Star Bulk Carriers 1Q17 Earnings Call Notes

Petros Pappas

Continued demolition is necessary to balance the market

“Continued absence of ordering and acceleration of demolition are required to place a cap on fleet growth for 2019, as 2018 is already almost closed at low prospective delivery levels. That way, the foundation will be laid for a sustainable market upturn to increase pace. Thereafter, and assisted by the positive scrapping and speedy reduction impact of the impending environmental regulations, the shipping markets will finally find their way to a strong recovery.”

Diana Shipping 1Q17 Earnings Call Notes

Stasi Margaronis

Dry Bulk shipping market is back in balance

“So what we can say now is that we are not able to tell you whether we’re going to see another 2007, 2008 market developing. All we are saying is that it appears that we are at a point of balance between supply and demand. And depending on the strength already factors affecting this balance, the market is going to move rather up or down. We hope it will not go down, but it might. The chances are that unless something totally unpredictable takes place, it will move gradually upwards. So that’s all we can say at this point. We are just watching the market quarter after quarter. And this might be the first quarter where we can say with a degree of certainty that we are at the point where demand and supply have reached balance.”

Ioannis Zafirakis

This is a very very important development

“Ben, this is very, very important. It is one of the most important developments we’ve had the last seven years or so that we are in a position to say with a certain degree of certainty that we are in a balancing stage. This is very important because the previous years, a lot of time was wasted trying to see what the next period is going to be by calculating forecasted demand and supply, coming up with a number, which had no effect whatsoever or even the opposite effect than anticipated simply because we were not in a balancing stage and we kept saying that. I don’t want to repeat myself. But we were at the stage that we had, let’s say, exaggerating, 1,000 extra vessels. And people were talking about a positive effect of 50 vessels. And they were expecting the market to improve from 1,000 to 950 extra, the market to improve. You know that this never is going to happen. But if we can say with certainty that we are in a balancing stage, then the forecast, if they are correct, that will have an effect. This is what we are saying.”

We have managed to buy at the lowest part of the cycle

“We have managed to buy at the lowest – the lower part of the cycle as many vessels as possible. We have managed to leverage up the company to the maximum without having to restructure. And if the market improves as we expect the market to improve from now onwards, all the benefit of that is going to go to our shareholders and not to anybody else and especially not to those people that they offered a restructuring to the companies, of course, taking most of the upside of the market. So what we expect to happen is that if and when we end up at the upper part of the cycle, the company most probably will – we will reintroduce a dividend and we will renew the flip, getting rid of the older tonnage. And most probably, we are going to continue exactly the same strategy as we’ve done in the upper part of the previous cycle and remunerating and rewarding our shareholders for having invested in our company. “

Diana Shipping 3Q16 Earnings Call Notes

Diana Shipping’s (DSX) CEO Simeon Palios on Q3 2016 Results

Anastasios Margaronis

If Trump’s criticism leads to action then the effects would be profound

“Macroeconomic developments now, the recent election in the United States has seen Donald Trump elected to the Presidency of the largest economy in the world. Some of the policies he has been advocating prior to his election are implemented. There are fears that the new era of protectionism will see global trade as a share of world GDP fall. Several trade agreements that have so far been criticized by the President elect. If his criticism will lead to actions then the effects on world trade would be profound.”

Outlook remains difficult, but recovery more likely than it was a few quarters ago

“All in all the outlook for the Panamax market remains difficult. Fleet capacity is projected to grow by around 1% in 2016 and 2017. However this slow rate of growth does not yet appear to be enough to help support a significant improvement in the market environment. Significantly more scrapping is required going forward to help bring equilibrium to the market sooner rather than later. All we can say with a reasonable degree of confidence with the dry bulk carrier market is that if the supply continues along the path it has been following for the last 18 months or so and further down the road demand growth picks up from present level the market is bound to eventually reach equilibrium. The prospect of such an important development has become much more likely now that it was a few quarters — than it was a few quarters ago but only few ships were being demolished and owners were still ordering new buildings in large numbers.”

$8000 per day rates give us the opportunity to go beyond 2018 without a problem

“any rate in the vicinity of an average of $8,000 it gives us the opportunity to end up well after the beginning of 2018 without having a cash problem. Let alone the fact that today as we speak you can fix a Capesize vessel at $11,200 for a year on a time charter basis with an 8 lakh charter and a Panamax at $8,000.”

