Diana Shipping Inc. Q1 FY2025 Earnings Call

Thank you for standing by, ladies and gentlemen, and welcome to the Diana Shipping Inc. Conference Call for the First Quarter 2025 Financial Results. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Ms. Semiramis Paliou, please go ahead.

Thank you. Good morning, ladies and gentlemen, and welcome to Diana Shipping, Inc. first quarter 2025 financial results conference call. I'm Semiramis Paliou, CEO of the Company and it's my pleasure to present alongside our esteemed team; Mr. Anastasios Margaronis, Director and President; Mr. Ioannis Zafirakis Director, Co-CFO and Chief Strategy Officer; Mr. Eleftherios Papatrifon, Director; Ms. Maria Dede, co-CFO. Before we begin, I'd like to remind everyone to review the forward-looking statements on Page 4 of the accompanying presentation. After a record year for dry bulk volumes through 2024, the market seems to have taken a general breather. This can be attributed to the current closing uncertainty, both economically as well as geopolitical. Even though industry segments, which are tariff sensitive, such as container vessels are very volatile, the dry bulk market has been uninspiring so far this year, except for a significant dip in February. The overall market levels are still historically healthy; that sentiment is clearly lagging even though cargo volumes are stable compared to the same period in 2024. Nowhere is this more evident than in the newbuilding market where dry bulk vessel contracting so far this year has slumped to only 0.1% of the global fleet. Q1 was the second lowest quarterly contracting level on record. Only Q3 2016 was lower, but the higher rates and asset prices were a fraction of today's levels. Unfortunately, scrapping remained at historically low levels, with only 16 vessels scrapped so far in 2025, representing 0.1% of the fleet. Meanwhile, the forward curve has become flat for all sizes. However, this has not stopped us from securing improved charter hires, especially in the case size segment. Turning to Slide 5. Let's review our company's snapshot as of today. Diana Shipping Inc. founded in 1972 and listed on the New York Stock Exchange since 2005, operates a fleet of 37 dry bulk vessels, six of which are mortgage risk. Our fleet has an average age of 11.6 years and a total deadweight capacity of approximately 4.1 million tons. We anticipate the delivery of two methanol dual-fuel newbuilding Kamsarmax dry bulk vessels at the end of 2027 and early 2028, respectively. Fleet utilization reached 99.6% for the first quarter of 2025, highlighting our effective vessel management strategy. As of the end of the first quarter, we employed 974 individuals at sea and on shore. Financially, our net debt stands at 42% of market value, supported by $187.7 million in cash reserves as of quarter end and total secured revenues of approximately $124 million as of May 22. Moving to Slide 6. Let's go over the key highlights from the first quarter and recent developments. In February 2025, continuing the renewal and modernization of our fleet, we announced the sale of motor vessel Alcmene for a purchase price of approximately $11.9 million before commissions. She was delivered to new owners on March 13, 2025. Furthermore, in March, we became a strategic partner with an 80% equity interest and invested in a newly established joint venture, Ecogas Holding AS. This joint venture has agreed to order two 7,500 cubic meters semi-refrigerated LPG newbuildings, with an option for two additional vessels. Delivery of the first vessel is expected in the third quarter of 2027 and the second vessel in the fourth quarter of 2027. In April, we celebrated the Company's 20-year anniversary of listing on the New York Stock Exchange with a Closing Bell Ceremony and hosted an Investor Day in New York. The investor presentation is available on the Company's website. As of May 22, the Company has raised $25.6 million from the exercise of 6,414 warrants under the ongoing warrant program to purchase common shares for cash. A further $64.9 million could be raised under the scope of the program if all outstanding warrants are exercised. As of May 22, 2025, we have also secured $86.8 million of contracted revenues for 66% of the remaining ownership days of the year 2025 and have secured $36.5 million of contracted revenue for 13% of the ownership days of the year 2026. Finally, we are pleased to declare a quarterly cash dividend of $0.01 per common share, totaling approximately $1.2 million. Slide 7 summarizes our recent chartering activities. Since our last earnings presentation, we have secured favorable time charters for nine vessels, one Ultramax vessel at a weighted average daily rate of $14,000 for 232 days; three Panamax, one post-Panamax, and one Kamsarmax vessel at a weighted average daily rate of $11,764 for an average of 299 days. Two new capital vessels at $24,720 for an average of 490 days. Slide 8 highlights our disciplined chartering strategy. We focus on staggered medium- to long-term charters to avoid clustered maturities, ensuring earnings visibility and resilience against market downturn. Now, I'll pass the floor to Maria for a more detailed financial analysis.

