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Edited Transcript of SB earnings conference call or presentation 24-Feb-17 1:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Safe Bulkers Inc Earnings Call

Athens Feb 24, 2017 (Thomson StreetEvents) -- Edited Transcript of Safe Bulkers Inc earnings conference call or presentation Friday, February 24, 2017 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Loukas Barmparis

Safe Bulkers, Inc. - President

* Konstantinos Adamopoulos

Safe Bulkers, Inc. - CFO

* Polys Hajioannou

Safe Bulkers, Inc. - Chairman and CEO

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Conference Call Participants

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* Jon Chappell

Evercore ISI - Analyst

* Ben Nolan

Stifel Nicolaus & Company - Analyst

* Fotis Giannakoulis

Morgan Stanley - Analyst

* Magnus Fyhr

Seaport Global Securities - Analyst

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Presentation

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Operator [1]

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Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers conference call to discuss the fourth-quarter 2016 financial results. Today we have with us from Safe Bulkers Chairman and Chief Executive Officer, Polys Hajioannou; President, Dr. Loukas Barmparis; Chief Financial Officer, Konstantinos Adamopoulos; and Chief Operating Officer, Ioannis Foteinos. (Operator Instructions). Following this conference call, if you need any further information on the conference call or on the presentation, please contact Capital Link at 212-661-7566.

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 strategies, 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 may include, but are not limited to, changes in the demand for drybulk 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 I now pass the floor to Dr. Barmparis. Please go ahead, sir.

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Loukas Barmparis, Safe Bulkers, Inc. - President [2]

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Good morning. I am Loukas Barmparis, President of Safe Bulkers. Welcome to our conference call and webcast to discuss the financial results for the fourth quarter of 2016. Let's start our presentation with the developments in our industry.

The charter market has somewhat improved from the historical lows observed in the first quarter of 2016, as shown in slide 3. Presently, Cape market is at $8,000 per day compared to $1,500 for the same period last year. The Panamax market is at $7,500 per day compared to $3,000 for the same period last year.

Asset values, as shown in slide 4, have also recovered. A five-year-old Cape is sold at about $23.5 million compared to the low of $21 million last year. A five-year-old Panamax is sold at about $14.6 million compared to $11.1 million lows last year. However, asset values remain lower than the 12-year historical averages, which include also the high values of the big years of the previous cycle as well as the recent historical lows.

Let's examine the status of the supply and demand equilibrium. In slide 5, we see information about the net fleet change in Capes and Panamaxes. Dark blue bars denote deliveries, and light blue denote scrapping, while the number above represent the net increase. We observed smaller net increase in the number of Capes in 2016 and minimal for Panamax, where the vast majority of our fleet lies, 35 out of 38 vessels in total.

The excessive order book of the past years is substantially exhausted this year, as shown in slide 6, without accounting for potential cancellations or slippage. We believe that the problem of the order book is resolved, one way or the other. Some of the reported vessels have already been canceled. Some will be further delayed for 2018. But the important factor is that there are no new orders for newbuilds. Assuming a stable fleet size, the question for a potential and sustainable recovery is related directly to the global development, which dictates the demand for drybulk services.

In the context -- in the next few slides, we show certain information in relation to demand. In slide 7, we present certain data in relation to iron ore trade. Chinese imports, supported also by domestic production as well as global exports, are showing growth. A couple of tips: in January 2017, iron ore imports in China grew by 12% year on year. Second an additional effect is the increased ton-miles due to strengthening exports from Brazil, where substantial investments have taken place.

In slide 8, we present the development of coal demand. The percentages in the bars represent a decrease or increase against previous year. After a substantially weak 2015, the year of 2016 showed increasing strength for coal imports in China, while global demand seems to stabilize.

In January 2017, coal imports were up by 64% year on year. The import substitution in China continues, supported by Chinese government, in an effort to control local inefficient coal miners. In addition, China relies heavily on coal, as it remains a strategic fuel for electricity production.

Demand for grain, as shown in slide 9, supports historically the drybulk transportation demand. With [each seasonality] boosts in certain periods the charter rates as a result of concession of certain ports as well as increased ton-miles effect due to long distances traveled.

