Safe Bulkers, Inc. Q1 FY2022 Earnings Call

Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers Conference Call to discuss the First Quarter 2022 Financial Results. Today, we have with us from Safe Bulkers, Chairman and Chief Executive Officer, Mr. Polys Hajioannou; President, Dr. Loukas Barmparis; and Chief Financial Officer, Mr. Konstantinos Adamopoulos. Following this conference call, if you need any further information on the conference call or the presentation, please contact. I must advise you that this conference is being recorded today. Before we begin, please note that this presentation contains forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, concerning future events, the company's growth strategy and measures to implement such strategy, including expected vessel acquisitions and entering into further time charters. Words such as expects, intends, plans, believes, anticipates, hopes, estimates and variations of such words and similar expressions are intended to identify forward-looking statements. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the company. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in the demand for dry bulk vessels, competitive factors in the market in which the company operates, risks associated with operations outside the United States and other factors listed from time to time in the company's filings with the Securities and Exchange Commission. The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company's expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. And now I pass the floor to Dr. Barmparis. Please go ahead, sir.

Good morning. I'm Loukas Barmparis, President of Safe Bulkers. Welcome to our conference call and webcast to discuss the financial results for the first quarter of 2022. Let's start our presentation on Slide 3. Certain general comments: our 2022 quarter profitability exceeded the first quarter of 2021 profitability by $15 million, reaching net revenues of $77.7 million and net income of $36.4 million. We deleveraged our balance sheet year-over-year by more than $200 million, reducing our debt to comparable levels for our fleet's scrap value. We used EUR 100 million 5-year unsecured non-amortizing bond with a fixed coupon of 2.95% and maintained significant liquidity and capital resources of $298 million. We redeemed in April 2022 more than a quarter of our 8% preferred shares, improving our weighted average cost of capital. Furthermore, we have significant cash flow visibility with over $400 million of charter contracts. At the same time, we continue to focus on fleet renewal and expansion with 8 Phase 3 newbuilds on order and 42 vessels in the water with an average fleet age of 10.4 years. In May, we took delivery of our first Phase 3 Kamsarmax class MV Vassos and have also expanded our Capesize fleet to 7 vessels. Our financial strength enables us to declare a dividend of $0.05 per common share, noting that at the same time, we are renewing our fleet with secondhand and Phase 3 newbuilds ahead of the competition. Allow me now to guide you through the company's key investment highlights as presented on Slide 4 and 5. Safe Bulkers is a top 10 pure dry bulk vessel owner in the Panamax segment with a heritage of over 60 years of track record experience and central management led by Polys V. Hajioannou. With strong company balance sheet fundamentals, ample liquidity, leverage at comparable levels to fleet scrap value and secured cash flows from reliable counterparties, we have executed 8 Phase, Tier III newbuilds. Our fleet expansion and renewal ahead of peer competition and the expected impact of the environmental regulations of 2023 onwards. We took delivery of our first Phase III newbuild a few days ago. We have $463 million of secured contract revenues, 25% of our fleet is contracted for more than 1 year, our fleet average charter period duration is about 1.2 years and we have an additional yearly revenue capacity of about $20 million from our 17 scrubber-fitted vessels due to the inherent fuel price differential. Our 42 vessels fleet is 85% comprised of Japanese vessels with superior modifications and commercial and operational upgrades, which cause a substantial premium both in chartering and resale value. The order book remains at a 20-year low, and market fundamentals are positive for the remainder of 2022. We believe that the company is well positioned for the long run with an environmental-based advantage. Moving to Slide 5, we highlight certain key figures to create value. All numbers presented are as of quarter end. More specifically, our liquidity and capital resources are at $359 million, consisting of $166 million in cash and $193 million in undrawn available revolving credit facilities and secured commitments. Furthermore, we have contract revenue of $426 million net of commissions from our non-cancelable spot and period time charter contracts. Our CapEx was $243 million in relation to these 9 Phase 3 newbuilds, the fact of which we took delivery a few days ago. And we had $409 million of outstanding consolidated debt, including our EUR 100 million unsecured bond issued in February 2022. Our fleet scrap value of $395 million is calculated on the basis of our fleet aggregate lightweight