Thank you, Semiramis. Okay. Going to Slide 9. We can say that this first quarter of 2025 was a good quarter for Diana despite the negative market dynamics in the dry bulk sector. Our time charter revenues for the first quarter were $54.9 million, decreased by about 5% compared to the $57.6 million for the same quarter last year. This decrease was due to the reduction in the size of the fleet and an increase in write-offs rather than time charter, as the average rates that our vessels were fixed at during the quarter were better than those of the same quarter last year, which we will see later in the presentation. For the same reasons, our adjusted EBITDA decreased to $23.3 million compared to $24.9 million in the first quarter of 2024, a decrease of 6%. Our adjusted EBITDA is calculated by deducting from our operating income depreciation and amortization of deferred charges and the gain on sale of vessels. Our net income for the quarter increased to $3 million compared to $2.1 million for the same quarter in 2024, an increase that is mainly attributable to decreased interest and finance charges as a result of the combination of decreased average debt and decreased weighted average interest rate. Net income has also been affected by decreased losses from nonoperating activities recorded at share values. Earnings per common share diluted was $0.01 in the first quarter of 2025 and remained unchanged compared to the same quarter of 2024. On the balance sheet side, our cash includes cash on hand and advanced time deposits maturing within three months included in cash and cash equivalents. Deposits with maturities above three months are excluded from cash and cash equivalents and restricted cash, non-current setting as compensating cash balance to secure our loan facilities. On March 31, 2025, our cash decreased to $187.7 million compared to $207.2 million as of December 31, 2024. In the quarter, we generated positive operating cash flows, which covered our breakeven costs, which include operating costs and net service, but cash decreased due to the repurchase of our common shares in January 2025 in a tender offer, under which we purchased 11.4 million shares for $23 million. Long-term debt and finance liabilities, net of deferred financing costs, decreased to $623.9 million as of March 31, 2025, compared to $637.5 million as of December 31, 2024, a decrease of around 2%, which reflects the steady quarterly amortization of our investments. Going to Slide 10. In this slide, we present to you the financial and other data that affected revenues, our time charter equivalent rate, and the daily operating expenses rate for the period in review. The average number of vessels was 37.8% in the first quarter of 2025 compared to 39.7% as average assets in the first quarter of 2024, and decreased due to the sale of the vessel like streaming early in March this year, and the sale of two more vessels in the first and third quarters of 2024. This decrease in the size of the fleet is also reflected in the decreased ownership, available, and operating gains of the fleet which we use to calculate time charter equivalent daily operating expenses and utilization. Our time charter equivalent, which is defined as our revenues less voyage expenses divided by the available days, was $15,739 per day for the first quarter of 2025 compared to $15,051 per day in the first quarter of 2024, an increase of 5%, reflecting the better rate achieved in the quarter compared to the same quarter last year. It is important to note that this increased time charter equivalent rate is the result of our consistent and disciplined commercial strategy rather than market conditions—a strategy designed to leverage market volatility, deliver a more resilient performance across cycles, and stable earnings. Fleet utilization for the quarter also increased to 99.6% compared to 99.1% in the same quarter last year as a result of less idle higher days. Vessel operating expenses decreased in absolute numbers by 4% due to the decrease in the average number of vessels, but the daily operating expenses increased by 2% to $5,866 per day compared to $5,735 per day during the same period in 2024. The Company actively and consistently monitors its expenses and tries to maintain its costs at an optimal level without compromising the quality of its fleet and its operations. Slide 11 presents our current debt profile. This slide shows how the Company has prudently and proactively designed its financing strategy, having a mix of variable and fixed-rate debt instruments. Variable rate instruments consist of secured loan agreements, fixed at term SOFR plus a margin. Fixed-rate instruments consist of an unsecured bond for sale and leaseback agreements at very favorable fixed rates and an interest rate swap under which we receive SOFR and pay fixed rates. We have a fixed