Earnings call transcript: Safe Bulkers Q4 2024 misses EPS forecast

Safe Bulkers Inc . (NYSE:SB) reported its fourth-quarter 2024 earnings, revealing a slight miss on the earnings per share (EPS) forecast. The company’s EPS came in at $0.15, just below the forecasted $0.16. Despite this, Safe Bulkers reported revenue of $71.5 million, surpassing the expected $70.95 million. The company maintains impressive gross profit margins of 64.46% and trades at an attractive P/E ratio of 4.12. Following the announcement, the company’s stock price experienced a modest increase of 1.48% in after-hours trading, closing at $3.69.

According to InvestingPro analysis, Safe Bulkers currently appears undervalued, with multiple indicators suggesting potential upside. InvestingPro subscribers have access to 10 additional key insights about the company’s financial position and growth prospects.

Key Takeaways

• Safe Bulkers’ Q4 2024 EPS was $0.15, slightly below the forecast of $0.16.
• Revenue exceeded expectations, reaching $71.5 million.
• Stock price rose by 1.48% in after-hours trading.
• The company declared a $0.05 dividend per common share.
• Safe Bulkers continues to focus on fleet decarbonization and expansion.

Company Performance

Safe Bulkers reported a decline in its adjusted EBITDA and net income for Q4 2024 compared to the same period in 2023. Adjusted EBITDA fell to $40.7 million from $50.7 million, while net income decreased to $19.4 million from $27.6 million. The company has maintained a strong liquidity position with $276 million and a leverage ratio of 35%. InvestingPro data shows the company’s current ratio stands at 1.91, indicating liquid assets exceed short-term obligations, though the company operates with significant debt of $536.64 million.

Financial Highlights

• Revenue: $71.5 million, surpassing the forecast of $70.95 million.
• Adjusted EBITDA: $40.7 million, down from $50.7 million in Q4 2023.
• Net Income: $19.4 million, down from $27.6 million in Q4 2023.
• EPS: $0.15, below the forecast of $0.16.
• Dividend: $0.05 per common share.

Earnings vs. Forecast

Safe Bulkers reported an EPS of $0.15, missing the forecast of $0.16 by approximately 6.25%. The revenue, however, exceeded expectations by $550,000. This mixed result reflects the company’s ongoing challenges and opportunities within the dry bulk shipping market.

Market Reaction

Following the earnings release, Safe Bulkers’ stock rose by 1.48%, reflecting investor confidence despite the slight EPS miss. The stock remains within its 52-week range, with a high of $6.33 and a low of $3.31, suggesting room for growth as market conditions evolve. The company offers an attractive dividend yield of 5.42%, significantly higher than its 5-year average of 3%.

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Outlook & Guidance

Looking ahead, Safe Bulkers anticipates a softer trade market in the coming quarters but remains committed to fleet decarbonization and expansion. The company has projected a slight decline in fleet speed due to environmental regulations but continues to invest in fleet renewal and upgrades. With an overall Financial Health Score of "GOOD" from InvestingPro, the company appears well-positioned to navigate market challenges while maintaining its strategic initiatives.

Executive Commentary

Lucas Bompadis, President of Safe Bulkers, stated, "We remain true in our commitment to expand by building a resilient company." Constantinos Adamopoulos, CFO, added, "Our strong liquidity and comfortable leverage will enable us to expand the fleet."

Risks and Challenges

• Potential decline in global dry bulk demand, expected to fall by 1% in 2025.
• Ongoing environmental regulations impacting fleet speed and operations.
• Fluctuations in asset values, with recent months seeing a 15-25% price reduction.
• Macroeconomic pressures, including China’s and India’s GDP growth forecasts.

Q&A

During the earnings call, analysts questioned the flexibility of Safe Bulkers’ share buyback program and the trends in asset values. The company acknowledged recent asset price reductions but expects stabilization in the near future.

Full transcript - Safe Bulkers Inc (SB) Q4 2024:

Conference Operator: Thank you for standing by, ladies and gentlemen, and welcome to the Safe Boker’s conference call and fourth quarter twenty twenty four financial results. We have with us Mr. Polis Hajioanu, Chairman and Chief Executive Officer Doctor. Lucas Bompadis, President and Mr. Constantinos Adam Uplis, Chief Financial Officer of the company.

At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. At which time, if you would like to ask a question, please press star one on your telephone keypad and wait for your name to be announced. Following this conference call, if you need any further information on the conference call or the presentation, please contact Capital Link at (212) 661-7566. I must advise you that this conference is being recorded today.

The archived webcast of the conference call will soon be made available on the Safe Bocals website @www.safebocals.com. At this time, I’d like to turn the conference over to Doctor. Lucas Bompadis. Please go ahead, sir.