Not modelling any further acquisitions

“The model that we used earlier describing our ability to sustain in that environment for till the middle of 2018 did not include any further acquisitions. However, depending on the charter these has assumptions above the charter rates that we estimate to receive in 2017 which possibly is having a low side but if the market showed signs of improvement we may consider investing $20 million let’s say for one or two vessels. Don’t forget that this acquisition is not burning any cash because if you buy a vessel full equity for example today, you don’t burn any cash with the existing time charter rates. But the cash flow position described earlier does not include any further acquisitions.”

We have a main shareholder who is going to participate in any equity offering

“The termination of discussions, it is because we are considering one year and a half as time that maybe sufficient not to need to raise equity for the company. And as regards the reason why we are resisting in issuing equity today is because it is not necessary and because we do not want to dilute the existing shareholders but certainly another thing that it should be clear to everyone is that — the main shareholder is going to participate in any equity offering if it happens after a year from today or a year and a half. And he is not — we are not resisting in diluting the shareholders and Mr. Palios. We are resisting in diluting the shareholders because even if it was to be an equity offering today Mr. Palios was going to participate.”

Ioannis G. Zafirakis

Explanation for stopping talks with lenders

Hi, this is Ioannis speaking. Let me start by saying that we initiated the coal story proactively and we took the decision to stop the discussions. The reason why the discussion were stopped it was because we were not getting anywhere although we had a good reference point. At the end of the day we couldn’t arrive into a meaningful result for everyone. So the same way we initiated as I said, the same way we stopped the discussions.

Don’t have a cash flow problem until the second quarter of 2018

“we have the power to sustain even worse charter rate scenario to date easily till we first — up to second quarter of 2018 before we have a cash flow problem. In the scenario where you run the numbers with existing charter rates then you go even after third quarter of 2018. So why should we be talking about an equity offering or some analyst talk about an equity offering.”

Star Bulk Carriers 1Q16 Earnings Call Notes

Star Bulk Carriers’ (SBLK) CEO Petros Pappas on Q1 2016 Results

Commodity prices appear to have reached bottom

” after more than two years of strong declines commodity prices appear to have reached the bottom during the first quarter of 2016.”

Some fundamentals improving in China

“We expect that the ongoing monetary in the system stimulus taking place in China will boost steel consumption in the medium-term. As a matter of fact house prices and building permits have been recording healthy increases during the first half of 2016. Furthermore, we find very encouraging that both iron ore and coal production in China are reported to have recorded strong declines during the first month of 2016.”

Scrapping could be slower in the second half of the year

“if you look at last year’s scrapping the way scrapping went last year there was a lot of it in the first half and much less in the second half. So, depending on people’s expectations we will also see how scrapping moves. I think that probably scrapping in the second half of the year will reduce in comparison to the first half, but it will depend a lot on how rates go, if rates are strong scrapping will slowdown.”

China will be importing coal from different locations

“Well, what we’re seeing is that Indonesia is supposedly going to cut exports by about 50% going forward because of needs for domestic consumption. We think that China has raised its bottom of — I mean the downside of Chinese coal imports have reached their bottom. And we think that China will be obliged to import this coal now mostly from South Africa, Australia and probably also Colombia especially with the new Panama Canal coming into play.”

A year from now the market for ton miles should be better than it is today

“Just one thing I want to say. I believe that in a year or a year and a half from now we will see a better market as far as ton miles are concerned in various sectors like coal as we already discussed, iron ore because we see that Brazil is going to be exporting many more tons probably more than 100 million tons starting as of mid ’17. And Australia has much less to export in addition to what it’s already exporting and that is a major factor in the market it’s more important than tons, ton-miles it should be more important than tones. And then we think that there is going to be much more trade in bauxite because Indonesia again is curtailing their exports in bauxite and we’d probably see it coming from Africa. And we think there is going to be more grain trade which by definition is long ton miles. So, we believe that the upturn of this market is going to start from that sector more than anything else”

Scrapping will be a key to a better market in 2018

“I think this year there is going to be more scrapping than last year I don’t know by how much. And oil prices are important because if it stays around $50 versus $30-$35 that we were seeing last year will probably contribute in slowing down vessel speeds. And we see China looking more towards infrastructure and we see more housing permits starting up, so we think that there are reasons why we should be looking at a better future. However, as we said more strain on ordering and more scrapping this is going to be the key of a better market in 2018. Thank you very much operator.”

