Diana Shipping Inc . (NYSE: NYSE:DSX), a global provider of shipping transportation services, has announced a strong performance in the second quarter of 2024, according to CEO Semiramis Paliou during the company's conference call. Despite a 7% decrease in average time charter rates for Capesize vessels, Panamax and Supramax rates saw a rise of 6% and 16%, respectively.
The company's fleet utilization reached an impressive 99.5%, and it declared a quarterly cash dividend of $7.05 per share. Looking ahead, Diana Shipping anticipates the delivery of two methanol dual-fuel newbuildings in 2027 and 2028 and remains focused on ESG initiatives, with secured revenue for a significant portion of its available ownership days in 2024 and 2025.
Key Takeaways
- Diana Shipping's second quarter showcased resilient performance with mixed charter rates.
- The company operates 39 dry bulk vessels and expects two new Kamsarmax vessels in the coming years.
- Fleet utilization was high at 99.5%, with 1,000 employees onshore and at sea.
- Financial stability is indicated by a net debt of 38% of market value and $140 million in cash reserves.
- Diana Shipping has secured a substantial portion of revenue for 2024 and 2025.
- The company declared a quarterly cash dividend totaling approximately $9.4 million.
- Market factors such as port congestion and demand for bulk commodities are expected to support earnings, despite some predictions of a drop in shipments and growth.
Company Outlook
- Delivery of two methanol dual-fuel newbuildings Kamsarmax dry bulk vessels anticipated in 2027 and 2028.
- Secured revenue for 74% of remaining ownership days in 2024 and about $68.9 million for 26% of available ownership days in 2025.
- The company's strategy is focused on ESG initiatives, fleet modernization, and transparency.
Bearish Highlights
- A decrease in average time charter rates for Capesize vessels by 7%.
- Predicted drop in iron ore shipments and thermal coal growth in 2025 by Clarksons.
- The industry outlook remains uncertain due to environmental policies and supply-demand balance.
Bullish Highlights
- Increases in Panamax and Supramax rates by 6% and 16%, respectively.
- High fleet utilization at 99.5%.
- Positive impact expected from port congestion in Brazil and rising demand for bulk commodities.
- Chinese seaborne iron ore imports grew by 7% from January to May.
Misses
- No specific misses were mentioned in the context provided.
Q&A Highlights
- Discussion included the state of the freight market, environmental restrictions, and the company's disciplined strategy.
- The company addressed questions on ESG initiatives and the impact of market conditions on future scrapping of vessels.
In the dynamic shipping industry, Diana Shipping Inc. has managed to maintain a strong presence with its diversified fleet and strategic focus on future growth and sustainability. The company's proactive approach to securing revenue and managing its debt showcases its commitment to financial health and shareholder value. With the global market conditions providing both challenges and opportunities, Diana Shipping's disciplined strategy and commitment to ESG principles position it to navigate the future market landscape effectively.
InvestingPro Insights
Diana Shipping Inc. (DSX) has demonstrated resilience in its second quarter performance, and InvestingPro data provides further context to understand the company's financial health and market position. With a market capitalization of $286.88 million and a Price to Earnings (P/E) ratio of 11.31, Diana Shipping appears to be valued reasonably in the market. Notably, the company's Price to Book (P/B) ratio stands at a low 0.55 as of the last twelve months ending Q1 2024, suggesting that the stock may be undervalued relative to its assets.
InvestingPro Tips highlight that Diana Shipping boasts an impressive gross profit margin of 59.83% for the same period, which is indicative of the company's ability to efficiently manage its operational costs relative to its peers in the shipping industry. Additionally, Diana Shipping is trading near its 52-week low, which could represent a potential entry point for investors considering the company's high shareholder yield and significant dividend payout, currently at a yield of 11.19%.
It's important to note that analysts have mixed expectations for the company, predicting a sales decline in the current year while still forecasting profitability. This aligns with the article's mention of Diana Shipping's secured revenue for a substantial portion of its available ownership days in 2024 and 2025, reflecting a cautious yet stable outlook.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available, including insights on the company's sales decline and anticipated net income drop for the year, which can be accessed at https://www.investing.com/pro/DSX. These tips could provide valuable information for shareholders and potential investors considering Diana Shipping's stock in their investment portfolios.
Full transcript - Diana Shipping Inc (DSX) Q2 2024:
Operator: Welcome to the Diana Shipping 2024 Second Quarter Conference Call and Webcast. At this time, all participants are in a listen-only mode. The question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Edward Nebb, Investor Relations Advisor. Thank you. You may begin.
Edward Nebb: Thank you, Darrell, and thanks to everyone who is joining us today for the Diana Shipping Inc. 2024 second quarter conference call. With us today from management is Semiramis Paliou, Chief Executive Officer who will introduce the other members of the management team. And so, without further due, I will turn the call over to Ms. Paliou.
Semiramis Paliou: Thank you, Ed. Good morning, ladies and gentlemen, and welcome to Diana Shipping Inc.’s second quarter 2024 financial results conference call. I'm as Ed said, Semiramis Paliou, the CEO of Diana Shipping, and it's my pleasure to present alongside our esteemed team, Mr. Stasi Margaronis, Director and President; Mr. Ioannis Zafirakis, Director, CFO and Chief Strategy Officer; Mr. Lefteris Papatrifon, Director; and Ms. Maria Dede, Chief Accounting Officer. Before we begin, please review the forward-looking statements on Page 4 of the accompanying investor presentation. After a strong first quarter, the second quarter has remained resilient. The average Baltic time charter rates called Capesize vessels fell around 7%, while Panamax rates increased by 6% and Supramax rates arose by 16%. Compared to recent years, the end of the second quarter and the start of the third quarter are somewhat muted, but sentiment remains strong as shown by the time charter rates in our most recent period fixtures. Turning to Slide 5, let's review our company snapshot, founded in 1972 and listed on the New York Stock Exchange since 2005, Diana Shipping Inc, operates a fleet of 39 dry bulk vessels, five of which are mortgage-free with an average age of 11 years, and the total deadweight of approximately 4.4 million tons. We are expecting the delivery of two methanol dual-fuel newbuildings Kamsarmax dry bulk vessels in around 2027 and 2028. Our fleet utilization reached 99.5% in the second quarter of 2024, reflecting our efficient vessel management. As of the end of June, we employed 1,000 people at sea and the shore. Financially, our net debt stands at 38% of market value with 140 million in cash reserves and total secured revenues of approximately US$145 million. On Slide 6, we highlight key developments from the second quarter. We recharted eight vessels year-to-date with an average charter rate increase of 11% with high quality counterparts. On June 18, 2024, we announced the pricing of 150 million placement in the Norwegian market of senior unsecured bonds maturing in July, 2029, with an 8.75% fixed rate coupon. The net proceeds from the bonds were used to refinance all of the Company’s $125 million senior uncured bond due in 2026. As of July 24, 2024, we raised US$25.3 million from the exercise of warrant under our ongoing warrant program with a further $65 million possible. On July 25, 2024, we signed $167.3 million, six years secured term loan facility with Nordea Bank secured by 10 vessels. This refinancing released two previously mortgaged vessels. We have secured revenue for 74% of the remaining ownership days of 2024, amounting to approximately US$76.8 million and approximately US$68.9 million for 2025, covering 26% of the available ownership date. Ioannis will provide a more detailed analysis of our cash flow generation potential later on. Finally, we are pleased to declared a quarterly cash dividend for the quarter ending June 30th of $7.05 per common share, totaling approximately $9.4 million. Slide 7 summarizes our recent chartering activity. Since our last earnings presentation, we have secured profitable time charters for eight vessels. Specifically, we chartered one Ultramax vessel at a daily rate of US$15,400 for 316 days. We charted six Panamax and post-Panamax vessels at a weighted average daily rate of US$15,455 for 259 days, and one Newcastlemax vessel at US$28,700 for 438 days. Slide 8 illustrates our strategy of staggered charters that we believe will result in positive free cash flows and efficient market participation. Now, I'll pass the floor to Ioannis for a detailed financial analysis. Ioannis?