tons and scrap rate of $662 per lightweight, again as of quarter end. On top of our liquidity and capital resources, we had as of quarter end, an additional borrowing capacity concerning 5 unencumbered vessels and 7 newbuilds upon their delivery. Moving on to Slide 7 and the dry bulk market. We present the development of the CRB Commodity Index, which currently stands at a 5-year high with further upside potential. The index reflects basic commodity future prices, for example, energy, agriculture, precious metals and industrial materials, which represent a leading indicator for shipping. As a result of the ongoing Russia-Ukraine war, we have witnessed a rapid surge in prices during 2022. The updated forecast of the IMF in April following the Russia-Ukraine war cites the global GDP expected growth of 3.6% for 2022 which is a decrease from 4.4% previously and at 3.6% for 2023, which is again a decline from 3.8% previously. In addition, global protection for inflation started at 5.7% in advanced economies and 8.7% in emerging markets and developing economies. The Chinese GDP growth over the first quarter of 2022 was 4.8% despite the new domestic COVID-19 lockdowns and the Russia-Ukraine war. The forecasted global dry bulk ton-mile demand is expected to increase by 2.2% in 2022 supported by the industrial materials like iron ore, coal, and agricultural commodities, while the expected dry bulk net fleet growth stands at 2.1% for 2022, which means that the squeeze in the supply of vessels may well be a realistic scenario. Let's go to Slide 8 to have a good look at present charter market conditions. As shown on the top graph, the Capes market for this year-to-date continues to be healthy. Capes lately have been volatile, driven by the commodities dynamics, which we analyzed. The forward freight agreement curve, present in red color is about $30,000 to $35,000 for 2022. Similarly, for Panamax in the lower part of the graph, the FFA carries about $25,000 to $30,000 for 2022. The prevailing commodities market, coupled with strong supply fundamentals, is likely to support the freight market throughout 2022. On Slide 9, we present our scheduled order book deliveries. In this positive charter market environment, we have 1 more delivery in 2022 following the delivery of our first Phase Kamsarmax vessel a few days ago, 5 in 2023, and 2 in the first quarter of 2024. In the same slide, in the bottom graph, we also present a record low order book for the forward years for Capes and Panamax vessels. The supply fundamentals are strong as we witnessed a historically low order book and the shortage in shipyard capacity, which is mainly covered by other sectors' orders such as containerships and tankers. Turning to Slide 10. We focus on the intrinsic value of our company due to the appreciation of our investments, which is about $150 million. Before this business cycle, as part of our fleet renewal strategy, we have invested in 9 newbuilds of the newest design compliant with the IMO regulation for CO2 and NOx emissions. We have also acquired 3 Panamax and 3 Capes second-hand vessels built in Japanese shipyards. The average acquisition price of our 9 newbuilds was about $32.5 million as compared with the current average market value of about $42.5 million. For the 6 secondhand vessels, the average price was $25.9 million as compared with the current average market value of $31.9 million. This timely stream of investments has appreciated by about $125 million. Furthermore, the company has previously invested in scrubber technology for 17 of its vessels. The surge in fuel prices in the last months, which is more evident in today's market, has pushed the very low sulfur fuel oil versus a high sulfur fuel oil differential to high levels, which translates to increased revenues for the scrubber-fitted vessels. Presently, the Hi-5 in Singapore stands about $280 per ton. According to the future market, the balance for 2022 stands at about $190 per ton. The scrubber-fitted post-Panamax consumes about 7,500 metric tons per year, pushing the implied scrubber gain potential to about $24 million per annum, in aggregate, for our company's 17 scrubber-fitted vessels. As a result, this intrinsic value of the company is calculated at approximately $150 million. Let's summarize the company's and market takeaways in Slide 11. Safe Bulkers has a strong upside with the newbuild program and secondhand acquisitions with ample liquidity and capital resources, which favor opportunistically the expansion and strong balance sheet with leverage comparable to fleet scrap value, future visibility of contracted cash flows. We reward our shareholders with a sustainable dividend policy coupled with our fleet renewal strategy. At the same time, the market has strong fundamentals. With limited dry bulk fleet expansion for the next couple of years and new and forthcoming environmental legislation that sets new standards for shipping, we believe that Safe Bulkers will be at the forefront of environmental-based competitiveness with newbuilds ahead of competition, upgrades in the existing fleet, the use of biofuels and research for alternative fuels. Now let me pass the floor to our CFO, Konstantinos Adamopoulos, for our financial overview.