annual debt amortization of $47.1 million without any maturities or balance until 2029 when our bond becomes due. This steady amortization provides good visibility of our debt service costs, reduces debt in a predictable manner, allows better management of the Company's liquidity, strengthens our balance sheet, and reduces the Company's credit risk profile. As of March 31, 2025, in Slide 12, consider our breakeven rate was $16,218 per day. As of May 22, 2025, we have fixed 66% of the ownership days for the remainder of 2025 and expect to generate $86.8 million of revenues at an average time charter rate of $15,806 per day. For 2026, we have 13% of the ownership days and expect to generate $36.5 million of revenues at an average time charter rate of $20,363 per day. On top of our contracted revenues, we have calculated the revenues that we could generate for the unfixed days of 2025 and 2026. By using the FFA rate presented in this slide. Based on these assumptions, we have estimated that for the remainder of 2025, we could generate revenues of $123.6 million on aggregate at an average time charter rate of $14,911 per day. And for 2026, we would generate revenues of $190.7 million on aggregate at an average time charter rate of $14,118 per day. Although it appears that the estimated revenues may not be adequate to cover our breakeven rate, going forward, by taking into account the current FFA rates, which are not particularly strong due to negative market positions in the dry bulk sector, increased volatility, and uncertainty, we believe that through our targeting strategy, we could capture any market upside going forward by securing short- to medium-term charters at one-year time charter rates. Also, we believe that the Company is well positioned, having a strong balance sheet and predictable cash flows to navigate through the cycles even if market conditions do not improve. On Slide 13, this slide presents our dividend payout since the third quarter of 2021, which has rewarded our shareholders with quarterly distributions of both cash and shares. Consistent with this payout, we have declared another dividend of $0.01 per share, increasing our cumulative dividend paid since 2021 to $2.67 per common share. Thank you for listening to this presentation. And now, I will pass the floor to Stasi, who will continue with a dry bulk market overview.

Thank you, Maria, and welcome to the participants of this quarterly earnings call of Diana Shipping Inc. Looking briefly at the markets, it is troublesome to note that as if the market did not have enough factors creating volatility, such as geopolitical and economic uncertainty and supply issues, we now have the addition of tariffs and trade restrictions introduced between the U.S. and practically all its trading partners. The effect on spot and time charter rates has been generally negative so far. Sentiments have certainly taken a downturn as a result of such huge uncertainty about the future. As of May 27, the 12-month time charter rates for Capes stood at about $19,000 per day for a scrubber-fitted ship after reaching a high of $35,000 a day in March 2024. The Kamsarmax rate stood at $10,750 a day in May with a high of $21,000 per day in March of last year. Similarly, Ultramax time charter rates have dropped from $19,000 a day in February of last year to $11,400 per day only on May 27. Some recent good news on the tariff front is the trade deal reached between the U.S. and the U.K., which even though leaves plenty of details to be agreed provides for lower tariffs for steel and 10% tariffs for cars. More recently, it appears that China and the U.S. are making progress on leaving behind them the ridiculously high tariffs announced a few weeks ago and are settling for tariffs of 51% on average for Chinese imports to the U.S. and 10% baseline Chinese tariffs on U.S. exports with an effective average of 32.6%. Moving to the next slide on our macroeconomic development now. In view of recent tariff announcements and the risk of a trade war developing, the IMF has streamlined the 2025 growth rate estimates for China, India, the U.S., and the euro area by between 0.2% and 0.5%. So based on these predictions, China is expected to grow by 4% this year and at the same rate in 2026. India is expected to show a GDP growth of 6.2% this year and 6.3% in 2026. In the U.S., the economy is expected to grow by 1.8% this year and by 1.7% in 2026. Most importantly, though, World GDP growth is expected to be 2.8% this year and just 3% in 2026. Nevertheless, Chinese GDP grew by 5.4% during the first quarter of 2025, driven by robust consumer demand and increased industrial production. Escalating trade tensions with the U.S. and headwinds in the property market create huge challenges going forward. Slight encouragement comes from the fact that the revised measures announced