Ioannis Zafirakis: Thank you. Here, we are again for our conference call for the results and we are going to be talking about the second quarter of 2024 financials. I think this slide, the most important point for someone to notice is the net loss of $2.8 million. However, this has been influenced from some non-cash items like the pricing of the warrants and also our shareholding in OceanPal calculation accounting-wise. Otherwise, we would have been on the positive side of as guided net income. Our cash and cash equivalent stands at $140 million and our long-term debt and finance liabilities, net of defer financing cost has decreased and that is at $613.5 million. Moving to the next slide. Our ownership days have decreased compared to the ownership days for the same quarter in 2023. But we have kept the utilization very high and of course, the time charter equivalent rate has decreased to US$15,106 compared to US$17,311 in the same quarter the year. Now in the six-month period, again, you can see the ownership days that have increased and also the decrease -- sorry, I beg your pardon. Also, the time charter equivalent that has decreased to 15,000 approximately from 17,900 in the previous six months. The daily operating expenses we have kept at very similar levels. Moving to our debt profile, we are very happy, as we have said in the past, the way we have managed our credit facilities. Together, we be sharing leaseback facilities and also the senior unsecure bond. Basically, the way now the debt profile is that we don't have basically we have maturity is accepted, a small one in 2028, and we start having maturities in 2029. Also, if you notice at the bottom graph the projected senior and secure bond balance together with the sale and lease back, and amortized balance in the loan balances supposed to be decreasing steadily and slowly 2029 almost. In the next slide, here again, we show that based on our fixed days and our unfixed days, if we were to project using the FFA rates as of July 26, 2024, there is some room to have a profit in 2024 and also in cashflow and also in 2025. As regards our dividend policy, we are very happy also that managed to accumulate since 2021, the third quarter of 2021, US$2.634 per common share and this is you can see that and also our CEO also mentioned that we just announced another $0.075 per share. I think that Stasi Margaronis is going to follow now with the drive bulk market overview.
Stasi Margaronis: Thank you, Ioannis. As mentioned in our last call, geopolitical developments have continued to have a profound effect on the developments in the drive bulk carrier market during the second quarter of this year as well. The 12-month time charter rate for Capes started a year at US$19,500 per day, and the latest fixtures were around US$22,100 per day. For Kamsarmax, the figures were US$14,500 per day and US$15,600 respectively, and for Supramax rates started a year at US$13,000 a day, and recent fixtures were around US$14,000 per day. The highest levels for Capes and Kamsarmax were reached in March this year at US$27,000 a day and US$17,000 a day respectively. Rates reached their highest level early this month for Supramax at around $16,000 a day. As reported by Clarksons, during the first five months of this year, average sector earnings were US$15,750 per day, up 40% on a year-on-year basis. The main reasons for this firmness were firm bulker demand in the Atlantic, created by firstly Brazilian iron ore exports; secondly, Guinea bauxite exports; thirdly, Brazilian grain exports; fourth, U.S. East coast coal and grain exports; and finally, manganese ore shipments from West Africa, mainly Ghana and Gabon. According to Braemar due to its use in steel making, China remains the dominant driver for manganese imports, while shipments to India might be rising soon as well. Growth in this group of commodity shipments mentioned above is expected to add 500 billion ton-miles to dry bulk demand this year alone, which would represent about 45% of dry bulk demand growth in ton-mile. Added to the above have been the positive impact from the Red Sea (NYSE:SE) and Panama Canal disruptions, which according to Clarksons have increased bulk of demand by about 1.2% over the last 12 months. As regard the Panama Canal, bulker transits until recently have been one third their normal number. These might start increasing during the second half of the year, which will somewhat reduce ton-mile demand going forward. Average bulker earnings in 2021 were $26,887 per day, and in 2022, $20,478. So, the market has plenty of catching up to do before reaching those levels. Turning to macroeconomic news, the expected GDP growth figures as published by the IMF are shown in this slide. World GDP growth, which has been adjusted slightly upward to 3.2% this year, and 3.3% in 2025 is supportive for demand for bulk carriers, particularly through its effect on minor bulk trade. Overall, Clarksons predict that dry bulk ton-mile trade growth this year will be 3.9% outpacing fleet growth of 3.1%. Slower bulk carrier operating speeds down about 1% so far this year, and the gradual rise in port congestion from last year's lows particularly in Brazil, are also likely to support earnings. Turning to the demand side, major bulk commodities such as iron ore, coal and grains are all expected to grow this year around 2% to 3%. As for 2025, iron ore shipments are expected by Clarksons to drop by 1% to 1.576 billion tons, as well as thermal coal growth, which might come in negative by 1% and reach 1.033 billion tons. The rest of the major commodities should show some growth going into 2025. Chinese seaborne iron ore imports were up 7% year on year between January and May this year, reaching 505 million tons. These were supported by software iron ore prices despite concerns about stocks in Chinese sports. The seaborn minor bulk trade is also expected to grow by about 3% in 2024 and by the same percentage next year and reach 2.269 billion tons. This trade is more directly related to world growth and macroeconomic headwinds are expected to ease somewhat for the rest of