Thank you, Loukas, and good morning to everyone. Let me start with our quarterly financial highlights on Slide 13. During the first quarter of 2022, we operated in an improved charter market environment compared to the same period of 2021 with low interest expense and increased revenues, which also include earnings from scrubber-fitted vessels. Our quarterly net revenues stood at $77.7 million versus $62.5 million last year. Net revenues increased by 24% compared to the same period in 2021, mainly due to the increased TCE rate as a result of the improved market, which was also assisted by the additional revenues from our scrubber-fitted vessels. We had a TCE of $21,352 compared to a TCE of $15,567 during the same period in 2021. The net income for the first quarter of 2022 reached $36.4 million compared to $21.3 million during the same period of 2021. Our daily OpEx stood at $5,722 compared to $4,702 last year and a daily OpEx, excluding dry-docking and predelivery expenses stood at $4,923 versus $4,350 last year. Vessel operating expenses increased, mainly impacted by increased dry-docking expenses, which include low-friction paints application for upgrading the vessels' environmental performance, increased provision of technical services, and increased crew repatriation expenses due to the COVID-19 pandemic. The aggregate figure for our OpEx and G&A for the first quarter of 2022 was $7,242. This includes all dry docking and predelivery expenses and all director and officer compensation. Our adjusted EBITDA for the first quarter of 2022 increased to $46.9 million compared to $34.6 million for the same period of 2021. Our adjusted EPS for the first quarter of 2022 was $0.24, calculated on a weighted average number of 121.6 million shares compared to $0.14 during the same period in 2021, calculated on a weighted average number of 103.4 million shares. Let's conclude our presentation on Slide 14 with our quarterly operational highlights for the first quarter of 2022 compared to the same period of 2021. We were able to enter into several favorable time charters, substantially deleveraged our fleet, and improved our liquidity. As a result of our performance, the company's Board of Directors decided to declare a $0.05 dividend per common share. In February 2022, we successfully issued the 5-year unsecured non-amortizing bond in the amount of EUR 100 million, guaranteed by Safe Bulkers, which pays a coupon of 2.95% on a semiannual basis. We would like to emphasize that the company is maintaining a healthy cash position of around $141.5 million as of May 2022, and an additional $156.6 million in revolving credit facilities and secure commitments. The combined liquidity of a little less than $300 million provides us with significant firepower. Furthermore, we have contracted revenue from our non-cancelable spot and period time charter contracts of around $463 million, net of commissions. And we have additional borrowing capacity in relation to 7 newbuilds upon their delivery and 6 existing vessels. Our press release presents in more detail our financial and operational results. And now we are ready to take your questions.

This is Eli Winski speaking on behalf of Chris. I would like to discuss the updated outlook for the bulk market in light of the current geopolitical issues. You touched on the situation between Russia and Ukraine, but I would appreciate insights on how your business is adapting to these market changes. While I understand that predicting the future is challenging, could you share your thoughts on what the market might look like by the end of this year and into next year?

Yes. The updated market conditions is that we have entered the second quarter with a healthier market than we had in the first quarter, which underperformed due to several factors, including the break of the war in February between Russia and Ukraine, which had a negative effect, and the prolonged COVID lockdowns in the Shanghai area in China. So, this has muted the market for much of Q1. The recovery started in May, a bit later than other years, and the market is improving from that point on. Now the Ukraine war will change the dynamics of the market in that we would lose the exposure claims from Ukraine, which is around 40 million to 50 million tons a year at least for the foreseeable future. And then we will have a problem with sanctions cargo from Russia, so that people cannot load on their ships. The joint effect of losing these two countries will be around 100 million tons. And this impact can be replaced by other countries, but without that, the whole amount will not be replaced by the rest of the world. Of course, the ton-mile effect will cover part of this loss because whatever is substituted from other countries will come from longer distances. We're seeing cargoes now from Australia being carried to places far away that they used to be supplied from the Black Sea. So initially, there is a benefit on ton miles. But later on, I think we will see a shortage, especially on grains. To the contrary, we see increased movement of coal because of the conflict. All the environmental issues will be postponed, as countries, especially in Europe, have to rely more on coal supplies for the foreseeable future. So the sanctions will delay the carbonization of the market indirectly. Overall, the picture is unclear how it will develop. But there are pluses and minuses from this equation. If we add upon this COVID fear in China with the recent lockdown of about 7 weeks there, we believe that the Chinese government will follow stimulus packages for their economy in the months to come to recover this loss of productivity and slowdown in production due to COVID. This should be positive for iron ore trade and trade into China.