Expeditors International (EXPD) Annual Report Highlights

Expeditors International (EXPD) is seeing the Chinese economy slow in real-time but says they are trying to making the transition to a consumer driven economy
 
Despite the general economic slowdown in China, it is still one of the fastest growing economies with massive capabilities and infrastructure. It is also increasingly becoming a consumer economy with a very large emerging middle class with wealth and a taste for imports. We believe that presents an opportunity for us as China becomes more than just an export market. We have done a great deal of work aligning origins and destinations on accounts that we target in China and have invested in building infrastructure that supports efforts to increase our import business and focus on customs clearance in China.”
Their biggest concern is slowing global trade
 
Our number-one concern is that global trade slows significantly, as it did across most markets during the financial crisis of 2008. While we did see slower market conditions in the second half of 2015, we have not seen signs of a return to the severity of the slowdown that we experienced during the financial crisis. Global markets are more interconnected than ever before, and a slowdown in one market can have ripple effects on other markets. While we serve a highly diversified base of customers and industries, which limits our exposure to any one area, we were not immune to the impact of the global market meltdown of 2008. But we have not seen signs of a return of those conditions thus far.”

Expeditors International (EXPD) Q1 2016 Earnings

Expeditors International (EXPD) CEO Jeff Musser says global trading is weakening

“We knew that comparing our 2016 results to our record year in 2015 would be challenging, especially when considering the current headwinds from slowing global trade.”

There is excess shipping capacity, driving rates down 

“We delivered solutions to customers who navigated around and through issues in the U.S. West Coast ports, and in Q1 2016 we worked with carriers to adjust pricing in over-supplied air and ocean markets to maintain and grow profitable market share.”

Expeditors International (EXPD) CFO Brad Powell says customer base remains cautious 

“Our people performed very well as we adapted to a rapidly changing marketplace affected by slowing global trade and excess carrier capacity.  Many of our customers are being cautious about how to spend their logistics dollar, taking advantage of abundant capacity in search of lower rates where possible, and we are aligning ourselves to address their needs. While volumes and average sell rates in air and ocean were lower compared to both Q1 and Q4 2015, we continued to benefit from available ocean and air carrier capacity and favorable market buying opportunities.”

CH Robinson (CHRW) Q1 2016 Earnings Call

CH Robinson (CHRW) CFO Andrew Clarke says the macroeconomy remains sluggish 

“The macro environment remains sluggish. Despite that, we were able to grow our volumes in nearly all services in the first quarter. We will maintain our focus on profitably taking market share in this softer environment. The market conditions in the second quarter remained pretty consistent with what we saw in the first quarter.”

Won many awards from their Fortune 500 customers

“In 2016, we’ve had many customer awards recognizing our performance as a top logistics provider to prominent companies like Wal-Mart, Coke, Dollar General, Ocean Spray, Home Shopping Network and Brose North America. These awards are a great example of how our team is adding value with the customers.”

Pricing of their services was flat

“Customer pricing remained flat in the quarter and the results of bid pricing in our contractual business is a bit stronger than in the truckload segment, as we are seeing low-single-digit increases in contractual bid responses. We continue to build on our industry-leading position as the largest third-party provider of LTL services in North America and that value proposition is winning across all verticals.”

CH Robinson (CHRW) CEO John Wiehoff says they will open up more offices overseas 

“While we’re proud of our global footprint and it’s changing every day, we also acknowledge that it’s a significant growth opportunity for us to expand in parts of the world where we don’t currently have a presence in our network today. We do have plans to open offices in Europe and Asia that will expand our geographic footprint. There are other parts of the world where we don’t have a presence and work through agents that we think we can continue to grow, as well as optimizing. When we talk about expanding and optimizing, it’s hitting on both the growth and efficiency part of how we think about our network that, as proud as we are on how we can execute, we have a long list of opportunities that we think we can optimize our global network and continue to improve the outcomes for our business partners as well as our results. So expanding and optimizing our global network continues to be a strategic imperative that we think has a lot of upside in it to continue to both grow our business and make it more effective.”

 

Diana Shipping 4Q14 Earnings Call Notes

The end of 2014 was disastrous

“There is no doubt at the last quarter of 2014 brought a great disappointment to owners and huge movements in earnings of all bulk carriers unfortunately on the downside. A year ago capesize vessel time charter rates stood at around $40,000 a day and hopes were high for 2014. As we say prices at the time approach US$60 million. As we all know by now 2014 ended in a disastrous way despite seaborne Chinese iron ore import increasing by about 100 million tons.”

Wide over-capacity

“the Baltic dry index slumps with lowest point in 29 years hit by a shipping glove, falling commodity prices and declining import demand from China. We agree with these analysts and the most important factor in the Baltic dry indices decline is industry wide over capacity.”

Steel capacity utilization in China only 72%

“The crude steel capacity utilization ratio in December 2014 was 72.7% which was 2.4% lower than in December 2013. Average capacity utilization in 2014 was 76.7% compared to 78.4% in 2013. ”

Panamax rates are below operating expenses

“As of the first week of February the average spot market earnings for capes have dropped to a miserable US$5,125 per day. As if this was not bad enough the equivalent rate of Panamaxes stood at $3,906 per day, a rate which is definitely below operating expenses.”

Rates to stay low for a long time

“The result of this trend is unfortunately that rate unlikely to remain low for a long time as the industry overcapacity works itself out of the shipment that will in all likelihood remain the case even if global mainly Chinese commodity demand recovers substantially. So this is once again the environment which the management team of Diana Shipping is implementing investment strategy which we have repeatedly stated and explained.”

Market will gradually strengthen from 2016 and beyond

“Our priorities to preserve these strength and integrity of our balance sheet and gradually increase leverage towards the 60% to 65% or even 70% mark and asset values, we believe that purchasing vessels at this point in the cycle will prove to be profitable investment as the market strengthens gradually from 2016 and beyond.”

Constraint in ordering will eventually lead to better industry

“We also believe that provided there is a continued restrain in ordering, the lack of bank finance and the even greater lack of investor appetizing the capital markets will eventually lead the industry to better days. All the ships will be scrapped and earnings will gradually increase, this should find our company in the advantageous position of owning mostly very modern ships to the large income generating capability. That will be the time when our dividend can be reintroduced and older vessels can be sold at very advantageous prices. The company can then expand through the essence of fresh equity which will enhance both our ability to pay dividend and the level of those dividends.”

Repurchased shares

“During the second half of 2014 we repurchased and retired 2.8 million shares for an aggregate cost of about $25.3 million and subsequently to year-end we additionally repurchased and retired 413,804 shares for an aggregate cost of $2.7 million.”

We’re still pessimistic about the market

“we have no change whatsoever in our bearish view about the market. We have not seen the scrapping and the laying up of vessels that we want to see before will start going up this scale. The psychology as regard to market turning positive should turn little bit more to the less and less optimistic. But not at the pessimistic level. We won’t achieve that before and some other things as we have explained in the past, before we start going up in the scale of your question.”

There is appetite still that has to go away

“The vessels have definitely to lay up and things are moving to the proper direction in putting the market in a different phase all together. And this up to now it has not been some for example our ships today capes that they have been inspected by almost 10 people. There is still appetite admittedly at lower levels but the appetite is still there and psychologically that appetite has to go away.”

First priority is to ensure survival of the company

“As we have said in the past our first priority is to ensure the survival of the company for as long as possible. At the same time we want to keep buying vessels in this lower part of the cycle because we strongly feel that we should shed this type of investment. And we have — as we kept saying in the past we’re talking about one vessel every two months and we tell we will try to spend let’s say something like in the vicinity of $15 million every two months. And at the same time we will make sure that our cash flow, our loans et cetera are going to be serviced in such a manner that we will buy some more vessels for the next year at least. And then from then onwards we can survive a bad environment for another two to three years. This is our target.”

buying back shares same as buying ships

“You should consider the repurchasing of our shares as an investment at this part of the cycle. So it goes together with our vessel acquisitions, so from the moment we said we will keep the same pace and we will make sure that w”

For us to really be positive we’d have to have analysts not wanting to ask us questions anymore

“The next time that we will have less and less analyst really interested about the dry bulk sector it would be a very good point for the market to start for us to start thinking positively.’

Diana Shipping 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Chinese steel demand only forecast to grow 1% in 2015

“”As for Chinese steel demand this is expected to grow by only 1% to 748.3 million metric tons this year mainly due to the cooling down of the real-estate sector and the government’s efforts to rebalance the economy. The weak growth momentum will probably continue into 2015 and the WSA forecast that steel use will grow by 0.8% in 2015 and reach 754.3 million metric tons.”

Don’t expect big increases in charter rates next year. Panamax fleet is still oversupplied

“We expect the result of demand growth being closed to expect the supply growth to be volatility and further expect average time charter rates for next year of about US$18,000 per day for Capes and no more than $11,000 per day for Panamax. According to Commodore Research, the Panamax market continues to show signs of severe over supply. Expansion of the Panamax fleet is expected to slow the 6.5% in 2014 and 4.3% in 2015. However, unlike Capesize fleet very large growth has continued in the Panamax fleet again this year up until the last few months. It will still take time for the Panamax sector to truly recover from robust fleet growth that has only recently begun to ease.”

People are finally turning negative on the market

“What is real is that we recently had analyst, banker, private investors saying that they don’t like what they see, this is a good starting point. You remember that we were the only ones that we were talking about something like this. Now that people start seeing clearly that things are not so good, but we’ll make the market better and on the supply side as you are saying, we are seeing a better attitude from the investors, form the ship owners stalwarts, new building stalwarts putting more and more vessels into the water. We are on the right direction as regards thinking about the market not being so well for the near future. I know that it sounds contradicting but it’s a bad thing when everyone — it’s a good thing rather when everyone thinks that the market is really bad and we are going towards that direction, because that’s the way the market is going to turn positive at day point.”

Chinese pollution controls worry us more than anything

“What worries us a lot is the realization now in China that the country cannot continue on the path that they have been following up till now as regards pollution. Now that may have profound effect on the production of sea the importation of coal and general movement of bulk commodities that we have been talking about.

Now that only shown is far more important than any other structural changes might take place worldwide, either in developing nations or developed countries, because if they all these influences in structural changes fail in significance compared to what might happen if China imposed strict regulations in an orderly way on pollution.”

At this stage the best thing we can do is keep reinvesting

“consistency says to us that as the lower part of the cycle, we should keep our dry bulk to invest in order to create shareholders value, differentiating in a manner by introducing a dividend just to gain $0.20 on the share price, or $0.30 is something that is not an option for us. We find this part of our industry, this timing a very attractive one to invest as much money as possible and by doing that we will create a much greater value for our shareholders rather than giving them a small or a big dividend at this stage.”

Diana Shipping 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Chinese steel growth expected to be just 3% this year

“Apparent steel use in China is expected to slow to 3% growth this year and 2.7% in 2015 after growing by 6.1% in 2013.’

Chinese iron ore stockpiles are at record levels

“Stockpiles remain at near record level, and are above 39% higher than the same time last year.”

Chinese steel mills starting to restock met coal

“steel mills have been restocking since April and if this continues Chinese stocking volume for demand could drive in coming months, provided the freight differential between import and domestic coal remain favorable for imports.”

Fleet growth peaked in 10, only starting to get back in line with demand growth

“Fleet growth may have peaked in 2010, but only by the end of last year this has started falling in line with cargo growth.”

still not a positive outlook on the market

“unless the market deteriorates, we are not growing to see a better market.”

Shipping is a great industry eventually, but it may take some time

“Of course it will become profitable, the shipping market is the best market. Some of the industries in the world. And it’s going to return to earnings again, but it’s not going to be immediately, it will take some time.”

Until we see a real black spot on the market, there will be no turn

“without looking as ForEx you are missing the point. And the ForEx is saying that we have not seen a real black spot for the market to turn positive. We will be none of you are aware and the market will not turn if we don’t see really bad date.”

We are more positive on containerships

” if you have heard the management talking about the two different titles we are more positive as regard to the fundamentals on the Containerships sector and especially the medium size vessels there.”