The key takeaways are presented in slide 10. One, excessive past-order book will be exhausted in 2017. Two, no additional drybulk orders have been placed. Three, stabilization or decrease of drybulk fleet. Four, general financing constraints remain; we face cuts in financing.

Five, the additional effect of installation of ballast water treatment plant in all vessels after September 2017, as well as other regulations. Keep in mind that about 15% of the total fleet is more than 15 years old, and should install a ballast water treatment plant at latest when they reach their fourth special survey within the next five years. In addition, after 2020, we have the limitation of low-sulfur regulations.

Six, China is a key player in drybulk transportation through development plans for infrastructure projects and thorough urbanization and substitution of Chinese domestic production.

And seven, the prospects for global growth, which have been enhanced recently, lead to improved market conditions and improving asset size, although there are rising concerns over protectionist policies.

Mr. Konstantinos Adamopoulos will now present, in brief, key points of our financial performance.

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Konstantinos Adamopoulos, Safe Bulkers, Inc. - CFO [3]

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Thank you, Loukas, and good morning to all. Let's now move in slide 11 to with quarterly financial highlights for the last quarter of 2016 compared to the same period of 2015. Net revenues increased by 6% to $31.7 million from $29.9 million, mainly due to an increase in charter hires. Our time charter equivalent rate per vessel increased by 8% to $8,936 per day from $8,251 in the same period in 2015.

Daily vessel operating expenses decreased by 9% to $3,711 compared to $4,072 for the same period in 2015. Daily general and administrative expenses, which include daily monitoring fees payable to our monitors, and daily costs incurred in relation to our operation as a public company, were reduced by 13% to $1,083 for the fourth quarter of 2016 compared to $1,238 for the same period in 2015.

We still remain unprofitable. However, our adjusted loss per share for the fourth quarter of 2016 was $0.09, calculated on a weighted average number of 87,364,672 shares, reduced as compared to adjusted loss per share of $0.13 during the same period in 2015, calculated on a weighted average number of 83,504,266 shares.

In slide 12, we present our quarterly and full-year fleet data compared to the same periods of 2015. Liquidity, in a cyclical industry like ours, is a key point. I will now show you in the next slide what we have achieved.

In slide 13, we focus on our expenses, both OpEx and G&A, including everything, dry docking as well as initial supplies of newbuild vessels. We managed to reduce the aggregate figure from $5,530 per day for 2015 to $4,847 for 2016. This is a 12% reduction and represents $9 million annualized savings compared to our performance during 2015, and about $18 million or $0.21 per share savings compared to the average expenses of our peers.

On slide 14, the light blue bars show that the effect we have achieved by our cost-cutting efforts was sustainable during all four quarters of last year. The dark blue bars represent our TCE and shows the improvement of the market from its lows during 2016. For us, it is important to be able to demonstrate that we have positive operational cash flows, as we have already controlled the financing and investment cash outflows. The liquidity we preserve helps us go through the cycle and can be used opportunistically at the right market conditions.

We have only one remaining newbuild in our order book, scheduled to be delivered in 2018, as shown in slide 15. In order to finance this, we already have agreed the issuance of $16.9 million of preferred shares on the owning company of this vessel to a non-related investor at a dividend of 2.95% per annum. In total, we have $32 million in CapEx, and we need to spend only $15.5 million from our own liquidity. In comparison, as of February 2017, our liquidity was $114 million.

Moving on to last slide, 16, we show information about last year's cash flows. In 2016 we achieved positive operating cash flows of $13.5 million, supported by our low operating expenses, which were the result of our cost [reducing] efforts throughout the year. We may be the only Company among our peers in the lowest part of the cycle to have positive operating cash flows covering all expenses in more than two-thirds of our interest. We are proud of this achievement, as we are able to demonstrate to our investors that our Company can be operated profitably even during the worst part of the shipping cycle.

We had also positive cash flows from investment activities, due to all the actions we did since the beginning of last year in relation to newbuilding contracts and vessel sales. In relation to financing cash flows, we have returned money back to our lenders to reduce our short-term debt. But at the same time, we achieved a reduced principal payments on loan deferrals, and amendment and waiver of covenants for the following years.