Got it. So just a quick clarification, you said out of Ukraine, that's a loss of 50 million tons a year. Is that what you were saying, 50 million tons?

No. 40 million to 50 million tons, it's the amount that every year we were expecting to see from Ukrainian exports.

It's a little net effect of 100 million tons given the sanctions in Russia?

Yes. Together with Russia, it's around 100 million. Other countries will cover a significant portion of that, but not entirely. So ton miles will increase because other countries are further away from receiving areas like North Africa, Egypt, and the Middle East. Some of this will be accounted for by increased ton miles and the loss of cargo. However, the quantities won't meet expectations. I believe we will observe a grain shortage in the second half of the year.

I understand that your time charter rates were up compared to last year, but they have decreased from the previous quarter. There is typical seasonality involved, but the decline is steeper than what has been seen historically. Was this primarily due to specific headwinds impacting the first quarter, or are there other factors we should consider?

Q1 is typically slow. The average we recorded in Q1 is still satisfactory, over $21,000. It's important to note that we experienced several dry docks during this quarter. I am reasonably optimistic about the upcoming quarters, but we will face significant challenges from various sources. Currently, we may experience a very strong market in one area and a weak market in others. Therefore, we are waiting to observe the new trends and routes that will emerge as long as this war continues.

Got it. One more for me. So what is your contracting strategy here for the rest of the year and into 2023? I think you guys are 78% for the full year. What does that look like to increase that number throughout the rest of this year?

For the rest of 2022, we prefer to work mainly in the spot market. If we can find charters that could take us well into 2023, we will go for 1-year charters, taking us past the first quarter of Q1 of '23. For the bigger ships, the Capesize bulk carriers, at the right time in the market, we prefer to try and fix for 2- or 3-year charters. It’s much easier to find 2- or 3-year charters on the Capesizes than on the Kamsarmaxes because the forward curve is always undervalued on Kamsarmaxes, while it is sometimes more favorable on the bigger ships. So where possible, for the bigger ships, we will be going for 2- or 3-year charters and for the smaller ones up to 1-year charters.

Our next question comes from Ben Nolan with Stifel.

As you discussed your outlook for the dry bulk market and how you see things developing, I'm interested in your vision for the company over the next three years. You've been actively ordering new vessels and upgrading the fleet, and you now have a dividend. Based on your expectations for the dry bulk market, how might the company change three years from now if everything goes as you hope?

Yes. I believe that a modern shipping company must be active throughout all cycles, have competitive and contemporary vessels, and be capable of competing in the market. For instance, we recently received our Phase III, Tier 3 newbuild last month, which we secured at a rate exceeding the spot market by about $7,000 or $8,000 for modern Kamsarmaxes. Consequently, the ship earned $35,900 for a round duration of 4 months while modern Kamsarmaxes were making $28,000 daily. This is due to the ship's efficiency, as it consumes very low amounts of fuel each day. As we start receiving delivery of these ships—over the next 18 months, we will add 9 new vessels to our fleet—we will reduce the average age of our fleet by 2 years. In 2 years, the fleet's average age will still be 10 years old. Additionally, we plan to acquire a few younger, modern secondhand ships, no older than 10 years. We recently purchased 3 Capesize bulk carriers and are exploring further opportunities. We believe these vessels can be chartered over the next 18 months at favorable rates for 2- or 3-year terms with minimal risk on their residual value. Thus, we will combine our order book with selective acquisitions, especially of larger ships. The future engines and fuel types we'll use are not yet determined, as we can't predict whether it will be methanol, LNG, or another option. So for now, we are focused on sourcing the best ships from reliable shipyards that offer low consumption rates. These vessels use 6-7 tons less fuel daily than similar modern ships, which is significant given that fuel costs are nearing $1,000 per ton. By continually renewing our fleet with new ships, we aim to position ourselves as a modern company over the next 3-4 years. During this period, we will evaluate how to best invest the liquidity generated from our revenues, considering which engines and fuels to invest in. Currently, we don't have a definitive direction but we want to keep our options open before committing to a long-term strategy. Therefore, we will utilize the best available designs and keep an eye on technological advancements and environmental standards to enhance our environmental sustainability.

