Safe Bulkers 2026 Q3 Earnings Call

Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers Conference. This conference call is being recorded.

financial results. We have with us Mr.

Polys Hajioannou, Chairman and Chief Executive Officer, Dr. Loukas Barmparis, President, and Mr. Konstantinos Adamopoulos, Chief Financial Officer. 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 1 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 on 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 Bulkers website, www.safebulkers.com. Many of the remarks today contain forward-looking statements based on current expectations. Actual results may differ materially from those results projected from those forward-looking statements. Additional information concerning factors that can cause the actual results to differ materially from those in the forward-looking statements is contained in the 3rd quarter 2026 earnings release which is available on the Safe Bulkers website. Again, www.safebulkers.com. I would now like to turn the conference call over to one of your speakers today, the Chairman and CEO of the company, Mr.

Polys Hajioannou. Please go ahead, sir.

Hello, it's me, Loukas Barmparis, President of Safe Bulkers, that I will do this presentation at the beginning and then welcome you all at this quarterly and 9-month period results. We had a strong financial performance based on improved charter market conditions. Our adjusted EPS reached $0.31 in the 3rd quarter. quarter of 2026, more than doubled compared to the same period of 2025. Our board has declared an increased dividend to $0.09 per common share following our private placement of about €80.4 million to institutional investors in Euronext Athens in September to increase the liquidity of our stock in Europe. We have diversified our investor base and further strengthened our balance sheet, liquidity, and capital resources. Please be reminded that the total number of shares today is about 114 million, substantially lower compared to about 122 million shares prior to our buyback program. Following a comprehensive review of the forward-looking statements, uh, please present in slide 2, let's start our presentation with the company section in slide 4, where we always make a reference to our track record. Safe Bulkers draws on extensive experience gained through multiple market cycles with an interrupted presence in the dry bulk shipping sector. the last 7 decades with presence in 4 countries: Athens, Limassol, Monaco, and Geneva.

Our interests are closely aligned with those of our public shareholders through significant management ownership of about 44%. As a pure-play dry bulk shipping category, we provide worldwide seaborne transportation of major bulks including iron ore, coal, and grain, as well as minor bulks, serving some of the world's largest shippers. We have consistent fleet growth since our IPO. As shown in slide 5, for the last 5 years we have taken delivery of 16 Phase 3 new builds. Bringing our fleet size to 46 vessels. Key points are the extensive fleet— the extensive fleet growth plan of 8 more new builds on order until 2029. And the young modern fleet of 9.8 years average age while maintaining age stability through the fleet renewal program. Our net debt per vessel stands comfortably at $5.3 million per vessel. A successful course in the dry bulk sector is relied on 2 elements: the operational excellence and the successful asset play. Let's focus on our operational advantage as shown in slide 6. On the top graph, we present our improving daily time charter equivalent rate together with our relatively steady daily operating expenses. The improved TCE due to the prevailing market conditions is enhanced by the reduced fuel consumption of the fleet, as reflected by the 22% reduced carbon intensity index. since 2021. This is because our 16 newbuild vessels are by about 30% more efficient, and the environmental upgrades of 26 existing vessels improved their efficiency by about 10%.

All these vessels are traded in premium to the Baltic Exchange Index. 19 heavy-consuming vessels are equipped with scrubbers, thus they, they are able to burn the less expensive HFO compared to the very low sulfur fuel oil imposed by IMO since 2020. Benefiting of the price differential of the 2 fuels, which is about $150 today. Improved managerial procedures with implementation of dry BMS giving us commercial and financial advantage with selected large operators. Safe Bulkers was among the very few companies worldwide to agree to this level of operational standard of vessels being the first engaged in the 6th Blue Economy Act. 3rd point is our CII rating of zero vessels on the rating of B category, which would require additional topics in relation to asset play as reflected in slide 7. We point out the timing of newbuild ordering in relation to market conditions. Today, the, the new orders can be delivered only after 2030 or 2031 at very high prices. We have already taken delivery of 16 newbuilds, which have provided us with the ability to renew our fleet by selling 19 older vessels, while still our order book is 8 additional until 2020. 29. We have built a resilient company as seen in slide 8 with a comfortable leverage standing below 30% as of quarter end, backed by $319 million in total cash and cash equivalents, bank time deposits, and restricted cash, and $196 million available under revolving credit facilities, totaling a significant firepower of about $510 million.