in mid-April by the USTR reduced in scope the number of vessels and port calls that will be impacted versus the previous proposals. We need not go into greater detail in this short presentation, but we’ll just mention that the effect on the Diana fleet and its charters of such measures in their current form will be relatively minor. Going for a brief now commodities update. According to Commodore Research, steel output at large and medium-sized steel mills in China is up 5% so far this year, while stockpiles of flat and construction steel have been going down over the last two months. Indian steel production has also risen this year by about 9% on a year-on-year basis. However, there is considerable overall weakness in steel output outside of China and India, which is bound to create a headwind for the dry bulk market. Global iron ore trade is expected to fall by 1% this year with Chinese demand dropping, while field production trends remain soft in most key economies outside China and India. World seaborne volumes are expected to drop to 1.57 billion tons this year, and for 2026, shipments are expected to be flat compared to this year. Global seaborne coking coal trade is expected by Clarkson to decline by 1% this year as macroeconomic headwinds put pressure on demand for steel in key economies. Chinese imports are expected to go down by 4% this year, mainly due to softer Chinese demand; thermal coal shipments are expected by Clarksons to drop by 4% this year to just over 1 billion tons and drop by a further 2% in 2026. Chinese imports are expected to drop by 6% this year compared to 2024. Again, due to softer Chinese demand, seaborne grain trade is expected to drop by 2% in the 2024-'25 season. Strong stockpiling and high domestic output are cited as the main causes for this trend. In the coming trade years, starting next month, the trend is expected to reverse course. The USDA anticipates growth of between 4% and 6% for global corn, soybeans, and wheat exports. Growth in soybean exports will be led by Brazil, where exports of this commodity alone are expected to reach 12 million tons. According to Braemar, the greatest significance for shipping of the soybean projections would be, first, the ever-greater reliance on Brazil's port and supply chain infrastructure; and second, additional long-haul Panamax trade from Brazil to China, Taiwan, and Vietnam. Minor bulk trades are expected to remain stable this year and increase by 2% in 2026, reaching nearly 2.3 billion tons. Metals such as bauxite, as well as minerals such as cement, pet coke, and aggregates are anticipated to play a key role in achieving growth for shipments in this sector going forward. Moving now to our slide on fleet development. Looking at the order book, we stood at the end of March this year at $107.2 million deadweight, representing 10.3% of the trading fleet. On the Handymax side, there were $28.6 million deadweight on order, equivalent to 11.5% of the fleet. On Panamax, Kamsarmaxes, the $35.9 million deadweight on order represents 13.3% of the fleet, and on Capes, the $32.1 million deadweight on the order book is equivalent to just 8% of the trading fleet of Capes. Deliveries this year are projected by Clarksons to reach 38 million deadweights, followed by an increase to $42 million deadweight in 2026. So far this year, the bulk carrier fleet has increased by 1.1% in deadweight terms with 135 ships delivered with an aggregate of 9.3 million deadweight. Dry bulk contracting, as our CEO mentioned earlier, was very subdued during the first quarter of this year with just 14 vessels of a combined 1.4 million deadweight reported orders down 88% year-on-year on an annualized basis. As for demolitions, Clarksons expect these to reach 5.8 million deadweight this year and about $8.6 million in 2026. These figures will obviously depend on the state of the freight market for the rest of this year and sentiment based on anticipated future developments and earnings. A quick look at asset values and how they have developed. According to Clarksons, asset values in bulk shipping remained surprisingly robust compared to the end of 2024 levels in the face of relative weakness seen in current and projected earnings. Newbuilding Cape resales are trading at around $76 million, about the same as the end of last year, while the price of a 10-year-old Cape has gone up from $43 million at the end of last year to around $45 million this month. Kamsarmax resale prices have come down slightly to $38.5 million since the end of last year, while 10-year-old vessel values have remained steady at around $25 million. Prices for Ultramaxes have remained steady according to Clarksons on both the retail and 10-year-old vessel price levels. Resales are at around $37 million, and 10-year-old vessels are trading at around $23.5 million. On a 12-month basis, however, prices