Costamare Inc. Q3 FY2025 Earnings Call

Good day, and welcome to the Costamare Third Quarter 2025 Financial Results Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Gregory Zikos, CFO. Please go ahead.

Thank you, and good morning, ladies and gentlemen. During the third quarter of the year, the company generated net income of about $99 million. After the spin-off of Costamare Partners Holdings Limited, Costamare Inc. remains the sole shareholder of 69 containerships as well as the controlling shareholder of Neptune Maritime Leasing. In September, following up from our previously announced order of 3,100 TEU capacity containerships, we exercised our option for 2 more sister ships to be delivered in Q1 2028. Upon delivery, they will also commence an 8-year time charter with the first-class liner company. Since last quarter, we have also fixed 8 vessels with a forward start for periods ranging from 12 to 38 months. These transactions resulted in increased contracted revenues of about $310 million. Our fleet deployment stands at 100% and 80% for 2025 and '26, respectively. Total contracted revenues amount to $2.6 billion, with a remaining time charter duration of about 3.2 years. Regarding the market, the positive outcome from the latest trade discussion between the U.S. and China and the delay in the implementation of port fees should positively contribute to global increased trade flows. Without the fleet of less than 1%, the charter market remains strong with rates fixed at healthy and stable levels on the back of vessel shortage and steady demand. Finally, with regards to Neptune Maritime Leasing, the growing leasing platform, 50 shipping assets have been funded or are committed and total investments and commitments are exceeding $650 million. Moving now to the slide presentation. On Slide 3, you can see our third quarter results. Adjusted net income was $98 million or $0.81 per share. Net income for the quarter was around $93 million or $0.77 per share. Our liquidity stands at about $560 million. Slide 4. We have concluded newbuild contracts for another 3,100 TEU containerships with expected delivery in Q1 '28, bringing the total number of new building orders to 6. Upon delivery, each vessel will commence an 8-year charter with a leading liner company. On the employment side, we have increased our contracted revenues through new chartering agreements by more than $310 million. In addition, our revenue days are 100% fixed for '25 and 80% for '26, while our contracted revenues are $2.6 billion with a TEU-weighted remaining duration of 3.2 years. Moving to Slide 5. Regarding our financing arrangements, we have agreed to the pre- and post-delivery financing of our 4 new buildings. We have no major maturities till 2027. On the S&P side, we have concluded the acquisition of a 6,500 TEU container vessel. Slide 6. On our leasing platform, we have invested around $180 million. NML has funded or committed to fund 50 shipping assets for a total amount of more than $650 million. Finally, we continue to have a long uninterrupted dividend track record. Moving to Slide 7, the last slide. Charter rates in the containership market remain at firm levels. The idle fleet remains at low levels at about 0.9%, indicating a fully employed market. With that, we can conclude our presentation, and we can now take questions. Thank you. Operator, we can take questions now.

The first question comes from Omar Nokta with Jefferies.

I have a couple of questions. Looking at your chartering activity, you've added significant visibility by fixing several ships for an average of at least two years. I'm curious about how chartering activity has evolved over the past couple of months, especially considering the volatility in the freight market with large fluctuations in freight rates. Rates hit a low about a month ago and have since increased. Given your active participation in the chartering market, have you observed any changes in liner appetite or shifts over the past several weeks? Any insights you can provide on recent developments in chartering would be appreciated.

Sure. First of all, regarding the box rates, you are correct. Last week and overall last month, box rates have increased, particularly on the U.S. West Coast trade route. Now, concerning the charter market, there is a shortage of ships, especially larger vessels. Therefore, any available ships are certainly in demand for chartering. The market remains very healthy, with high demand and quick absorption of ships. A key indicator to consider is the idle vessels; when excluding dry dockings or technical issues, this is less than 1%. An idle fleet of less than 1% indicates that we have a nearly fully employed market. Charter rates are generally holding up well. It's uncertain whether this trend will continue and for how long, due to various geopolitical events that may impact it. However, at this moment, the market is healthy, and liners are generally eager to charter vessels. You could argue that they might be less inclined to commit to longer charter periods compared to the past, but there are still instances of 2- or 3-year time charters for secondhand vessels being arranged on a forward basis. Given the current supply of vessels is relatively limited, the fundamentals appear quite tight and positive.

I wanted to follow up and ask about the secondhand acquisition you mentioned. You purchased the 6,000 TEU vessel built in 2006, which appears to be under contract to Maersk. Could you elaborate on how this acquisition came about? Was it a direct purchase from Maersk with a charter back to them? Do you see potential for more opportunities like this in the sale and purchase market?

Yes. I believe this vessel has been chartered back to Maersk. This involves a structured sale and leaseback arrangement. There could be more opportunities like this in the future, although we haven't found anything similar that seems viable yet. However, there is potential. As you may have noticed, we have been concentrating on new buildings for the 3,100 TEU ships, having previously finalized four mentioned in the Q2 results. We have now added two more options, expected to be delivered in Q1 '28. We have mostly arranged financing for the first four on a back-to-back basis and are finalizing the financing commitment for the last two. This makes sense for us, and we remain active in the market. Whether it's secondhand vessels or new buildings, we plan to be quite active as long as we are comfortable with the residual value risk of our equity.

The next question is from Climent Molins with Value Investors.

Following up on Omar's question on the first one. Could you talk a bit about whether you believe the recent increase in freight rates is sustainable? It seems it was mostly a function of front running as tensions between the U.S. and China increased, but those have been lowered since. So how do you think about the trade-off of having more visibility versus the front running?

For freight rates, particularly box rates, this is a matter that can be better addressed by the liners who have more insight. I agree that the increases in freight rates observed last week and last month were largely driven by front running, which may relate to the adjustment of port fees and schedule changes among liner companies. Regarding the sustainability of these rates in the medium or long term, I can't provide a definitive assessment. Historically, if you examine box rates over the past 3 to 6 months or even a year, they have shown a downward trend. However, I'm unable to predict where box rates might be headed from today over the next 3 to 6 months. Liner companies likely have a better grasp on this situation.

Yes, makes sense. No one can really forecast that. And also following up on Omar's second question, it seems the Maersk Puelo is fully committed until next October, but Maersk has options to extend employment until 2031. Could you talk about how likely those are to be exercised given the rate?

I'm afraid these are charter risk options, and it's up to the charter to decide whether to exercise them. I cannot predict what a third party will do. Market conditions will influence whether the charter will take those options. This is a 1-year charter, and we have been conservative by factoring in this 1-year time period. After that, it will be the charter's decision based on their needs, market rates, and cargo demand to determine if those options will be exercised.

This concludes our Q&A or question-and-answer session. I would like to turn the conference back over to Gregory Zikos for any closing remarks.

Yes. Thank you for dialing in today and for your interest in Costamare Inc. We are looking forward to speaking with you again during the Q4 and year-end results call. Thank you. Operator, I think we have concluded.

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

Thank you.