Diana Shipping 4Q15 Earnings Call Notes

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Diana Shipping’s (DSX) CEO Simeon Palios on Q4 2015 Results

M&A is not attractive in this industry at this time because you can buy the assets that you want

“As we have said in the past the consolidation in our industry is not such an attractive opportunity, you can understand that you can buy cheap assets out of the market instead of buying a company that probably has vessels that you don’t want. Also the due diligence is getting more and more difficult especially nowadays, so M&A is not very attractive proposition for anyone or I would rather say only for those that they want to be safe, but we do not consider that as an attractive opportunity for our company.”

We don’t think this cycle lasts as long as the 80s recession because banks are acting more quickly

“we don’t really see as I mentioned earlier that this recession lasting the five plus a years that 1980s recession last and we say this because of the ability to take ship to demolition and at the same time the attitudes of banks which tend to become much quicker much faster than they used to in the old days. The only difference here now that we have with further below interest rate, which make banks more patient to a certain degree and more reluctant to arch for the border to send ships to scrap yards if the ships are of a certain age. But we’re confident the things are going to happen faster in spite of what I just said, because ships will be scrapped very quickly and in larger, larger quantities. ”

There’s a lot of surplus that needs to be taken out in the Panamax sector

“The problem is that there is a lot of surplus to be taken out in the Panamax sector in particularly the Ultramax sector which is competing the Panamax sector for certain cargos, it looks pretty awful, it tied between various specific for overall bulk carriers.”

We can’t go much farther down on earnings, but we’re not near the end of recession yet

“we have to be ready for a good number of quarters there of weak earnings. We can’t go much further down on the earnings, as we agreed, but at the time that these earnings will remain low that [Indiscernible] hopefully as I said less than 1980s, but we’re not near yet at the end of recession.”

Interest rates have changed the equation

“Really they’re not a lot of differences, but Stacy was right in mentioning the interest rate because don’t forget as those days the interest rate was almost 23% or even higher and today it’s almost zero. So that is a huge difference, which makes the lagging effect between the chartering graph and you say in terms of graph come to a shorter as it totally points much quicker, that is quite it.”

There are so many more shipyards today able to bring vessels to market

“Don’t forget that the biggest shipyards in the world in 2000 was Hyundai able to build 58 vessels per year, which was, every week one vessel and we thought it was huge. Today there are so many yards who are capable of building more vessels. And that also changes the forces which will bring the [indiscernible] a different market, provided of course on this will be wise to not accept ordering again.”

It’s also different than the 80s because recommissioning costs will be higher

“I think Stacy mentioned that the numbers, in his little presentation, which is not all that much today. The difference so between the lay-up tonnage in the 80s and today is that the quality of the vessel of the 80s is completely different from today. Today when you lay up a vessel you may have a problem in re-commissioning the ship because of the technology involved”

Ioannis Zafirakis

We’re focused on survival but need to take entrepreneurial risk as well

“Yes, you see the most important number one factor that we have to worry about the surviving and we pay a lot of attention in giving to the company the appropriate breathing space to do that. We think that we have done a very good job there and if there is also the ability of the company to make some best decision as well. Without a danger a lot the survival period of the company; we are there to do it. You have to understand that we have to take some entrepreneurial risk as well

Lack of maintenance from other companies is good for the long term

“Certainly in bad time, people cannot afford to properly maintain their vessels, companies cannot afford to maintain their vessels properly and this is a determent of the quality or the useful life of the vessel. And eventually this is one of the factors why the market stands positive at same point where you have a lot of scrapping of down grade vessels, really bad condition vessels”

Andreas Michalopoulos

The market turns when nobody believes it will

” the market turns when nobody believes is going to turn, but we will do everything we can to make sure that we will be there where the market turns, when the time comes.”

The debt level we have is what’s necessary to earn a proper return at this point in the cycle

“Fotis, as we said earlier we are entrepreneurs and we would like to produce a nice return for our shareholders eventually. Taking positions as the lower part of the cycle is the best thing we have done up to now. Having invested as you said having vessels more than 20 vessels at the lower part of the cycle. It means that this is very, very profitable that it will create lots of value for our shareholders from the moment the market turns. The safe level of money today is what we having in our balance. After a year from now, it maybe a lower number and it has to be a lower number. And again, we have to say that we are here to have an entrepreneurial reach in order to produce a nice return. If we were not ship owners, we wouldn’t have done this. We are very, very happy with our debt level at the moment, because being at the absolute bottom of the market, having the debt level that we have, we continue to be the most appropriate debt level to have in order to produce nice return.”