Okay. But you do still expect your growth to take advantage of the market and to be able to continue to grow the company as compared to using this as an opportunity to really increase dividends substantially or something like that?

The dividend increase is the easy part. You can always do it. The difficult part is to have the dividend sustained in the long run and to grow it consistently over time. It’s important not to go up and down and give it out in one go when you don't know how much money you will spend on new technologies and how much investment you would do. We have a selected growth plan, renewal plan, and deleverage plan. We reinstated last quarter a dividend, which is not, of course, the largest in the market because we combine it with other actions, but we want to believe that what we are doing here is creating value for our shareholders in the long run. So we are focusing on what creates value for shareholders in the long run.

I understand. You have historically concentrated on the Panamax class fleet, including Panamax, Kamsarmax, and Post-Panamax vessels. However, you've recently begun to expand into the Capesize sector. Do you see potential for growth in this area that could allow you to achieve some scale, even if it doesn't reach the same level as your other segments?

Yes. Look, I mean, since all our new ships are Kamsarmaxes and Post-Panamaxes, it’s logical to try and expand in a different sector to spread out the risk and have more diversification. We selected the bigger ships because we believe that there are opportunities from time to time. There are ups and downs in the market affecting prices as well. You can have low prices for 2-3 months that may present a good buying opportunity on Capesize bulk carriers, and then the market may recover after 6 months. With the COVID restrictions in China, I believe that there will be enough stimulus actions taken by the Chinese government to increase production in China and investments that can help their economy. Therefore, we see that we don’t need to take more risks by investing in the same sector when the order book for Capesize is very low. We’ve seen that scrap value is appreciating and these ships are made of a high-value steel, which increases scrap value. This also gives us leverage in that market while our investments remain in the Panamax to Post-Panamax medium sector. That explains this acquisition focus on Capesize bulk carriers. We do not intend to go to smaller ships despite the lucrative trade lanes as prices in that sector are sometimes more expensive than even a Capesize.

Our next question comes from Chris Robertson with Jefferies.

Could you discuss the older segment of the fleet regarding your sales and investment strategy? Additionally, are there any necessary upgrades ahead of the new IMO regulations this year that might require dry docking or off-hire in the upcoming quarters?

As far as we are concerned now, the older part of the fleet, which includes 6 vessels built between 2004 and 2006, are all Japanese shipyards, and they appear to be equipped to serve for the next few years. Of course, we are not much interested in trading these ships until they are scrapped. Our history has shown that in the past, we used to sell ships at around the 10-year mark. These days, it’s nearer to 16-17 years. Overall, I believe the aging of the fleet will create problems as older vessels cannot comply with regulations after 2024 without making significant environmental investments. This will create a positive market condition for modern ships, as charters will likely avoid older vessels due to penalties faced in various ports worldwide regarding emission charges. This provides a more attractive horizon for the younger ships, particularly those that consume significantly lower quantities of fuel. Additionally, we have observed that a certain segment of the fleet may need to slow down to meet emission targets. Overall, while our older ships are all built in Japan, I think the market will face challenges in this regard. Loukas, do you want to elaborate?

If you consider that about 50% of our fleet is relatively young due to our ordering of 9 ships which are Phase 3 and from the previous ordering cycle about 11 eco ships. The other 50% mostly includes Japanese vessels, which are much more efficient relative to Chinese-built ships that era and can easily comply. I think the problem lies with heavier vessels, larger vessels that, as Polys said earlier, will face increased competition based on new regulations. From our strategy, we will continue upgrading our fleet during dry dockings, do what's necessary, and monitor the environmental performance to better meet our standards going forward. We believe this will lead to very good performance over the next two years. Any discussion regarding a new fuel is a question for the next generation, probably after 2025 or 2027, as there isn't currently any proven suitable fuel available.

Yes. There's certainly a lot of technological uncertainty here. My second question is related to the Series C preferreds that you redeemed. It looks like around 35% is still outstanding. I know you mentioned fleet renewal and deleveraging focus and things like that. But how are you thinking about the remaining Series C preferreds?

