026 and one in the first quarter of 2027.

Newbuild deliveries

The Company, during the fourth quarter of 2023 and as of February 9, 2024, took delivery of four Japanese Kamsarmax class IMO GHG Phase 3 – NOx Tier III sister newbuilds: the Morphou, Rizokarpaso, Ammoxostos and Kerynia.

Vessel Sales

In November 2023, the Company entered into an agreement for the sale of the Katerina, a 2004 Japanese-built, Panamax class, dry-bulk vessel, being the oldest vessel in its fleet at that time, at a gross sale price of $10.2 million. The vessel was delivered to her new owners in December 2023.

In November 2023, the Company entered into an agreement for the sale of the Pedhoulas Cherry, a 2015 Chinese-built, Kamsarmax class, dry-bulk vessel at a gross sale price of $26.6 million. The vessel is scheduled to be delivered to her new owners in February 2024.

On February 12, 2024, the Company entered into an agreement for the sale of the Maritsa, a 2005 Japanese-built, Panamax class dry-bulk vessel, the oldest vessel in its fleet, at a gross sale price of $12.2 million. The vessel is scheduled to be delivered to her new owners in April-May 2024.

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 flows, while the vessels we deploy in the spot market allow us to maintain our flexibility in low charter market conditions as well as provide an opportunity for a potential upside in our revenue when charter market conditions improve. The chartering of our vessels is arranged by our Managers15 without any management commission.

As of February 9, 2024, we employed, or had contracted to employ, (i) 12 vessels in the spot time charter market (with up to three months original duration) and (ii) 37 vessels in the period time charter market (with original duration in excess of three months). Of the vessels chartered in the period time charter market, 11 have an original duration of more than two years. As of February 9, 2024, the average remaining charter duration across our fleet was 0.8 years.

As of February 9, 2024, we had contracted revenue of approximately $246.4 million, net of commissions, from our non-cancellable spot and period time charter contracts excluding the Scrubber benefit. Given the volatility associated with the Capesize charter market, as of February 9, 2024, all eight of our Capesize class vessels have been chartered in period time charters, six of which have remaining charter durations exceeding one year. As of February 9, 2024, the average remaining charter duration of our Capesize class vessels was 2.2 years and the average daily charter hire was $23,633, resulting in a contracted revenue of approximately $148.4 million net of commissions, excluding the additional compensation related to the use of Scrubbers. During the fourth quarter of 2023, we operated 45.93 vessels, on average earning a TCE of $18,321, compared to 44.00 vessels earning a TCE of $21,078 during the same period in 2022. Our contracted fleet employment profile as of February 9, 2024, is presented in Table 1.

15 Safety Management Overseas S.A., Safe Bulkers Management Monaco Inc., and Safe Bulkers Management Limited, each of which is referred to herein as “our Manager” and collectively “our Managers”.

Debt

As of December 31, 2023, our consolidated debt before deferred financing costs was $515.9 million, including the €100 million – 2.95% p.a. fixed coupon, non-amortizing, unsecured bond issued in February 2022, maturing in February 2027. As of December 31, 2023, our consolidated leverage16 was approximately 37% and our weighted average interest rate during the three-month period ended December 31, 2023 was 6.31% inclusive of the applicable loan margin. During the three-month period ended December 31, 2023, we made scheduled principal payments of $6.1 million, voluntary debt prepayments of $45.0 million and drawings of $25.5 million under a new loan facility, $28.0 million under a new sale and leaseback facility and $60.0 million under our existing revolving facilities. The repayment schedule of our debt as of December 31, 2023, is presented in Table 2 below:

Liquidity, capital resources, capital expenditure requirements and debt as of December 31, 2023

As of December 31, 2023, we had a fleet of 46 vessels, one of which was held for sale, and an orderbook of eight newbuilds. In relation to our orderbook, we paid $85.6 million and had $222.6 million of remaining capital expenditure requirements.

We had $98.8 million in cash, cash equivalents, bank time deposits and restricted cash, $131.5 million in undrawn borrowing capacity available under existing revolving reducing credit facilities, $55.5 million in undrawn borrowing capacity available under a loan facility and a sale and leaseback financing relating to two newbuild vessels. Our held for sale vessel has a gross sale price of $26.6 million and is expected to be delivered to her new owners in February 2024. Furthermore, we had contracted revenue of approximately $271.1 million, net of commissions, from our non-cancellable spot and period time charter contracts excluding the Scrubber benefit, and additional borrowing capacity in connection with the financing of eight unencumbered vessels and six newbuilds upon their delivery.

In relation to capital expenditure requirements of the eight newbuilds the schedule of payments was $81.8 million in 2024, $52.2 million in 2025, $60.8 million in 2026 and $27.8 million in 2027.

The scrap value17 of our fleet, excluding our held for sale vessel, was $341.3 million and the outstanding consolidated debt before deferred financing costs was $515.9 million, including the unsecured bond.

