Safe Bulkers, Inc. Q3 FY2024 earnings call

• The quarter was good compared to the same quarter last year, but the charter market is softening with geopolitical uncertainties.
• Focus on capital allocation towards newbuilds program, operational efficiency, and rewarding stockholders with a $0.05 per share dividend.
• Cape market: all 8 Capes period charted, average remaining duration 2.6 years, daily rate $23,600, contracted backlog over $175M from Capes.
• Panamax market: soft at low $10,000.
• Global disinflation, geopolitical tensions, and IMF forecasts impact dry bulk demand and growth expectations.
• Fleet details: 11 Phase 3 vessels on water, 23 environmentally upgraded, 11 eco-vessels; average fleet age 9.8 years, 80% Japanese-built.
• Debt profile: comfortable level, consolidated debt $500M as of Sept 30, 2024, leverage 32%, net debt per vessel below $9M.
• Q3 2024 financial highlights: adjusted EBITDA $41.3M, adjusted EPS $0.16, net income $25.1M.

The Cape market segment was volatile during the quarter. All eight of Safe Bulkers' Capes are period charted, with an average remaining charted duration of 2.6 years and an average daily rate of $23,600, providing over $175 million in contracted revenue backlog from Capes alone. The Panamax charter market is soft at low $10,000. The fleet counts 46 vessels, with 23 having undergone environmental upgrades, 11 being Phase 3, 11 being eco, 80% Japanese-built, and an average age of 9.8 years. Cape segment contributed significantly to revenue with its contracted backlog, while Panamax faced softer market conditions.

• Committed to newbuilds program with seven more Phase 3 vessels on order, to be delivered in next two years.
• Dividend of $0.05 per share declared.
• Comfortable leverage level (32%) is sufficient given fleet age and future newbuilding deliveries.

• Geopolitical uncertainties (Middle East, Red Sea, Ukraine tensions).
• Softening charter market, particularly for Panamax vessels.
• China's economic challenges including weak domestic demand, real estate crisis, potential deflation.
• Trade barriers and external pressures limiting growth potential.
• Fleet aging and impact of stringent environmental regulations.

Q: You outlined that consolidated leverage is 32% at the end of the quarter. We wanted to know, are you comfortable at this level or are you striving to lower your debt? Is the goal to be debt free? Why or why not?

A: Yes. This is a very comfortable level. We don’t plan to reduce it much further. We take newbuilding deliveries in the next three years. So this ratio or anything below 40% is good enough, even if it raises to 45% or 50% in later years, it’s still a very comfortable ratio given the age of the fleet.

Q: Panamax spot rates have lagged in comparison to other dry bulk classes, such as the Capes and Supramaxes. Could you please provide some color as to why there might be a discrepancy there?

A: The company owns Panamaxes and Kamsarmaxes, post-Panamaxes and Capes. There is not one category that you can decide to expand on. It’s opportunistic if you will expand. The company will expand in Kamsarmax or Capes in the future. It remains to be seen according to opportunities that appear. Capesize vessels are not that many and their market is even in periods of low market. They have been doing well in recent years because of demand from China. And of course, in the future if there is opportunity to expand in that sector of the market, we will do so. But we need to see lower prices to do that.