Seanergy Maritime Holdings Corp.
Q4 2012 Earnings Call Transcript

Published: 18 Apr 2013

[Operator:]

Thank you for standing by and welcome to the Seanergy Maritime Conference Call on the Fourth Quarter and 12 months ended December 31, 2012 financial results. We have with us Mr. Stamatis Tsantanis. Chief Executive Officer, and Ms. Christina Anagnostara, Chief Financial Officer of the company. I must advise you that this conference call is being recorded today, Thursday, April 18, 2013. Please be reminded that the company publically releases financial results today before the market opens to New York where it is available to download on the Seanergy website which is www.seanergymaritime.com. If you do not have a copy of the press release, you may contact Capital Link 212-661-7566 and they will be happy to fax or email a copy to you. Before turning the call over to Mrs. Tsantanis we would like to remind you that this conference call contains forward-looking statements as defined in section 27A of the Securities Act of 1933, as amendment and Section 21E of the Securities Exchange Act of 1934, as amendment. Concerning future events and the Company's growth strategy and measures to implement such strategy, 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. 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 competitive factors in the market in which the Company operates; risks associated with operations outside the United States, change and rules and regulations applicable to the shipping industry, another risk factors included from time to time in the company’s annual report on form 20F and other filings with the securities and exchange commission or the SEC. The company’s fillings can be obtained free of charge on the SEC’s website at www.sec.gov, 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. Now, I will pass the floor to Mrs. Tsantanis, please go ahead sir.

[Stamatis Tsantanis:]

Thank you, Paul. Good morning everyone and thank you for joining our call. We will first review our fourth quarter and full year 2012 results and important company developments. Christina will give you an overview of the figures in more detail. Seanergy Financial performance in 2012 was adversely affected by the prevailing low market rate. For the three months ended December 31, 2012; our net revenues were $8.5 million, down 69% compared to the same period last year, while adjusted EBITDA was negative $1.7 million. This excludes non-cash losses of $109 million incurred on vessel sales and impairments. Our adjusted net loss was $8 million while net loss was $117 million or $9.79 per basic and diluted share. Our financial performance is mainly a reflection of available supply of dry bulk vessels and new comers entering the market which has resulted in a weak rate environment. Since the start of the fourth quarter 2012, a series of vessel sales and transaction unwinding has allowed us to significantly reduce our debts and enhance our shareholder value. Sales included the BET Intruder, the Clipper Grace, the Clipper Glory, and recently the African Oryx. The aforementioned vessels represent a deadweight reduction of a (154.5000) tonnes and the associated loan repayment amounted to $25 million. In addition, as part of our restructuring plan, we sold a 100% ownership stake in Bulk Energy Transport for a nominal cash consideration. At the time of sale, BET owned the two remaining Capesize vessels in our fleet, the BET Commander and the BET Prince with a total carrying capacity of 313,000 deadweight tonnes. The transaction closed on December 30, 2012 and as a result overall indebtedness of the Seanergy group decreased further by $46.7 million. In January 2013, our subsidiary, Maritime Capital Shipping Limited, sold its 100% ownership stake in four subsidiaries that owned the Handysize bulk Fiesta, Pacific Fantasy, Pacific Fighter and Clipper Freeway for a nominal cash consideration, to the third-party nominee of the lenders. As a result of this transaction, all their outstanding indebtedness of approximately $30.3 million was discharged. In total we sold 13 vessels and from their sales proceeds we significantly reduced the overall indebtedness of the company. In regards to our fleet employment profile, as of today, and in light of the current weak market conditions, we assure to employ our vessels for certain time period or on index linked contracts, seizing this opportunity, I would like to stress the fact that all of our vessels are being employed with what we believe to be highly reputable charters. Regarding general market conditions profit for the drybulk shipping appeared to be improving. On the demand side, we believe that the infrastructure and investment activity driving drybulk shipping remained healthy and (inaudible) excellent forecast that from 2013 to 2015 compounded annual growth rate in demand is expected to be around 5.8%. The main problem with drybulk market can still be calmed through vessel oversupply. In terms of the good results, in 2012 the drybulk fleet grew by 10.3% as new vessels are delivered at the record pace from the previous year, the order book has fallen below 20% of the existing good rate. Consequently going forward the ability of ship demand to absorb existing available vessels is clearly going to be more important than the evolution of the order book. On an encouraging note in 2012, vessel building contract and delivery times fell by around 43% in 2011, compared to 2011 levels. The trend is expected to continue as we don’t find industry condimental particularly strong full fledging the orders so far in 2013 we have seen an increase in operating activity of 35% compared to 2012, the activity, it should be understood that this represents an increase from a very low base and for profits we saw from that re-emergence of a new speculative ordering ways like we the one seen in the previous years. The increased ordering is fueled by a record low new building prices but we will be seeing them around (inaudible) yard given the ability of new fuel efficient record designs, it is therefore the case that (inaudible) liquidity will be willing to place orders that is following the cycle as it will allow them to replace all the vessels up for good returns. The demolition activities had a record in 2012 with more than 33 million dead weight has been recycled, shipping market’s weakness, negative returns, longer duration of ship owners derived cash and the emergence of new environmental regulations all from continued future event in the volume of demolition activity. Under this condition, the steady rise in the volume of cargoes could work towards long run oversupply concerns. Now, our Chief Financial Officer, Christina Anagnostara, will go over the fourth quarter and 12 months of 2012 financial results.