Overall, we believe that the Company, with a liquidity of $114 million as of February 17, with positive cash operations and controlled outflows for investing and financing activities, as we have only one newbuild remaining, is well-positioned to withstand turbulence that may occur in the chartering market while remaining well-positioned to take advantage of improved market conditions, if and when the market turns.

Our press release presents in more detail our financial and operational results.

We now are ready to take questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions). Jon Chappell.

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Jon Chappell, Evercore ISI - Analyst [2]

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Loukas, I wanted to ask you -- you are in a very unique position right now with the liquidity, minimal capital commitments, minimum data amortization. So how do you prioritize the use of that liquidity right now? And I'm thinking about three potential options. On the one hand, in this market environment which is improving but still not great, is it beneficial just to have cash on the balance sheet to show your financial strength, especially as it relates to negotiating with banks?

Secondly, as you pointed out, asset values are off the bottom, but from a historical basis they are still quite low. So an opportunity presents itself there.

And then, third -- and we talk about this every time I see you -- you also have some expensive debt out there in the form of the preferred.

So how do you prioritize the strong liquidity situation you are in today with either playing defense, as far as keeping the cash on the balance sheet, with maybe playing some offense?

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Loukas Barmparis, Safe Bulkers, Inc. - President [3]

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Look, I think that you've said and you've described all possible actions very well. The truth is that, yes, we've seen this cashing out balance sheets. And we want to see if the market -- how it improves the next weeks and next months in order to take certain decisions. And we have -- let's say the important thing is that we have booked a number of our vessels for a longer period of time; not in spot charters anymore, but for one year or two. And in rates that are substantially higher compared to our cash breakeven point, which is lower than $7,000, which means that we are quite sure that the Company will -- the Company's liquidity will increase gradually from operating activities.

We have limited outflows in financing activities. And of course we have the option to reduce our debt, which is also a priority. We have the preferreds out there, which is also a priority. And also we have the possibility, at a certain point of time, to acquire a secondhand vessel if we have seen -- if we can find the right vessel in the market.

So all these options are open. And we want to wait for a little bit to see how the situation in [certain] market improves.

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Jon Chappell, Evercore ISI - Analyst [4]

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And then just as a follow-up to that, there has been, apparently, some increased activity in the secondhand market, and maybe a concern that the bottom has been reached. And we know how this volatile market can be. When it starts moving up and the sentiment shifts in the right direction, asset values and rates can move quite strongly. So how long are you willing to wait before maybe being a little bit concerned that you've missed out on the best of opportunities in the cycle?

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Polys Hajioannou, Safe Bulkers, Inc. - Chairman and CEO [5]

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This is Polys. Yes, we believe that the bottom was reached the first half of 2016, particularly in February-March last year. So we are off that bottom. The current levels are improving slowly, slowly. There is competition as the freight market improves for ships. As soon as we start fixing charters at profitable levels, we will concentrate into secondhand market. This -- we are not afraid if we lose our market by $500,000 or $1 million. What we are interested is, before we make an acquisition, to secure some profitable charters.

So we will not rush. We have 39 ships, including the newbuilding. We have enough ships to make a good return if the market really improves. And I think we will strike at the right time; and not right now that there is so much competition.

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Jon Chappell, Evercore ISI - Analyst [6]

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Yes, that makes complete sense. Thanks, Polys. Thanks, Loukas.

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Operator [7]

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Chris Wetherbee.

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Unidentified Participant [8]

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This is Alex on, in for Chris. I just had a question on rates. They came in a bit better than we expected, but we were interested in what the dynamic for chartering in the market was as it stands today, and at what levels do you think longer-term charters should be locked in?

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Polys Hajioannou, Safe Bulkers, Inc. - Chairman and CEO [9]

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Right now nobody expected the market to be that strong in January and February. And I think it was stronger than expectations because charters refrained from fixing ships for a period in November when was push on freight rates. They said that we will wait for Q1 when traditionally rates go down during the Chinese New Year.

Instead of that, at the beginning of January we saw a lot of chartering activity for one-year period business, which encouraged us to start fixing some ships for short periods, six months or 12 months period. Right now we're seeing one-year period rates for good ships approaching $10,000 a day, which is a very good level. And at this level, the Company should start locking in some more charters.

As soon as we do this and we have a clearer picture of our cash flows, we will start concentrating maybe on opportunities. I think that the market cannot really, in 2017, move a lot higher than $10,000 to $11,000 a day, as we will have maybe in the next 2-3 months, because there are still an order book to be delivered this year, there is still a slow-speed factor in the fleet. Ships are still performing on slower speeds. So we think there will be needed some time before these two factors are clear. And we still believe that secondhand prices cannot rise hugely before we clear these two factors: the order book and the slow speed.

So I don't believe that we will lose a market by waiting a little bit longer. And I don't think that freight rates will shoot up in the course of the next six months to levels that we would say that present opportunity, and we should buy ships now. So I think the current level, if we manage to get some charters around the $10,000 mark, I think this will be way above our expectations, a few months ago. And this is what we plan to do.

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Unidentified Participant [10]

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Okay, thank you. That was helpful. And so we are seeing that the order book is pretty contained at the moment. Do you guys have any insight into how scrapping is developing?

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Polys Hajioannou, Safe Bulkers, Inc. - Chairman and CEO [11]

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Yes. Scrapping at this point will be reduced; it's obvious. Only ships that have to be scrapped will be scrapped, or ships that they have to face ballast water treatment regulation and/or expensive special survey. So I don't expect that we will see any ships built in 2001 or 2002 to be scrapped, like we saw last year.

I think that ships over 20 years old will be going to the scrap yard, whatever the market is. So we are talking about ships built 1997-1998 will still going to the scrap yard. But the pace will be much slower than last year.

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Unidentified Participant [12]

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Okay, thank you. And just one more thing on the expense side -- it seems like voyage expense has come down quite materially over the past nine months. Can you provide some more in-depth color on this shift? And do you expect this to be the norm, going forward?

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Polys Hajioannou, Safe Bulkers, Inc. - Chairman and CEO [13]

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Yes, this should be the norm because as the market improves, you are getting your rates on DOP, which means some dropping out of pilot on the last discharge in port. So you don't need to balance the vessel to a loading area. So if a ship completes in India, you don't need to ballast to South America before you get paid. You will be receiving the higher from the last discharging port. This is the norm of the market. So if the market maintains at current levels, we expect that these voyage expenses should be reducing.

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Unidentified Participant [14]

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Okay, thank you. That was very helpful. I'll turn it over.

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Operator [15]

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Ben Nolan.

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Ben Nolan, Stifel Nicolaus & Company - Analyst [16]

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A few of the things that I was going to ask you have been covered. But one thing that I was curious about is on the preferred financing that you have for the newbuilding that's coming online next year. I believe that you mentioned the rate on that, but I was curious about just the dynamics. Is this something that you could also finance as well with regular bank debt? Or is this effectively a loan? I'm just interested to know how that exactly works.

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Loukas Barmparis, Safe Bulkers, Inc. - President [17]

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This preferred comes -- it's for July 2018. We have the option from now until then to call it back. I think the Company is in a strong position. And we are, let's say, also right now our reserves are built up. So I don't find any problem to finance this acquisition, this preferred, when the time comes. We will consider very carefully the next period about the preferreds.

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Polys Hajioannou, Safe Bulkers, Inc. - Chairman and CEO [18]

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If I may add to Loukas, this preferred equity for participating on the last vessel is at a very, very reasonable level. I don't think you can find a lot of bank debt today at much lower rates than this. Maybe you can find around 2.5% on the split. So I think that is to the Company's interest to maintain this preferred. So it's at a very reasonable level.

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Loukas Barmparis, Safe Bulkers, Inc. - President [19]

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Let me ask you something. In the one question, did you ask also about the preferred that we have on the vessels?

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Ben Nolan, Stifel Nicolaus & Company - Analyst [20]

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Yes, that's what I was referring to, yes.

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Loukas Barmparis, Safe Bulkers, Inc. - President [21]

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The preferred of the vessel will be issued in February in next year, upon delivery. So basically, this is about financing of this -- let's say it's about 50% of the outstanding [B]. This will be issued next year, in 2018.

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Ben Nolan, Stifel Nicolaus & Company - Analyst [22]

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And is it possible to get bank financing as well as that, or is this effectively how we should think of the financing for the vessel?

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Loukas Barmparis, Safe Bulkers, Inc. - President [23]

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I don't think that we will get bank financing for that.

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Ben Nolan, Stifel Nicolaus & Company - Analyst [24]

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Okay, that's very helpful. And you said the rate was just below 3%, I believe, is what you had said. Correct?

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Loukas Barmparis, Safe Bulkers, Inc. - President [25]

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2.95%.

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Ben Nolan, Stifel Nicolaus & Company - Analyst [26]

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Okay, very good. That was my only question. I appreciate it. Thank you, guys.

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Operator [27]

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Frank Fotis Giannakoulis.

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Fotis Giannakoulis, Morgan Stanley - Analyst [28]

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Hi, guys. Clearly not Frank; but hello there.

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Loukas Barmparis, Safe Bulkers, Inc. - President [29]

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Hello, Fotis.

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Fotis Giannakoulis, Morgan Stanley - Analyst [30]

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I wanted to ask you, Polys, about a statement that you made. You are not ready to buy vessels yet; you think that there are more opportune time to do that. I'm wondering if that implies that you are expecting some weakness in the asset values, going forward. We have seen a diversion between the time charter market and the spot market. I understand that partially this is seasonal. I was wondering if you view that we're going to have some weakness the next few months that will give you the opportunity to buy some more ships.

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Polys Hajioannou, Safe Bulkers, Inc. - Chairman and CEO [31]

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No, it's not exactly this logic behind. We want to wait to fix some vessels from the existing fleet at profitable numbers, at numbers that they are in the region of $10,000, $10,500 a day. Right now in January-February, as you have said, we fix some ships between $8,000 and $9,000 a day for 6 to 12 months. These are not profitable numbers for us. These are loss-making numbers, but are still much more healthier than we thought they would be for the first quarter of 2017. In our initial estimations we were running in cash flow projections, we were running the Q1 of 2017 at $6,000 a day. So fixing $8,500 on six-month period is quite a better number.

But we want first to cover some ships at $10,000, $10,500. Because we have modern ships, younger ships, I believe this could be achievable during the export season of South America. And thereafter, when we start covering the ships we will jump in and consider new acquisitions. Right now there is a lot of competition between private owners because they are seeing a market at better levels. So we are not prepared to go and compete at this very moment. But if we get some charter done in the next 2, 3 months, we will feel comfortable enough to go and compete or find the right opportunity when some people will not be greatly focused on rates and on secondhand ships, and go and invest at that time.

I don't think that the freight market will shoot up and will surprise us more than already done; simply because, as I said, I still see that there is order book this year. And still we have the slow-speed factor in the fleet, which is going to -- if paid rates, for example, reach $12,000 a day, our charters will instruct our ships to start proceeding -- with the fuel oil price at $3.30, we'll start instructing us to proceed after 10 or 14 knots. This immediately releases another 10% or 15% supply onto the market. So I don't think that 2017 is a year that we will regret not investing in ships. I wish I'm wrong; but I don't think it will be happening. So there will be plenty of opportunity to invest in secondhand ships.

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Fotis Giannakoulis, Morgan Stanley - Analyst [32]

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And given your view on steel production in China, and steel demand, and the flows from Brazil that they are expected to increase, what do you think that is the new normalized rate? When the market balances, obviously not in 2017 but 2018-2019, at what levels do you think that it makes sense to consider that the normalized rate for a Panamax vessel versus the $20,000, which is the long-term historical average?

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Polys Hajioannou, Safe Bulkers, Inc. - Chairman and CEO [33]

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First of all, we have to see an improving market for Capesizes. At the moment, it's just starting. We don't know if this will be sustained and if this will be carried in higher numbers. We still see ships fixed from Australia to China at $6 freight rate.

I think when we start seeing Capesize numbers moving higher, then we will feel that it would be a sign that there would be better times ahead of us. But it will take time. I said before in the past in other quarter conferences, in quarter press releases: when we discuss that we expect freight market to reach a balance, including the speed factor, within -- around middle of 2018.

So we should not rush. Let's not forget that six months ago, we were earning rates of $5,000 and $6,000 a day on modern ships. So we should not rush and do rash decisions. We are here for the long run. So I don't believe that we will be fixing ships this year at $12,000 or $13,000 a day for one-year Panamaxes, or Capesizes at $20,000 a day. So we have to be patient and we have to be conservative. And nobody lost by being conservative.

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Fotis Giannakoulis, Morgan Stanley - Analyst [34]

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And Polys, we have seen a tremendous volatility in all these years in the drybulk market, which is highly correlated, this volatility, with the stocking and destocking cycles of China. Currently, inventories of iron ore at the Chinese ports -- they are at a relatively high level. I was wondering how long does it take until these inventories come down? Or how long would it take until we see activity picking up again? Is this something that can happen the next 2-3 months? Or could the Chinese drive down the inventories at a very low levels, and possibly see the weakness in the spot market lasting six months or longer?

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Polys Hajioannou, Safe Bulkers, Inc. - Chairman and CEO [35]

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Look, I don't believe the market is balanced yet. So, yes; the market will remain volatile until it reach a balance. And stock building and stock depleting will be affecting the freight market rates, especially on the Capesizes. So volatility for 2017, I think, will be the trademark for this year. Of course, will be volatility at better rates than we had last year. So from that point of view, we stand to gain.

I think that the iron ore stocking and unstocking will not affect the healthiness of the market once we reach the balance of supply and demand, including the split factor. And this, according to our calculations, will be next year, middle of next year. So after the middle of next year, when we reach balance of supply and demand, there will be no new order book, provided there is no new order book, which I believe will not be new order book.

And provided that the split factor is taken out of the equation -- which people tend to ignore that charterers can adjust the fleet splits by 10%, 15%, which means an excellent supply in the market. When we reach this balance then it will be less relevant to us, the building of stocks in China or the depleting of iron ore stocks in China, because we will have a healthy market. So until that point that we reach the balance, which is, to our estimations, middle of 2018, I think that the market will remain volatile, but at healthier levels than we had, of course, in 2016.

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Fotis Giannakoulis, Morgan Stanley - Analyst [36]

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Thank you, Polys. One last question, a little bit personal in terms of plans for the future of the Company. First of all, I want to ask you, why did you do this offering of $17 million? Your Company clearly is the one that needs the least any additional capital versus every other company. It has a lot of liquidity. I was wondering, why is it such a small amount?

And given the fact that we have seen a lot of the stocks in the space rallying, especially the larger -- the ones that they have larger market caps and greater liquidity, and the market is improving -- since you already own close to 60% of the Company, would you consider potentially buying back, taking the Company private if you see that the stock price does not reflect the intrinsic value of your Company?

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Polys Hajioannou, Safe Bulkers, Inc. - Chairman and CEO [37]

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Look, the equity raising we did last year, it was a decision we took in October-November time, when we saw that there was not -- no activity by the major charterers into period fixing. So we are -- our Company is called Safe Bulkers. So the name Safe is before anything else. So we took a decision, since there was opportunity for a small raising, we didn't want to raise more money and dilute our shareholders, including ourselves.

We thought that since charterers are not coming forward, and they are resisting to fix ships; despite the market was improving they were resistant to fix ships for six months or one year, we had to do something to have some extra liquidity.

Charterers, they were calling a bluff, or they were trying to dictate the market. They said that why to fix now when Q1 market will be $6,000 a day; $5,000, $6,000 a day? We come back and we fix at that point. I was in [the faris] for the first three weeks of 2017. Charterers clearly showed that they lost this opportunity, it won't be coming, despite that the Chinese New Year was imminent. And they will start fixing ships at $7,500 or $8,000, $8,500 a day.

So the offering, at the time we did it, it was the right decision. And what we are doing right now, fixing ships for six or 12 months at $8,500 -- or hopefully, in the next two, three months at $10,000 a day -- again, it's the right decision.

Now, to take a private company, you know we had many opportunities in the past to do this. We've proved that we are not interested into doing such moves. This Company is a public company, and will remain a public company.

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Fotis Giannakoulis, Morgan Stanley - Analyst [38]

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Thank you very much, Polys.

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Operator [39]

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Magnus Fyhr.

