Costamare Inc. Q4 FY2024 Earnings Call

Thank you for standing by ladies and gentlemen and welcome to the Costamare Inc. Conference Call on the Fourth Quarter 2024 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. I must advise you that this conference is being recorded today, Wednesday, February 5, 2025. 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. We'll pause one moment. Thank you. I will now pass the floor over to your speaker today, Mr. Zikos. Please go ahead, sir.

Thank you and good morning, ladies and gentlemen. During the fourth quarter of the year, the company generated adjusted net income of about $82 million. Our liquidity stands at around $940 million after repaying during the year a fixed rate bond of €100 million and also redeeming the Series E preferred stock of $115 million. In the containership sector, the Red Sea crisis led to diversions via the much longer Cape of Good Hope route. These diversions, together with strong cargo demand, absorbed the incremental new building capacity. The commercial idle fleet remained low during 2024 and at the start of '25. Should, however, liners gradually return to the Suez route, the release of tonnage, combined with new building capacity could potentially distort the current supply and demand dynamics. During this quarter, we chartered on a forward basis 12 containerships with an average time charter duration of about 2.5 years and estimated contracted revenues of close to $330 million. The containership fleet employment stands at 96% and 69% for 2025 and 2026, respectively. Total contracted revenues amount to $2.4 billion with a remaining time charter duration of about 3.4 years. On the dry bulk market, charter rates dropped to their lowest levels of 2024 during the last quarter and have started 2025 on a similarly soft note. The easing of congestion, along with pressures in the China steel market and less grain ton-mile demand have resulted in tonnage oversupply. As per our strategy to renew the owned fleet and also increase its average size, during the quarter we concluded the acquisition of one Capesize and two Ultramax vessels as well as the disposal of one Handysize ship, while we have agreed to sell one Panamax vessel. CBI today manages a fleet of 51 ships, the majority of which are on index-linked charter-in agreements. As mentioned in the past, we have a long-term commitment to the sector, and we view the vessel-owning and the trading platform as highly complementary activities. Finally, with regards to Neptune Maritime Leasing, the platform continues to grow with a healthy pipeline, having total investments and commitments exceeding $500 million. Moving now to the slide presentation. On Slide 3, you can see our annual results. Net income was above $290 million or $2.44 per share. Adjusted net income was around $330 million or $2.76 per share. Our liquidity stands above $940 million. Slide 4; on the chartering side we have chartered on a forward basis 12 containerships with incremental contracted revenues of around $330 million. Our revenue days are fixed at 96% for '25 and 69% for '26, while our contracted revenues are $2.4 billion with a TEU-weighted remaining duration of 3.4 years. As you will notice, we have chartered three 1996-built vessels for a period at healthy rates. Turning to Slide 5. Regarding our S&P activity, we have concluded the acquisition of one Capesize and two Ultramax dry bulk vessels. In parallel, we have concluded the sale of one Handysize ship and agreed to sell one Panamax vessel. Slide 6; we have concluded financing for a total amount of approximately $340 million, with respect to 36 of the 38 dry bulk vessels we currently own. The new financing provides us with improved funding costs and extension of maturities. In addition, we have secured a new hunting license of $100 million for financing the acquisition of dry bulk vessels. Slide 7; regarding CBI, we have chartered in 51 period vessels, with the majority of the fleet being on index-linked agreements. On our leasing platform, we have already invested around $123 million. Slide 8; our liquidity starts above $940 million. This liquidity gives us the ability to look for opportunities to grow the company on a healthy basis. Moving to Slide 9. Charter rates in the containership market remain at firm levels. The continued injection of new building capacity along with the rerouting via the Red Sea and Suez Canal may, however, affect current market dynamics. The idle fleet remains at low levels at around 0.6%. Finally, on Slide 10; you can see the recent dry bulk market trends in the spot and forward markets. Charter rates have extended their decline from Q4 '24 into the first quarter of 2025. The order book starts at around 11% of the total fleet. With that, we can conclude our presentation and we can now take questions. Thank you. We can take questions now.

Our first question today comes from Ben Nolan of Stifel.

I wanted to ask a couple of questions about CBI. First, can you provide any insight into what the contribution was in the fourth quarter from CBI? Secondly, looking ahead, considering the current state of the dry bulk market and the forward curve, what do you anticipate the profit or contribution from that business will be if the market remains soft throughout the year?

Yes, a couple of things. First of all, let me start from the latter regarding the weak market where it is today. It is weak today. I mean, it started from Q4 of '24 and this is the case for Q1 '25. At the same time, there is some seasonality built in there which it remains to be seen. The forward curve is pointing to a better market going forward. However, CBI can also take long and short positions. I mean, we are by default long in the ownership of the vessels of the 38 dry bulk ships we own. So CBI can either be long or short depending on the circumstances. The goal for CBI, because by default, this business is very volatile, is to have a balanced book, while at the same time, taking some positions long or short depending on the circumstances. As mentioned in my commentary, we view it as a complementary activity to the owning side. We don't aim — going forward, we don't aim to take big positions at the CBI level, except when we have conviction where the conditions justify those big positions. Otherwise, we will be taking a view of the market. However, it's going to be on a more balanced approach. For the owning vessels, as you've seen, by default, as I mentioned, we are long. We are selling older ships and smaller vessels and focusing on larger assets, especially Capes. Depending on the market conditions, we may continue doing so. The goal is that whatever equity we are releasing from the vessels we dispose of, buying hopefully at low market levels, and acquiring younger ships with larger tonnage. Now regarding the contribution of CBI and the same applies to the dry bulk owned fleet and for the containers, I'm afraid you will have to wait for our segmental reporting in the 6-K. This is something that we will be providing some information there relatively soon. So if you bear with me, the full information available will be there, if that's okay with you.

Okay. Yes. No, that's helpful. And just to clarify, for 2025, you expect the CBI chartered-in fleet to be roughly net neutral. So there's no sort of — currently, there's no position either long or short?

No. Today, we have a position. We have a position. And as we move ahead, those positions, we may close them depending on market conditions. We do have a position now. But in general, our goal is first to have a balanced book and then going forward, maintain that balanced book and of course, take some positions because this is part of the business, but those positions are going to be on a more balanced approach. It could be shorter. We wouldn't expect to take long positions without having, as mentioned, conviction that conditions justify those bets. So compared to how CBI was operating at initiation a couple of years ago, going forward, we would expect this to have a much more balanced approach, which makes sense.

Okay. And you said you had a position at the moment, it's net long or short?

At the moment, it's long. I mean, depending for Capes and for Panamax, it's long but this is a position which — I mean, it is a long position but it goes for a period. So it's something that we cannot work on over the next quarters.

Our next question comes from Clement Mullins of Value Investors Edge.

I wanted to start by asking about how chartering discussions have evolved on the containership side over the past few weeks as the normalization of the Red Sea seems closer. Some liners have announced they do not plan to return to the Red Sea in the near term. But have you seen an effect on rates and durations when discussing potential contracts?

Yes, thank you for the question. First of all, the 12 chartering agreements we have now disclosed, discussions took place some months ago before the announcement of the ceasefire. So this is something with those deals, it takes time to conclude. These were discussed two to three months ago. However, coming to where we are today, up to now — and it is a bit premature, I would say, we don't see any pressure in charter rates, not at all. And the normalization of the trade routes through the Suez Canal may take some time. So we will just sit and wait. I cannot predict when we are going to be back to normality or what it's going to be over the next two, three, or four quarters sooner or later. It is quite a fragile situation. For the time being, charter rates and asset values hold at levels similar to the ones we saw some months or some quarters ago.

That's helpful. I also wanted to ask about Neptune Maritime Leasing. Your investment in the company has been stable over the past few quarters. Could you talk a bit about the pipeline Neptune has and whether you plan additional investments over the coming quarters?

Yes, there is a pipeline. As I said, it has a total current financing with total future commitments, which is in total of close to $0.5 billion. Now our cash outflow or our investment to Neptune, it's also a function of what levels of back leverage Neptune will be receiving, whether the Neptune funding is going to be 100% with equity from the shareholders and/or with back leverage from other financial institutions, which is something we will take on a case-by-case basis. So I'm afraid I cannot provide any prediction about how much additional equity as shareholders we're going to be putting to Neptune, which depends on the leverage we're going to be getting. But there is a pipeline. There are currently deals not yet committed but under discussion. Whenever we feel that transactions make sense, we are more than willing to utilize our equity. If we can optimize our returns with additional back leverage, this is something we will consider as well.

This concludes our question-and-answer session. I would like to hand things back over to Mr. Zikos for any closing remarks.

Thank you all for dialing in to today's call. We are looking forward to speaking with you again in the next quarterly results call. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.