[Christina Anagnostara:]

Thank you, Stamatis, and good morning to everyone. For the fourth quarter of 2012, net revenues were $8.5 million compared to $27.5 million in the same quarter in 2011. The 69% fall in net revenue reflects lower trade rate earned by our vessels compared to the same quarter of last year as well as a 25% reduction in vessel ownership from 30 vessels to 15 vessels. Adjusted EBITDA was negative $1.7 million excluding losses of $109 million resulting from the vessel sales and non-cash impairment losses. Including the non-cash items, EBITDA was negative $110.7 million compared to EBITDA of $15.6 million in the fourth quarter of 2011. Net loss for the quarter was $117 million or $9.79 loss per basic and diluted share, as compared to net income of $6.6 million or $0.91 earnings per basic and diluted share in the same quarter in 2011. The weak market environment is rather than deteriorating of underlying operating performance as compared to last year even though we implemented several cost saving measures. Let’s discuss the results of 2012. Net revenues amounted to $55.6 million in 2012 as compared to $104.1 million in 2011, a decrease of 47%. Adjusted EBITDA was $5 million in 2012 excluding losses of $167.1 million resulting from vessel sales and non-cash impairment charges compared to $53.8 million in 2011. Including the aforementioned non-cash charges EBITDA was negative $162.1 million in the 12 months ended December 31st while EBITDA was negative $148.1 million in 2011. Excluding the effects of non-cash losses a 49% fall in daily Time Charted Equivalent rates and fewer fleet operating days resulted in deteriorating of operating performance as we selected in adjusted EBITDA. Net loss in 2012 was $193.8 million or $16.74 loss per basic and diluted share as compared to a net loss of $197.8 million or $27.04 loss per basic and diluted share in 2011. As previously explained losses were mainly caused by the lower time charter equivalent rate and by our vessels would compress operating margin. For the fourth quarter of 2012 our time charter equivalent rate was $5,592, down 62% compared to our time charter equivalent rate of $14,806 in the same period a year ago. For the fourth quarter of 2012 our time charter equivalent rate was calculated as a weighted average of $7,407 daily rate and under current charter contracts and $1,976 daily rate and operating under bareboat agreement after the taxing the fixed operating expense allowance. Time charter equivalent rate on the vessels operating under bareboat charter employment before reduction of operating expense allowance amounted to $6,409. For 2012 time charter equivalent rate was $7,465, a reduction of 49% from $14,524 in the same in 2011. Our time charter equivalent rate was calculated as a weighted average of $8,968 daily rate and under time charter contracts and $3,260 daily rate and on vessels under bareboat agreement after deducting the fixed operating expense allowance. Time charter equivalent rate for the vessels operating under bareboat vessel employment is for deduction of operating expense allowance amounted to $7,659. During the fourth quarter our daily vessel operating expenses decreased to $3,502 per vessel per day, down from $4,688 per vessel per day in the same quarter a year ago. For the fourth quarter, our daily vessel operating expenses excluding the ownership days of vessels under bareboat charters amounted to $4,773. For 2012, vessel operating expenses decreased to $4,189 per day from $4,757 per day in 2011. In 2012, our daily vessel operating expenses excluding ownership day of vessel under bareboat charter amounted to approximately $5,420. For the 12 month period, daily general administrative expenses amounted to $1,046 compared to $1,188 in 2011, representing a decrease of 12%. As of December 31, adjusted debt inclusive of EBIDTA, were 6.3 million and our total outstanding debt was $208.6 million. Our total asset amounted to $121 million. During the fourth quarter, we received $69.9 million of debt, while for 12 months; debt was reduced by approximately $137.8 million. Today, our total of sum in debt is $173 million. Over the past year, due to shipping sector volatility and climate difficulty, the company has experienced significant losses and reduction in cost which has affected the company’s ability to satisfy its obligations. The company experienced significant reduction in cash flow as it had to re-charter its vessels at low prevailing market rates. Due to the above, the company decided under its loan agreement in respect of certain covenants, including in some cases the failure to make principal and interest payment, the failure to satisfy financial covenants and the triggering of cross default provisions. Today, the company has not obtained waivers from these defaults from its lenders. During the restructuring process, the lenders have continued to reserve their rights in respect of events of default under the loan agreements, the lenders have not exercised their remedies at this time, including demand for immediate payment, and however, the lenders could change their position at any time. While the Company continues to use its best efforts to complete the restructuring discussion and obtain waivers from its remaining two lenders, there can be no assurance that the negotiations will be successful or that it will obtain waivers or amendments from the lenders. Failure to obtain such waivers or amendments could materially and adversely affect the Company’s business and operations. Furthermore, the impact of the final terms of any restructuring is uncertain. As a result of the above, the Company's $208.6 million outstanding debt as of December 31 was classified as current. That will close my remark. And we now pass the call back to Stamatis for his closing remarks.

[Stamatis Tsantanis:]

Thank you, Christina. To conclude, today’s economic uncertainty is making particularly difficult to forecast the exact timing of the market in charter. Yet it is our firm belief that as dry bulk shipping has affected a global economic growth and development, the industry’s long term prospects remains prevalent. Regarding our company, as we discussed earlier, we have made significant progress in the implementation of our restructuring plans to-date. During 2012 and up to now, we reduced our indebtedness by 50% to $173 million through finalized agreements with three of our five lenders. We are currently holding discussion with our remaining two lenders to repatriate the outstanding indebtedness and we aim to reach a mutually acceptable solution that will stabilize the company’s financial position, enhance our balance sheet and significantly improve our shareholders value. Once again we would like to thank you for joining our call today. Thank you.

[Operator:]

And with many thanks to our speakers today, that does conclude our conference. Thank you for participating. You may now disconnect.