have eased off by about 20% on average from the firm levels seen around the middle of last year on the back of firm earnings and expectations. Let's look at the market outlook now. The overall market outlook according to Clarksons for 2025 is for a softer year than 2024, with the fleet expected to grow by a reasonably modest 3% year-on-year, but demand is expected to fall this year due to several headwinds. However, slower speed, greater off-hire time due to special surveys and dry-docking, as well as pockets of port congestion could limit the downside. Red fee rerouting is expected to continue in 2025 and with arrivals in the Gulf of Aden still 70% below 2023 levels. On the demand side, seaborne dry bulk trade according to Clarksons is expected to drop by 1% this year, with a more modest decline of 0.4% projected in ton miles, supported by firm growth in long-haul bauxite shipments from Guinea, reduced market share for short-haul Indian iron ore shipments to China, and expectations for growth in South American grain exports promoted by fresh Chinese capes on U.S. grain, assuming, of course, these materialize. Commodore Research expressed some concern, which we share, regarding Chinese steam coal imports going forward. For as long as coal-derived electricity remains in contraction, which was 7% year-to-date, and domestic coal production continues to surge, it is obvious that Chinese coal imports will go down. This is not good news for the dry bulk carrier market, if it continues for several quarters. Braemar agreed with this forecast and state that China's coal import requirements will do much to determine vessel demand across the Panamax and Supramax, Ultramax sectors. According to Commodore Research, there is no other trade that can increase sufficiently to compensate for a year-on-year contraction in global coal trade imports. Looking out to 2026, Clarksons predict another year of softer earnings for bulk carriers with the fleet projected to grow by 3% year-on-year and trade growth being determined by prevailing macroeconomic conditions at the time, which are not sufficiently positive to justify much optimism. However, we need to wait for more developments on the macroeconomic front, which will affect demand next year. Turning to the last slide of this presentation. Analysts quoted in this short presentation mentioned several factors that they expect will influence the short- and medium-term future of the dry bulk carrier market. We summarize the most important points. On the positive side, we see strong Brazilian soybean as well as other grain crop season, the commencement later this year of iron ore shipments from Simandou in Guinea, revised measures announced in mid-April by the USTR reducing the number of vessels and port calls that will be impacted by them, red rerouting expected to continue for the rest of the year, gradual resolution of conflicts affecting Ukraine and Israel, leading to reconstruction, and finally, the lifting of sanctions against Syria, leading to the reconstruction of Syria itself. On the negative side, worldwide lower steel production outside India and China, protectionist measures with high tariffs leading to trade wars, bulk carrier fleet growth outpacing demand growth for 2025 and 2026, except for the Cape sector, large increases of hydropower output in India and China, anticipated long-term reduction in coal imports by China, and finally, weaker world GDP growth, if tariffs don't settle soon at reasonable levels. On this note, I will pass the call to our CEO, Semiramis Paliou, to present the most important financial highlights on the first quarter of this year as well as some takeaway points from this earnings call.

Thank you, Stasi. So, before we conclude today's presentation, I'd like to highlight our ongoing ESG initiatives. Diana Shipping Inc. is committed to promoting ecofriendly technologies and modernizing our fleet, transparently sharing emission data to ensure accountability. Amongst other things, building on partnerships and collaborations to advance our sustainability goals. So, moving on to Slide 19. In summary, Diana Shipping Inc. stands on a strong foundation built on over 50 years of industry experience and 20 years on the New York Stock Exchange. A seasoned management team adapts to addressing industry challenges, strong stakeholder relationships, and a disciplined strategic approach, a solid balance sheet with a strong capital position and a countercyclical mindset, an ongoing focus on rewarding our shareholders when possible, and a robust ESG strategy. So, thank you for joining us today. We now look forward to addressing your questions during the Q&A session.

Thank you very much for joining us today at the Diana first quarter 2025 financial results. We look forward to presenting to you again in the next quarter. Thank you for joining.