Lucas Bompadis, President, Safe Bulkers: Good morning to all. I’m Lucas Barbares, President of Safe Borkers, and I’m welcoming you to our quarterly financial results. We are having pre charter rates for environmentally upgraded vessels and our Phase three newbuilds and benefited from our Capes that have period time charters. It seems that our policy for renewing our fleet and upgrading the existing vessel works and offers additional personal financial advantages. The charter market weakened during the fourth quarter of twenty twenty four, and this impacted our revenues and profitability.

In this environment, our company maintains a strong capital structure with acquired liquidity with a leverage of about 35%, and we have declared a $0.05 dividend rewarding our common shareholders. We remain focused on capital allocation to our new build program, on improving our operational efficiency and the environmental footprint, and all our actions are targeted to increase the growth of our shareholders. Following the comparison, we have reviewed the forward looking statements presented in Slide two, let’s begin with a market update in Slide four. The Cape The Cape market segment has been moving downwards throughout the quarter. All eight of our Capes are presently period chartered with an average remaining chartered duration of over two years and an average daily charter rate of $22,000 This provides us with a considerable degree of cash flow visibility, topping $145,000,000 in contracted revenue from Capes alone.

On the Panamax front, the chartered market stands soft at 9,000 with signs of improvement. Moving now to Slide five, we will present an overview of the CRB commodity index fluctuation in basic commodity prices. The rise in tariffs elevate policy and salary and policy considerable downsizing for global growth and against this inflation. There are rising fears of higher for longer interest rates from central banks and lower investments globally in the context of this policy uncertainty. For our segment, we anticipate a relatively softer trade market over the following quarters as supply grows faster than demand, and we expect an increasing focus on the existing fleet decarbonization and on NxRPs and newbuilds.

The decision of the MEC eighty three in April about the global fuel standard and the levy will detect the pace towards decarbonization. The global GDP growth expectations for 2025 and 2026, as reflected in the IMF general forecast, call for a growth around 3.3% in the coming years, accompanied by a gradual control of inflationary pressures. According to Billco, the forecasted global drybulk demand will fall by 1% in 2025, followed by growth of 2.5% in 2026, with minor bulks being the best performing sector. China’s slower growth may hinder demand for drybulk commodities like iron ore and coal. Iron ore shipments are estimated to grow slightly, but with Chinese demand and increased recycled steel usage are anticipated to restrict growth.

Coal shipments may drop by about 2.5%, utilizing renewable energy in Asia and increased coal production in China and India. Grain shipments are predicted to rise by 2%, but main supply remains tight, particularly for Ukraine, although this might change if a piece three pick is achieved during 2025. Minor bulk shipments, including bauxite, are expected to be a key growth driver as demand increases due to the area of transition. The IMF project projects China’s GDP growth to be 4.6% in 2025 and four point five percent in 2026, signaling a faster than expected slowdown in consumption amid delayed stabilization in the property market and persistently low consumer confidence. Also, this projection reflects carryover from 2024 and the digital package announced in November largely offsetting the negative effect on investment from heightened trade policy uncertainty and property market drag.

Trade buyers, tariffs and external pressures could limit China’s growth potential. The weakness in the steel and construction sector is expected to reduce demand for commodities, such as iron ore. India, on the other hand, continues to perform as expected this project to experience the fastest growth among major economies with a forecasted 6.5% GDP increase in 2025 and 2026. Increased renewable energy and industrial growth will be key drivers for India’s economic momentum, which expanding domestic market and manufacturing sector may continue to contribute positively to the dry bulk demand with infrastructure investments playing a vital role. Let’s proceed now to examine the supply side dynamics in Slide six.

Supply growth is expected to outpace demand, exerting pressure on oil trades. The drybulk fleet is projected to grow by about 2.8% on average in 2025 and in 2026, due to stable new deliveries and increased recycling with Panamax vessels comprising the largest share. The order book now stands at about 10.6% of the current fleet and renewable charges have slowed. Asset prices weakened during the second half of twenty twenty four and are projected to weaken further and the second half ship prices may fall in line with freight market. Insiding volumes are anticipated to rise as weaker market conditions could prompt the retirement of older vessels.

Only 30% of ships capacity in the outlook will be capable of using alternative fuels upon delivery, and an additional 14% will be ready for future conversion. Out of the capable ships, 41% may use LNG, 37% methanol and 23% are expected to use ammonia. We believe that energy efficient designs will have an abundance in the coming years. And we expect the environmental emissions regulations are going to drive 1% fall in fleet speed in 2025 and in 2026, affecting supply by about the same percentage. Currently, about 25% of existing global fleet is older than fifteen years.