Liquidity, capital resources, capital expenditure requirements and debt as of February 9, 2024

As of February 9, 2024, we had a fleet of 48 vessels, one of which was held for sale, and an orderbook of seven newbuilds. In relation to our orderbook, we paid $73.3 million and had $206.1 million of remaining capital expenditure requirements.

We had $90.6 million in cash, cash equivalents, bank time deposits, restricted cash and $158.5 million in undrawn borrowing capacity available under existing revolving reducing credit facilities. Our held for sale vessel has a gross sale price of $26.6 million and is expected to be delivered to her new owners in February 2024. Furthermore, we had contracted revenue of approximately $246.4 million, net of commissions, from our non-cancellable spot and period time charter contracts excluding the Scrubber benefit, and additional borrowing capacity in connection with the financing of eight unencumbered vessels and seven newbuilds upon their delivery.

In relation to capital expenditure requirements of the seven newbuilds, the schedule of payments was $41.6 million in 2024, $52.5 million in 2025, $84.2 million in 2026 and $27.8 million in 2027.

The scrap value17 of the fleet, excluding our held for sale vessel, was $355.3 million and the outstanding consolidated debt before deferred financing costs was $535.3 million, including the unsecured bond.

Five Million Shares of Common Stock Repurchase Program

In November 2023, the Company authorized a program under which it may from time to time in the future purchase up to 5,000,000 shares of the Company’s common stock. Should the maximum number of shares of the Company’s common stock be purchased pursuant to the aforementioned program, it would represent approximately 4.5% of the shares of the Company’s common stock outstanding and 8.1% of its public float. The program does not obligate the Company to purchase shares of the Company’s common stock and the program may be modified or terminated at any time without prior notice. Any such purchases will be made in the open market in compliance with applicable laws and regulations, and purchases on the open market will be conducted within the safe harbor provisions of Regulation 10b-18 under the Securities Exchange Act of 1934, as amended. As of February 9, 2024, the Company had not purchased any shares of common stock under the aforementioned program.

Dividend Policy

On February 12, 2024, the Board of Directors of the Company declared a cash dividend on the Company’s common stock of $0.05 per share which is payable on March 19, 2024 to the shareholders of record of the Company’s common stock at the closing of trading on March 1, 2024. As of February 9, 2024, the Company had 111,617,369 shares of common stock issued and outstanding.

In January 2024, the Board of Directors of the Company declared a cash dividend of $0.50 per share on each of its Series C preferred shares (NYSE: SB.PR.C) and Series D preferred shares (NYSE: SB.PR.D) for the period from October 30, 2023 to January 29, 2024. The dividend was paid on January 30, 2024, to all shareholders of record as of January 19, 2024 of the Series C Preferred Shares and of the Series D Preferred Shares, respectively.

In November 2023, the Board of Directors of the Company declared a cash dividend on the Company’s common stock of $0.05 per share which was paid on December 14, 2023 to the shareholders of record of the Company’s common stock at the closing of trading on November 27, 2023.

In October 2023, the Board of Directors of the Company declared a cash dividend of $0.50 per share on each of its Series C preferred shares (NYSE: SB.PR.C) and Series D preferred shares (NYSE: SB.PR.D) for the period from July 30, 2023 to October 29, 2023. The dividend was paid on October 30, 2023, to all shareholders of record as of October 18, 2023 of the Series C Preferred Shares and of the Series D Preferred Shares, respectively.

The declaration and payment of dividends, if any, will always be subject to the discretion of the Board of Directors of the Company. There is no guarantee that the Company’s Board of Directors will determine to issue cash dividends in the future. The timing and amount of any dividends declared will depend on, among other things: (i) the Company’s earnings, fleet employment profile, financial condition and cash requirements and available sources of liquidity; (ii) decisions in relation to the Company’s growth, fleet renewal 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.

War in Ukraine

As a result of the war between Russia and Ukraine that commenced in February 2022, the US, the EU, the UK, Switzerland and other countries and territories have announced unprecedented levels of sanctions and other measures against Russia and certain Russian entities and nationals. We intend on complying with these requirements and addressing their potential consequences. While we do not have any Ukrainian or Russian crews, our vessels currently do not sail in the Black Sea and we conduct limited operations in Russia, we will continue to monitor the situation to assess whether the conflict could have any impact on our operations or financial performance.

Trade disruption in the Red Sea

Following attacks on merchant vessels in the region of the Bab al-Mandab Strait and the Gulf of Aden at the southern end of the Red Sea, there is disruption in the maritime trade towards the Mediterranean Sea through the Suez-Canal. As a result we have diverted our fleet from sailing in the specific region. While our vessels currently do not sail in the Red Sea, we will continue to monitor the situation to assess whether the trade disruption could have any impact on our operations or financial performance.