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Magnus Fyhr, Seaport Global Securities - Analyst [40]

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Just a question on the fleet composition. You are very focused on the Panamax segment, three Capesizes. Maybe you can talk a little bit about if you think you are rightly positioned with the current growth developments in both iron ore or in coal, and the other commodities. Once you start playing offense, would you be interested in going into the Capesize segment?

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Polys Hajioannou, Safe Bulkers, Inc. - Chairman and CEO [41]

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Yes. I think the Capesize segment, the investment is bigger. And since we only have three Capes, and those are long-time period charters, the Company does not have the connections and the relationships we have in the Panamax, post-Panamax market. I believe that we should stay focused on the market we know. We have around 100 different charterers who are doing business in the Panamax to post-Panamax market with a very, very close relationship with the top 20 names in the sector.

In the Capesize sector, you really need to be an owner with 20 Capesizes to build relationships with people like BHP, Rio Tinto, or Vale, which are the three people controlling 70% of the market. That's why you see that the big -- the players in the Capesize market, they all have fleets of more than 20 ships. And we are not in a position to make a fleet of 20 Capesizes. So we stay with what we know.

I believe we have demonstrated over the years that we are the best operator of Panamax, Kamsarmax, and post-Panamax fleet. We have on these sizes the lowest cost in the market and the best fixtures of the market. So if we maintain this track record, which is our target, I still believe we should stay -- stick with the sector we know better than others, and not try to be too clever on other sectors that we are really very small.

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Loukas Barmparis, Safe Bulkers, Inc. - President [42]

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On the other hand, those have about 12 post-Panamaxes which take, let's say, advantage when the Cape market is improved. And the important thing with this are, let's say, two things that nobody is taking care of. First of all, all these post-Panamaxes mainly are from -- except two -- are from Japanese shipyards, which means that they are far more competitive and economically compared to the other Chinese vessels that are in the market.

The second point is that we have already fitted in, let's say, most of them fittings to pass the new Panama Canal. So these are two, for the iron ore and the new Panama Canal, that we would take advantage as this trade is developing.

So our fleet is very fine. It's very well [sold] and structured.

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Magnus Fyhr, Seaport Global Securities - Analyst [43]

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That's good to hear. One last question: what do you make out of the current developments in the coal markets? We see a lot of the coal trade being dependent on government policies regarding workdays in China and also in India. I guess they're trying to be self-sufficient. Longer-term, you would think with the pollution issues in China that they would try to get less dependent on coal. I'm just curious to see your thoughts there.

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Polys Hajioannou, Safe Bulkers, Inc. - Chairman and CEO [44]

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Yes. In the future you think that they will be less dependent on coal. On the other hand, their needs and their quality of life is improving, and their populations are increasing. And the demand is increasing and the electricity consumption will be going up. So, so long we don't see newbuildings hitting the market in any big force like we had in 2010, 2011, and 2012 and also in 2015 and 2016, I think that we are very well placed, with a fleet of average age 6 years old, to capitalize on modest increases of coal demand. We don't need huge increases.

I think that coal will always be the backbone of energy production in China. And you see that the Chinese -- okay, they will be reducing the production of domestic coal, which is higher sulfur content, and for pollution reasons. On the other hand, you see them that they believe in the coal industry, and they are investing in coal mines everywhere in the world, in Australia and East Africa, in Indonesia; everywhere, you see Chinese investing money in coal mines. So we are optimistic in the long run that coal will be the driving force of our market.

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Loukas Barmparis, Safe Bulkers, Inc. - President [45]

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There are technologies that you can use for clean coal energy production. The issue is that as long as the Chinese start implementing such technologies, then they will find this advantage. And of course also another point to remember is that only a marginal percentage of coal use in China is from imports. Most of it is from domestic production. So the substitution that can take place in the future is far higher.

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Magnus Fyhr, Seaport Global Securities - Analyst [46]

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Okay, great. Thank you so much.

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Operator [47]

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There are no further questions at this time. (Operator Instructions). There are no further questions. Please continue.

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Loukas Barmparis, Safe Bulkers, Inc. - President [48]

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Thank you very much for being with us in this conference call, and we are looking forward to discuss again with you in the next quarter. Thank you to all. Have a nice day.

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Operator [49]

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That concludes today's conference. Thank you for your participation. You may now all disconnect.