Look, it's not our priority. After the significant payment we made in the first quarter, I think redeeming more preferred shares is not our first priority. It’s a good class of shares to have on the balance sheet. We’ve done our part. If the strong market continues for another couple of years, we may consider the option again but at the appropriate time. We have the expansion, deleverage, and dividends in mind as well. So I think we've taken care of the preferred part for this year; we will see how strong the market is in 2023 and 2024 and if we have the liquidity to redeem more shares.

Overall, the company is looking closely at leverage, which is the debt part, not the equity part. If you consider that right now, we've reached a level where the leverage is comparable to our debt compared to our scrap value. This is a defining characteristic we would like to maintain in the future. Therefore, we don't want to see our leverage increasing substantially more than the scrap value of the vessels. This is the level where we feel quite comfortable. At the same time, to the extent that we can do additional period time short charter contracts providing visibility of our cash flows, this gives a good profile for anyone investing, as we are a low-leverage company with substantial contracted revenue and dividends. We also should not overlook that our Phase 3 vessels are being delivered sooner than expected before 2025.

Moreover, we try at any given time to utilize the reserves of the company as beneficially as possible for our shareholders. In the first quarter of this year, we had the opportunity to draw bonds in the Greek market with a coupon of less than 3%, which is very attractive. We used part of it to redeem preferred shares at 8%. Whenever we find specific opportunities to save money and create value for shareholders, we invest accordingly. We paid around $40 million, and with the saving of 5%, it's around $2 million a year; that is the differential between the interest rates of the preferred shares and the bonds we issued in February.

Our next question comes from Magnus Fyhr with H.C. Wainwright.

My question is related to how your chartering strategy and financing strategy have changed with recent events in Ukraine and building inflationary pressures. I think you answered the first question earlier, but just on the financing side, you did the $100 million euro bond, and I'm just curious with interest rates moving up, are you taking any proactive approach to fix some of that debt? Or most of your debt is fixed or a significant portion is fixed? So I was just curious if you have changed anything with inflationary pressures building?

Yes. Look, I mean, as we reduce our debt, we have less worry about inflation. But that is keeping us cautious. When we raised the debt and fixed our coupon at 2.95% with the bond, we decided to cash the benefits we had from preferred shares at that time, aligning with our priority to deleverage the fleet. Our loans are now down to around 30% of our assets, and we intend to reduce it even more. There will be a point when we take delivery of new buildings without financing, using liquidity to cover costs. Thus, we don’t feel the need to hedge because our interest rates have already risen to a level with flat curves across 2-3-5 years. I don't see interest rates going to 5% or 6% in the next 1-2 years. They may rise to 3%, but as we are deleveraging, the risk is minimal for the company. We are more concerned about how increased interest rates impact wealthy economies, which could lead to a recession and affect our industry than about the interest costs of our operations.

All right. Just one last. I mean you have one of the lowest operating costs in the industry. Is there anything you can do there to maintain that? And with inflationary pressures building as well? Or is that kind of a small cost within your overall operational expenses?

No, it's not a small cost. To be honest with you, I’m not happy at all with the current numbers because we, as shipowners, have been facing various pressures. It's not just inflation, but also the rise in energy costs, the increased price of transportation, coupled with the war's side effects that have raised the costs of transporting spare parts from Europe to the Far East. Additionally, we are experiencing increased challenges due to the COVID situation in China, making crew changes and dry docking complex and costly processes. Expanded dry docking costs, environmental improvements like low-friction paints, which are relatively expensive, are also factors keeping our operational expenses high. However, we do benefit from increased revenue due to reduced consumption from low-friction paints, ultimately saving fuel and increasing our time charter rates. Hence, while OpEx may seem rough now, we monitor every detail and expect our OpEx to decrease in the coming quarters, but not by a large margin, as several investments continue to occur.

We basically expense certain upgrades on environmental improvements, which raises operating expenses currently. Nonetheless, it's important we do so for better performance in the future.

I'm not showing any further questions at this time. I would now like to turn the call back over to management for any further remarks.

Yes. We would like to thank you for attending this conference call, and we'll be happy to discuss again with you in our next quarter's financial results. Thank you very much, and have a nice day.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.