We also present our balance sheet analysis, noting that assets are presented in their book values. We maintain a healthy, resilient balance sheet supported by a robust equity base. Moving on to our debt profile and financial health, as presented in slide 9, we stand strong with a total liquidity capital resources and revenue backup just shy of $700 million. For €567 million debt, including our unsecured €100 million euro bond. Let's move to slide 10. We have declared our 20th consecutive quarterly dividend and increased it to 9 cents, supported by operational cash flows. At the same time, our free cash flow continues to finance our utility programs. And we do have an active 10 million share repurchase program. The returns to shareholders include €109 million paid in common dividends and €78 million paid in common shares repurchases. since 2022. Reflecting our consistency in generating sustainable returns across market fluctuations.

Concluding the company's update, in slide 11, we present the historic development of our dividend versus earnings, noting that they improved. market conditions, the last quarters provide us with opportunity to increase once more the quarterly dividend. It is important to highlight that while enhancing shareholder returns through a more rewarding distribution policy, Safe Bulkers remains committed to allocating a substantial portion of its cash flows to its new building program. I now pass the floor to our co-CFO, Thanasis Adonakis, for the buyback market review. Thanasis, the floor is yours. Let's proceed to examine the supply-side dynamics in slide 13. We present 2 scenarios of ship supply growth with state of Hormuz closed and state of Hormuz open. Order book now stands at about 15.4% of the fleet, almost half of which is comprised of Capes. The forecast for dry bulk supply as per BIMCO is to grow 3 to 4% in 2026 in closed state scenario versus 4 to 5% growth in open. For reference, about 0.5% of dry bulk capacity is currently within the Gulf. BIMCO expects sailing speed will fall up to 1% in 2027 if the Strait of Hormuz remains closed. Asset prices remain elevated in line with the current Brent market.

Currently, only 10% of ship capacity in the dry bulk order book will be able to use alternative fuels upon delivery. Thus, the dual fuel order book remains small in the dry bulk segment. It is important to note that 10% of the dry bulk fleet is above 15 years old, which means these vessels will face increased repairs, maintenance expenses, additional inspections, restrictions, and certain associated costs. Let me point out here that in our total order book of 24 phase 3 vessels placed since 2021, we had 2 fuel— 2 dual fuel newbuilds on order. One of which we took delivery of just a few days ago, and the second one is due for the first quarter of 2027. These vessels are able to operate with fossil fuels until alternative fuels become available and economically viable, hedging for the carbon intensity-related environmental issues.

Safe Bulkers fleet now counts 16 phase 3 vessels on the water, all delivered from 2022 onwards. Our average fleet age of 9.8 years is more than 2 years younger than the global fleet average age of 12.5 years, strengthening our competitive position in terms of operational performance and fueled with SOx.

Moving on to slide 14, we present an overview of the demand in basic dry bulk commodities trade. The global GDP growth expectations for 2026 and 2027, as reflected in IMF's October forecast, call for a growth around 3.5% in the coming years. accompanied by persistent inflationary pressures. BIMCO forecasts a global dry bulk demand growth of about 1.5% in 2027 on the closed trade scenario. Iron ore demand is expected to grow up to 2.5% in 2027 in open or loose scenario. However, Chinese inventories may soften import demand in 2027. Coal demand is projected to decline 1 to 2% in 2027. Grains remain a strong-performing major bulk. However, the Black Sea trade disruption and China's policies pushing towards greater self-sufficiency and reduced soy meal usage present a downside risk. Minor bulks growth in an open or loose scenario is expected to be quite strong. Energy transition-related orders remain supportive. Fertilizer demand continues to be a key factor affecting the August closing. Now, China remains a central swing factor for the dry bulk market. Strong export performance continues to provide a counterbalance to subdued domestic demand, which remains constrained by the ongoing property sector crisis. and manufacturing overcapacity. China's GDP is forecasted to grow by 4.5% in 2026 and 4% in 2027.

With higher global oil prices, persistent trade uncertainty, and structural headwinds expected to weigh on economic activity. Although a truce has been reached, in the US-China trade tensions, these remain a key source of global economic uncertainty.

On the energy front, the Chinese government has issued directives to accelerate the resumption of idle coal mines and increase domestic coal production, reflecting its continued focus on energy security. In the longer term, however, China's gradual transition away from fossil fuels in electricity generation alongside the expansion of renewable energy capacity is expected to reduce its dependence on import energy and reshape its energy-related dry bulk trade flows. India, with a forecasted 7% GDP increase in 2026 and for 2027, is projected to experience the fastest growth among major economies. Its expanding domestic market, with infrastructure investments playing a vital role in manufacturing sector, continue to contribute positively to the dry bulk demand. Japan's transition from prolonged deflation to sustainable growth includes targeted fiscal stimulus and public investment to boost demand and sustain economic momentum. Japan is projected at 0.7% GDP growth in 2027, with fiscal support measures partly cushioning the impact from higher energy prices. and to stabilize as the energy shock dissipates, the monetary policy gradually normalizes.