Safe Bulkers, Inc. — FY 2023 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone 2023 fourth-quarter report; the supplied filing does not provide clear standalone Q4 financial results. Financial statements are audited under U.S. GAAP. Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting.
Business context
Safe Bulkers is a dry-bulk shipping company transporting commodities including iron ore, coal and grain. It reported an average fleet of 44.5 vessels during 2023 and operated 46 owned vessels at year-end, with newbuild deliveries and fleet activity continuing around the reporting date. Revenue is generated almost entirely from time charters; the company balances period charters with spot exposure.
Key financial metrics
| Metric | FY 2022 | FY 2023 |
|---|---|---|
| Revenue | $364.1 million | $295.4 million |
| Net revenue, after commissions | $349.7 million | $284.4 million |
| Operating income | $184.6 million | $104.1 million |
| Net income | $172.6 million | $77.4 million |
| EPS, basic and diluted | $1.36 | $0.61 |
| Net cash from operating activities | $218.0 million | $122.2 million |
| Net cash used in investing activities | $229.4 million | $151.7 million |
| Net cash from/(used in) financing activities | $(40.1) million | $29.1 million |
| Year-end total assets | $1,245.9 million | $1,339.8 million |
| Year-end total liabilities | $474.0 million | $547.3 million |
| Year-end total debt, before deferred financing costs | $422.6 million | $515.9 million |
Operating margin was approximately 35% in 2023 versus 51% in 2022; net margin was approximately 26% versus 47%. TCE rate declined to $16,579 from $22,712. Fleet utilization remained high: 96.48% on ownership days and 98.85% on available days in 2023.
Year-end cash and cash equivalents were $48.2 million; time deposits were $39.7 million and restricted cash totaled $10.9 million. Reported liquidity was $285.8 million, comprising $98.8 million of cash, cash equivalents, time deposits and restricted cash, $131.5 million available under revolving facilities, and up to $55.5 million available under financing agreements. The company reported $27.2 million of debt principal due in 2024. Its $100 million euro-denominated unsecured bond matures in February 2027 and bears a 2.95% coupon.
Material changes versus FY 2022
- Revenue fell 18.9%, primarily due to lower market charter rates; TCE also declined materially.
- Operating income fell 43.6% and net income fell 55.2%. The decline reflected lower revenue alongside higher operating costs, depreciation and interest expense.
- Interest expense increased 44.4% to $24.7 million. The reported weighted average interest rate on long-term debt rose to 6.034% from 3.255%, despite lower average loans outstanding during the year.
- Vessel operating expenses rose 11.2% to $89.2 million; daily operating expenses increased to $5,494 from $5,235. More drydockings, repairs, crew-related costs, insurance and supplies contributed.
- Voyage expenses more than doubled to $21.7 million, mainly reflecting bunker consumption under certain time-charter arrangements and the chartered-in vessel Arethousa.
- Operating cash flow declined to $122.2 million. Investing outflows included vessel acquisitions, construction advances and improvements; financing cash flow turned positive, supported by $255.2 million of debt proceeds, partly offset by repayments, dividends and share repurchases.
Outlook, management commentary and risks
- Management stated that liquidity, contracted operating cash flow and committed borrowing capacity should fund operations and current financial requirements, including capital spending, at least through the end of Q1 2025. This is an estimate, not a guarantee.
- As of February 16, 2024, 55% of expected ownership days for the remainder of 2024 were contracted; contracted TCE for that period was $16,818. The company reported approximately $259.8 million of contracted revenue, net of commissions, at that date. Market rates for expiring or redelivered charters may materially change results.
- The company had seven newbuilds in its orderbook as of February 16, 2024, including two methanol dual-fueled vessels, scheduled for delivery through 2027. Remaining newbuild capital expenditure was reported as $206.1 million at that date.
- Dry-bulk freight rates and vessel values are cyclical and volatile. The company cited economic and trade conditions, vessel oversupply, China demand, inflation and interest rates, and geopolitical events—including the Russia-Ukraine war and Red Sea disruption—as key uncertainties. It said its vessels were then diverted from the Red Sea and did not sail in the Black Sea.
- Debt is largely floating-rate and secured financing includes vessel-value, liquidity and other covenants. The company was in compliance with its debt and bond covenants at December 31, 2023, but a fall in vessel values or earnings could increase covenant and refinancing risk. A 100-basis-point increase in SOFR was estimated to add $3.4 million of interest expense in 2024.
- Environmental rules, including EU maritime emissions requirements and FuelEU Maritime, may increase compliance costs and require further investment. The company had scrubbers on 21 vessels and expected one further installation in 2024; it also reported environmental upgrades on 21 vessels.
- The company recorded a $10.4 million gain on vessel sales in 2023. Its year-end impairment analysis found no impairment, although broker estimates placed eight of 45 vessels below carrying value by an aggregate $51.9 million. