Costamare Inc. (NYSE:CMRE) Q3 2023 Earnings Call Transcript

Costamare Inc. (NYSE:CMRE) Q3 2023 Earnings Call Transcript November 1, 2023

Costamare Inc. misses on earnings expectations. Reported EPS is $0.46 EPS, expectations were $0.61.

Operator: Thank you for standing by ladies and gentlemen and welcome to the Costamare Inc. Conference Call on the Third Quarter 2023 Financial Results. We have with us Mr. Gregory Zikos, 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. [Operator Instructions] I must advise you that this conference is being recorded today Wednesday, November 01, 2023. We would like to remind you that, this conference call contains forward-looking statements. Please take a moment to read Slide number 2 of the presentation which contains the forward-looking statements. And I will now pass the floor to your speaker today, Mr. Zikos. Please go ahead, sir.

Gregory Zikos: Thank you and good morning, ladies and gentlemen. During the third quarter of the year, the company generated net income of about $53 million. As of quarter end, liquidity was close to $1 billion. In the containership sector, larger ships continue to enjoy a tight market, while smaller vessels experienced deteriorating conditions. Overall, the market outlook looks uncertain due to the large order book and the insufficient demolition [ph] On the dry bulk side, as part of our strategy to renew the fleet and increase its average size, we acquired two capesize and to one ultramax vessel and at the same time we disposed of two older supramax ships. Our owned dry bulk vessels continue to trade on a spot basis, while the trading platform has grown to a fleet of 59 vessels.

Having invested $200 million in the dry bulk operating platform, we are long-term committed to the sector whose fundamentals we view positively. Regarding Neptune Maritime Leasing, the platform has been steadily growing on a prudent basis, having concluded leasing transactions for 17 ships in total, which are complemented by a healthy pipeline extending over the coming quarters. Finally, during the quarter, we continued our surpasses program, and we bought $10 million worth of common shares, highlighting our strong belief that the share price is heavily undervalued, considering both the Company’s performance and prospects. Moving now to the slide presentation. On Slide 3, you can see our third quarter results. Net income for the quarter was roughly $53 million or $0.45 per share.

Adjusted net income was around $54 million or $0.46 per share. Our liquidity stands at roughly $1 billion. Slide 4, you can see an update on our share repurchase program. Since our Q2 earnings release, we purchased approximately 900,000 common shares for $10 million worth. In addition, we continue to have a long uninterrupted dividend track record boosted by strong sponsor support. Slide 5. Regarding CBI, we have chartered-in 59 period vessels with the majority of the fleet being on index linked, chartering agreements. On our leasing platform, we have already invested around $74 million. Since inception, NML has financed 17 vessels through sale and leaseback transactions and has a very healthy pipeline. Turning to Slide 6. We have acquired two capesize and to one ultramax dry bulk vessels, while we have agreed to sell two supramax dry bulk ships.

In addition, we have concluded the sale of a 2000-built containership along with the sale of our 49% equity interest on another 1998-built containership vessel. Slide 7. During the quarter, we have financed the acquisition of two dry bulk vessels through an existing hunting license facility, while we have roughly available $144 million for the financing of vessel acquisitions. We continue to charter all our dry bulk vessels in the spot market, having entered into more than 50 charting agreements since our last earnings release. On the containership side, our revenue days are essentially 100% fixed for this year, 87% for ’24 and 73% for ’25, while our contracted revenues are $2.7 billion with a TEU weighted remaining time duration of 3.7 years.

Slide 8. Our liquidity stands at roughly $1 billion. This liquidity gives us the ability to look for opportunities to grow the company on a prudent basis. Slide 9. Charter rates, the containership market have softened mainly for the smaller sizes remaining though at above pre-COVID levels. The ad capacity remains at low levels of 1.7%. On Slide 10, you can see the recent dry bulk market trends in the spotted forth [ph] markets. Charter rates have strengthened since Q2, although remaining volatile. The order book is at 8.1% of the total fleet. With that, we can conclude our presentation, and we can now take questions. Thank you. Operator, we can take questions now.

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Q&A Session

Operator: Thank you very much. [Operator Instructions] And your first question comes from the line of Chris Wetherbee from Citigroup. Please go ahead.

Chris Wetherbee: Thanks, guys. Thanks for taking the question. I guess maybe I wanted to start on the container side and just get maybe a general sense of your view of, I guess, demand in the market for any terms. So I guess I’m just trying to get a sense of – we understand the weakness that’s out there and obviously the capacity that is entering the market. But as you think about the opportunities for employment, can you just sort of talk us through what you’re seeing in the market and what your thoughts are on activity in the rechartering side?

Gregory Zikos: Yes. We’ve seen that, I mean, in general, if you compare tenor of previous fixtures a year ago. And now I think on average, you can say that where we have a shorter-term fixtures for the containerships. And the charter rates have been going down, which is something expected. And to some extent, you can argue that its healthy [ph] because you cannot have a market going up every single year after COVID. So for example, the panamax vessel is now at – for a year, the traditional panamax is now at around between $17,000 to $19,000 per day. Prior to that, it was between 20 to 22. And also the pictures [ph] we’ve seen now there for a year or so in the past we could see pictures at higher levels for longer periods. Especially for the smaller vessels, you can see the trend that the tenor of the charter party agreements, they tend to become shorter and shorter.

Having said that, however, still, I think we need to know that the market is holding up relatively well and much better than people thought 6 months ago. Although we can see a downward trend, still the charter rate levels, they are at very healthy levels. So they are very healthy. And we can see that, especially for the larger ships, market rates are still quite profitable. So we do have a large order book that needs to be absorbed. It’s highly questionable whether demand is going to be in order to digest all the order group. And at the same time, the demolition levels are quite low. So going forward, I think where the market will be heading, I don’t think that the supply and demand dynamics we experienced during COVID are going to be there.

Quite the opposite, I would say, we do see a downward trend, which is something expected. At the same time, this means more opportunities when sort of asset prices, together with charter levels and also new building prices come at, let’s say, more logical levels. This is a time when we, as Costamare, we would be ready to enter the market again. As you know, we didn’t put any bidding orders at the peak of the market over the last years. So we do expect for the market to find its average rate levels. And then this may become more interesting.

Chris Wetherbee: Okay. Okay. That’s helpful. I appreciate that color. And then on the dry bulk platform, if you could give us a sense of maybe how you think fourth quarter or maybe early first half looks in terms of vessels you plan to charter in. Obviously, this is a little bit of a difficult one for us to model. I want to get a sense of how you’re thinking about your capacity in that so we can get a better sense of how revenue and profitability could look either – the very at least in the next quarter, but maybe a little bit further beyond that?

Gregory Zikos: Yes, you’re right about it. This is a very difficult business model, I would say, because it’s volatile and because it’s chartering in vessels, entering into Boeing [ph] charters, entering into vessel relays, cargo relays. And we also have an FFA book in order to complement our exposure. First of all, on the modeling side, we can have and offline discussion, then we can discuss how this can be more streamlined and how we can assist each other. Now the company has grown quite substantially since it started beginning of the year. It’s a 59 ships charter-in. We’re going to grow depending on market conditions. We have put the whole infrastructure in place. This company runs with zero debt. It’s 100% equity funded because it’s levered by itself.