this year and into 2025. That's lending support to shipments of such commodities as agri bulks, fertilizers, sugar minerals, and related products. Demand from China is expected to remain strong through the end of this year and into 2025, however, the potential onset of a strong La Niña event later this year could bring weather disruptions in the operation of key exporters such as Australia and Brazil and Indonesia. On Slide 17, we turn to supply. According to Clarksons bulk carrier contracting has so far been slower. In 2024 compared to 2023 with 148 vessels contracted between January and May this year, down 40% year-on-year. Deliveries are currently projected to reach 35 million deadweights this year before easing back in 2025 to around 33 million tons. The Capesize fleet is expected to increase by 1.8% this year, and by near 1.3% in 2025. For the Panamax, Kamsarmaxes, the expected increases are 3.5% and 3% respectively. The Handymax fleet is expected to increase by 4.1% this year, and about the same in 2025. Looking at the order book, according to figures provided by Clarksons, as the first July this year, there were 26.2 million deadweight worth of Capes on order ting just 6.6% of the trading fleets. The 32.7 million deadweight worth of Panamax on order represents 13% of the existing fleet. On the Handymax side, there were 26.8 million deadweights on order, which were 11.1% of the trading fleet. According to Braemar, congestion is apparently on the rise again, leading this trend our ports in Brazil where according to the International Grains Council annual confidence report in June, many of the factors that caused the surge in congestion in 2023 are reappearing today as well. Some of these are sugar exports, putting pressure on sugar terminals and soybean exports likely to carry over into the third quarter corn export season. Turning to asset prices now. According to Clarksons, the overall change in bulk carrier asset values in July over the past 12 months was an increase of 22%. Kamsarmaxes and particularly Capes lead this overall increase. According to Clarksons 5-year-old Capes are worth about 64 million today and the resale newbuilding price stands at around $77 million 5-year-old. Kamsarmaxes are selling at around $38.5 million, while newbuilding resale would bring about $43.5 million today. All these are for ships with conventional engines. On the demolition side, according to Simpson, Spence and Young, during the first half of 2024, around 190 bulkers were committed to be scrapped amounting to 3.73 million deadweights. Statistics provided by Clarksons that 5.4 million deadweight worth of bulk carriers were sold for scrap in 2023 and the 2.3 million deadweight tons have been scrapped so far this year. Prices have remained relatively steady at between $510 and $525 per lightweight. Scrapping in 2025 will very much depend on the state of the freight market at the time as well as sentiment for the medium-term prospects of the industry. It is worth noting that most of the huge numbers of bulkers that were delivered between 2009 and ‘11 will soon have to pass their third special survey and be required to comply with the latest environmental restrictions on emissions. Depending on the overall condition and state-of-the-market, several of these ships will be sold for scratch. On Slide 18, we have the outlook of our industry and we list a several items as bullet points, which are positive and negative for our industry. Braemar and Clarksons believe that the Capesize market is expected to continue benefiting through the second half of this year from firm Atlantic iron ore bauxite and manganese exports. The latter have recently started being shipped not only in geared Ultramaxes, but larger vessels as well. Looking ahead into the 2025, Clarksons predict that there could be a small easing in markets as dry bulk trade is projected to grow by 1% in ton-miles, slightly below the fleet growth of about 2.5%. This assumes that the Red Sea disruption will gradually ease as the year progress. Impact from environmental policies will influence earnings going forward that 25% of the bulk carrier fleet capacity is estimated to have been rated D or E for CII last year. This fact together with even slower operating speed, ESG retrofitting and the demolition of all the units will also influence the supply demand balance over the next few quarters. Therefore, there is no firm direction that the market is expected to go from the rest of this year and into 2025. However, as we have mentioned on numerous past conference calls, then the strategy is to avoid predicting future trends in fleet earnings and charter vessels in a staggered way as has been the case in 2005. This strategy helps avoid the cluster of vessels opening at the same time and smooths out the Company's cash flow over the medium and long term. I'll now pass the call to our CEO, Semiramis Paliou, to provide some important takeaway points from our quarterly earnings call. Thank you.
Semiramis Paliou: Thank you, Stasi. Before summarizing to today's presentation, I'd like to highlight our ESG initiatives. We are committed to promoting eco-friendly technologies, modernizing our fleet, and transparently sharing our mission data. We build on partnerships and collaborations to further our goals. We have developed an equity, diversity, and inclusion program, and we continuously invest in our people. For the past four years, we have published our ESG report and remain committed to embracing and improving our standards. So, moving on to Slide 20. In summary, Diana Shipping Inc., with over 50 years of experience and nearly 20 years on the NYSE has an experienced management team ready to tackle industry challenges. We maintain strong stakeholder relationships and a discipline strategy, focusing on a solid balance sheet, a counter cyclical approach, fleet modernization, rewarding our shareholders whenever possible, and the robust ESG strategy. Thank you for joining us today. We now look forward to addressing your questions during the Q&A session.
Operator:
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