Full Year 2023 Pacific Basin Shipping Ltd Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Lee - Jefferies - Analyst : Hi, everyone. Thanks very much for the call, guys. Very useful. I have a few questions, right? My first question is in your previous results -- so your previous calls, right, whether it's quarterly or full year or interim, you always mentioned the word medium term on the overall outlook. Since this is not mentioned this time, would you say that you're more REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 29, 2024 / 10:00AM, 2343.HK - Full Year 2023 Pacific Basin Shipping Ltd Earnings Call optimistic now on the near term rebound rather than the so-called medium term, which I think you mentioned before with six months out? So basically, I'm saying is are you expecting the recovery to be happening from today? Second question is on shareholders' returns, right? I think in the presentation in the results, you mentioned a word share buyback quite a few times. Does that mean that that's going to be the target going forward rather than the special dividend? Because I think this was mentioned this time, not compared to previous. Third question I have is on the operating activities, right? In the fourth quarter itself, it was only $110 million margin. If I look at your third quarter '22, right, it was also lower as well, if you look at on slide 8. Is this a seasonality? Is this the trend? Can you give a little guidance in terms of how we should be looking at going forward, right, because $110 million is actually quite small, right, in terms of the margin rate. Fourth question I have is could you give us a little bit guidance on your total core operating days, right, for both the Supramax and the Handysize? The reason I say that is because we know how much long-term charter days you have. But during the last year, you had some changes in the owned fleet when you sold some and then you also had some new -- well, secondhand ships being delivered. So I just want to get a sense what's the total number of the operating days, right? And that's it for now.

Question: Andrew Lee - Jefferies - Analyst : The core fleet, right? So how many days you're going to have this year for the Supramax and the Handysize?

Question: Andrew Lee - Jefferies - Analyst : Yeah, that's good. Okay. I'll get back into the queue. I have a few more questions, but I'll let other people ask first.

Question: Parash Jain - HSBC Securities - Analyst : Yeah, hi. Thanks, Michael and Martin, and congratulation on good set of results. And especially, thank you, Michael, for running a pretty prudent capital structure, probably something that your peers on the container shipping segment can learn. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 29, 2024 / 10:00AM, 2343.HK - Full Year 2023 Pacific Basin Shipping Ltd Earnings Call But my question is more on -- with respect to the industry because of the Red Sea, lower Panama Canal water level, are -- how the vessels spend their time in between Atlantic and Pacific. Has it structurally changed, therefore? And if that's the case, how shall we see and understand the volatility or rather the divergence in freight rates throughout the year? And secondly, here 2023 is pretty much -- China growing like no tomorrow in terms of the import of drybulk volume while rest of the world was sluggish. Do you see a sort of China flattening out while rest of the world start to grow, as your base assumption, when you talk about the about the growth number? Maybe if you can handle these two first, yeah.

Question: Nathan Gee - BofA Global Research - Analyst : Hi, Martin. Hi, Michael. Thanks for the call. Just a question on impairments. So look, this is the second impairment you've taken around the small Handysize ships. You took something a lot larger in 2020. Just help us understand this given the optimistic market outlook and how it jives with the impairment? And also, just is there any further risk of the impairments ahead, particularly with the small Handysize?

Question: Parash Jain - HSBC Securities - Analyst : Yeah, hi, Michael. This one is more on the supply side. So we have been into the world of EEXI and CII and now perhaps EU ETS. Have you seen a material impact in terms of reduction of effective supply thus far? And if not, do you expect this to materialize in 2025, if not in 2024? And secondly, given relatively profitable last few years and how fragmented the drybulk ownership market is, do you see any reason why even a 15-year or 18-year old ship owner who would have paid off all its debt and can't care less about depreciation would bother to send it to the scrapyard even if Handysize is generating anything above cash operating cost? Thank you.

Question: Parash Jain - HSBC Securities - Analyst : Yeah, no, that's fine. And the second part in terms of what would drive smaller Handysize owners to hit the scrapyard at these levels.

Question: Parash Jain - HSBC Securities - Analyst : Yeah. No, that's absolutely clear. It's just that -- in the near term, probably that lowers the risk of scrapping, right?

Question: Parash Jain - HSBC Securities - Analyst : It's very, very clear. Thank you so much and have a lovely day.

Question: Parash Jain - HSBC Securities - Analyst : Hi, Martin. This will be my last question. Can you remind us the CapEx guidance for 2024 and 2025, both with respect to maintenance CapEx? Are there more scrubber fitting needs to be done after the purchases. All of the purchases that you've already made, how much almost need to be paid? And one final question is when we think about your capital return, is it fair to say that you are comfortable with your balance sheet as at the end of 2023? So whatever free cash flow that you're likely to generate minus CapEx minus 50% of payout would be something that will be available for a special dividend or share buyback. Thank you.

Question: Parash Jain - HSBC Securities - Analyst : Yeah, I think it makes perfect sense. Thank you so much.