Business context and reporting period
Safe Bulkers, Inc. is a dry-bulk shipping company transporting commodities including iron ore, coal and grain. This is its audited Form 20-F for the fiscal year ended December 31, 2020, prepared under U.S. GAAP; it is an annual report, not a standalone Q4 filing. The fleet numbered 42 vessels at year-end and 43 as of March 15, 2021.
Key financial metrics
Amounts are U.S. dollars; financial figures are in millions unless stated otherwise.
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $206.0 | $206.7 |
| Net revenue, after commissions | $198.2 | $197.8 |
| Operating income | $10.5 | $44.1 |
| Net income/(loss) | $(12.9) | $16.0 |
| Loss per common share | $(0.25) | $0.04 |
| Operating cash flow | $63.4 | $58.3 |
| Cash used in investing activities | $(34.8) | $(36.8) |
| Cash from/(used in) financing activities | $(9.3) | $8.5 |
| Total assets | $1,105.6 | $1,114.6 |
| Total liabilities | $642.8 | $624.7 |
The TCE rate fell to $10,559 per available day from $12,805; TCE revenue declined to $156.6 million from $184.0 million. Operating margin was approximately 5.3% versus 21.3%. Gross debt was $616.2 million at year-end, including $81.3 million due within 12 months. Cash and cash equivalents plus time deposits were $101.8 million; restricted cash was $22.2 million. Management reported total liquidity of $171.2 million, including available financing capacity. Current assets were $134.7 million and current liabilities $104.7 million.
Material changes versus 2019
- Revenue was nearly flat, but operating income decreased about 76% and the company recorded a net loss, reflecting lower charter economics and sharply higher voyage expenses.
- Voyage expenses increased to $41.6 million from $13.7 million, mainly due to vessel repositioning, fuel-related effects and variable bunker consumption under certain charters.
- Operating cash flow rose to $63.4 million from $58.3 million, notwithstanding the net loss; working-capital movements and non-cash depreciation materially affect the comparison between cash flow and earnings.
- Interest expense decreased to $21.2 million from $26.8 million as the average borrowing rate fell to 3.382% from 4.624%, despite higher average borrowings.
- Year-end debt increased to $616.2 million from $605.8 million. The company said it complied with its debt covenants at December 31, 2020.
- Preferred dividends of approximately $11.0 million were declared and paid in 2020. No common-stock dividend has been paid since 2015.
Outlook, commentary, risks and unusual items
- Management attributed weak 2020 dry-bulk conditions partly to COVID-19 disruptions and lower cargo demand. It reported market recovery into early 2021. As of March 15, 2021, 46% of expected remaining-2021 ownership days were contracted, at a reported contracted TCE rate of $16,870 per day. This is a dated employment snapshot, not formal earnings guidance.
- Management stated that liquidity, operating cash flow and committed borrowing capacity should cover operations and current capital needs at least through the end of Q1 2022. This depends on market conditions, charterer performance, financing access and expenditure timing.
- Planned capital requirements included about $52.0 million for two newbuilds, largely payable in 2022, and further vessel upgrades. The company also planned to complete BWTS installations and install one additional scrubber in 2021.
- COVID-related risks include renewed trade disruption, crew-change constraints and delays to repairs, drydockings, vessel sales or newbuild deliveries. Charter rates and vessel values are cyclical; market weakness could pressure cash flow, asset values and debt covenants.
- Other material exposures include customer concentration (Viterra and Cargill represented 26.14% of 2020 revenue combined), floating-rate debt and LIBOR transition, foreign-currency costs, environmental rules, and scrubber economics. The company had hedged 44% of LIBOR-linked loans at year-end; its derivatives did not qualify for hedge accounting.
- No vessel impairment was recorded for 2020, although broker estimates put 35 vessels’ carrying values an aggregate $195.9 million above estimated fair market values. The impairment assessment depends substantially on projected future charter rates.
- A charter for the Capesize vessel Lake Despina was terminated early in December 2020 for $8.1 million compensation; the vessel was redelivered and the compensation recognized as income in February 2021. Two older vessel sales were agreed after year-end, with expected losses of approximately $0.3 million and $1.0 million.
- After year-end, the company sold 3.2 million common shares through its ATM program for $8.9 million net proceeds, creating dilution. The independent auditor issued an unqualified opinion on the financial statements and internal controls.
Most important facts for investors to verify
- Review the full audited statements and notes, especially the composition of 2020 voyage expenses, debt maturities, restricted cash and committed borrowing availability.
- Check subsequent charter rates, contracted vessel coverage and actual cash generation against the March 2021 market snapshot and management’s liquidity assessment.
- Assess debt-covenant headroom using current vessel valuations and confirm financing availability for the newbuilds and environmental upgrades.
- Track the impairment assumptions and vessel sale proceeds, including whether the expected sale losses and Lake Despina compensation were recorded in the periods described.
- Confirm the effects of ATM share issuance, preferred dividends, customer concentration and LIBOR/foreign-exchange exposure on per-share value and future liquidity.