Safe market’s fleet now counts 11 Phase three vessels on the water, all delivered after 2022. In addition, we have 11 echo ships, which have superior design efficiencies compared to the past. 80% of our fleet comprises of Japan means built vessels, surpassing the global average of 40% with our average fleet aging about ten years old. We will continue to become even more commercially competitive as we have an order book of seven more Phase III vessels, place the prices well below the prevailing market to be delivered to us within the next two years. Overall, our fleet today is fundamentally upgraded and commercially more competitive than two years ago, underscoring our commitment to sustainable business.

The increasing impact of fleet aging and stringent environment regulations will position our fleet favorably to compete within the stringent greenhouse gas targets. Moving to Slide eight for our company update, we will present an overview of our green fleet advantage. The breakdown is presented in the top right graph, comprising of 46 vessels with 24 having undergone environmental upgrades, 11 being Phase 20 vessels and 11 being ECO vessels. The bottom graph presents our fleet renewal strategy with the investment of 14 older vessels, acquisition of seven secondhand vessels, delivery of 11 Phase III newbuilds and an order book comprising of seven more Phase III newbuilds, resulting to a relatively stable ten year average fleet age over the past four years, as clearly presented in Slide nine, a trajectory of fleet expansion serving as a testament to our commitment towards sustainability. In Slide 10, we will assume SafeAmerica’s debt profile for the next couple of years, which stands at very comfortable levels throughout that period with a deeper zoom for our CapEx spending.

As of 12/31/2024, our consolidated debt before deferred financing costs stood at €545,000,000 including the €100,000,000 unsecured bond at $2.95 fixed coupon maturing in February 2027. Our consolidated leverage stands at a comfortable 35%, and our net debt per vessel stood just below $9,000,000 for another eight fleet of just ten years old. Concluding the company update in Slide 11, we will present PagSegakis’ key attributes, such as our sterling sixty five year track record, a robust management ownership alignment, comfortable leverage of 35%, our ample liquidity of $276,000,000 our significant contracted backlog of $2.00 $5,000,000 our green fleet advantage evidenced by 7.4% decrease in fleet AR GHG emissions and by outright BMS standards management system implementation. We remain true in our commitment to expand by building a resilient company, owing a quality and competitive fleet strategically positioned to leverage on the regulatory landscape and create long term growth for our shareholders. I now pass the floor to our CFO, Kostadovich Adamopoulos for our portfolio financial overview.

Kostadovich, Kostadovich, the

Constantinos Adamopoulos, Chief Financial Officer, Safe Bulkers: floor is yours. Thank you, Lucas, and good morning to everyone. During the fourth quarter of twenty twenty four, we operated in a weaker charter market environment compared to the same period in 2023. We decreased revenues due to lower charter hires, decreased earnings from standard fitted vessels and increased operating expenses. Let us focus now on our liquidity, cash flows and our capital structure as presented in Slide 13.

We maintain a comfortable leverage of 35%. Our debt of $545,000,000 remains comparable to our fixed stock value of $331,000,000 although our debt is just ten years old. Our rate average interest rate of our debt stood at 6.12 for our consolidated debt with a portion of €100,000,000 being fixed at 2.95% coupon in unsecured five year bond. We have already paid $84,000,000 or 29% for our CapEx in relation to our outstanding order book. Our liquidity and capital resources stand strong at approximately $276,000,000 which together with a contracted revenue of about $2.00 $5,000,000 makes a total of $481,000,000 and this is more than doubling our outstanding CapEx of $2.00 $6,000,000 of newbuilds, providing flexibility to our management in capital

Lucas Bompadis, President, Safe Bulkers: allocation. Furthermore, we

Constantinos Adamopoulos, Chief Financial Officer, Safe Bulkers: have additional borrowing capacity in relation to those seven newbuilds upon their delivery. We strive to ensure that the capital expenditures is adequately covered by our contracted future revenues, fortifying our balance sheet towards a trajectory of sustainable growth. Moving on to Slide 14 with our quarterly financial highlights for the fourth quarter of twenty twenty four compared to the same period of 2023. Our adjusted EBITDA for the fourth quarter of twenty twenty four was $40,700,000 compared to $50,700,000 for the same period of 2023. Our adjusted earnings per share for the fourth quarter of twenty twenty four was $0.15 This calculated on a weighted average number of 106,400,000.0 shares in comparison to $0.25 during the same period in 2023 that calculated on a weighted average number of 111,600,000.0 shares.

In Slide 15, we present an overview of our quarterly operational highlights

Lucas Bompadis, President, Safe Bulkers: for the fourth quarter of

Constantinos Adamopoulos, Chief Financial Officer, Safe Bulkers: twenty twenty four compared to the same period of 2023. During that quarter, we operated 45.9 vessels on average, earning an average PCE of $16,521 in comparison to 45.93 vessels, earning an average PCE of $18,321 The company’s net income

Lucas Bompadis, President, Safe Bulkers: for the fourth quarter of

Constantinos Adamopoulos, Chief Financial Officer, Safe Bulkers: twenty twenty four was $19,400,000 compared to net income of $27,600,000 during the same period in 2023. Concluding our presentation, we would like to highlight that based on our financial performance, the company’s Board of Directors declared a $0.05 dividend per common share. We would like to emphasize that the company is maintaining a healthy cash position of about $130,000,000 as of 02/14/2025 another $165,000,000 in available revolving credit facilities a combined liquidity and capitalized resources of $295,000,000 Furthermore, we have contracted revenue from our non cash flow and period time charter contracts of almost $200,000,000 net of commissions and default scrubber revenue and additional borrowing capacity in relation to seven new bids upon their delivery. We believe our strong liquidity and our comfortable leverage will enable us to expand the fleet, be a resilient company and to create long term prosperity for our shareholders. This concludes our presentation.

We are now ready for the Q and A session.

Conference Operator: Thank you. We will now conduct a question and answer session. Our first question comes from Omar Nacht with Jefferies. Please proceed.

Omar Nacht, Analyst, Jefferies: Thank you. Hey, guys. Good afternoon. Thank you for the update. I guess just a couple of questions on my end and maybe just perhaps first on the share buyback.

You announced the $5,000,000 program in November. You went to work fairly quickly buying $1,500,000 but then in December you went ahead and terminated it. So just want to get a sense, is there a trigger maybe that kick started the buyback program and then was there something that caused you to terminate it outright? Or is it just the way Safe Bulkers tend to do its share buyback?

Lucas Bompadis, President, Safe Bulkers: Look, from time to time, we are doing buyback programs, especially when we feel that our market, the price of the stock market is very low. And we execute always a portion of it. So this has happened the past, it can happen again in the future. We believe really that the asset the valuation of our company is quite low compared to the net asset value, especially because we have made all these investments since the last two years. We have upgraded our fleet.

We have renewed our fleet. We have new builds. And we offer to our shareholders a solution where when they invest on us, they have the ability to invest in a company which basically has a better operational and financial prospects with the same number of ships because of Iran with a lower fuel consumption and advanced energy efficiency. I may ask what Lucas said. Sometimes, the company evaluates a program also related to the current trade market.

So if the company feels that the current trade market is not performing or it’s too much weaker than what we thought it would be, we may slow it down or we may stop it for a quarter and continue later. So all these parameters are assessed on a daily basis as the program develops and as the market develops. When we have more clear side of market, the program can always be reinsafe in the next quarter, I think.

Omar Nacht, Analyst, Jefferies: Okay. So that makes sense then in terms of looking at the share price versus NAV at a vacuum isn’t the only decision. If the freight market is there and supports positive cash flow, then that would be a trigger given that the market is softer so far.

Lucas Bompadis, President, Safe Bulkers: Okay. And then When you have freight market approaching or reaching all expenses like it did late in December, and you consider the buyback program, but it could wait for a couple of months.

Omar Nacht, Analyst, Jefferies: Got it. That’s clear. Yes. And maybe just a follow-up, just in terms of kind of the underlying NAV itself and what we’ve been seeing in asset values. Can you give just a sense from your perspective?

It feels that even though the freight market has softened here the past two or three months, asset values at least from what we’re seeing quoted by the various brokers seem elevated. There hasn’t really been much pressure. Would you say that the values are firm? Or is there just simply not enough business being transacted to have a good sense?

Lucas Bompadis, President, Safe Bulkers: Yes. Look, the market has dropped a lot in December and January. And prices have definitely been affected in we can say that all the ships have been affected by as much as 25%, whilst younger ships are around 15%. But at the same time, there are many orders that have made a lot of money, especially in other categories like tankers or on dealerships. But they’re always looking to buy in a cheaper sector, which is at the moment the drybulk sector.

So I don’t think that the prices have a long way to go unless the market, the trade market continues to slide. So if the trade market stabilizes as it is during the last few weeks, I don’t think that the parties will have a great deal of way to go down, maybe another 5%, ten %. And at the same time, when buying power is around, especially in the Greek market, I believe that prices will strengthen in the second half of this year, not a lot, but on the current levels.

Omar Nacht, Analyst, Jefferies: Okay. Very good. Well, thank you. That’s it for me. Thank you.

Conference Operator: Thank you. At this time, I would like to turn the call back over to management for closing comments.

Lucas Bompadis, President, Safe Bulkers: Okay. Thank you very much for attending this conference call that we had today for the Q4 and year end financial results. And we are looking forward to discuss again with you in the following quarter. Thank you very much.

Conference Operator: Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.

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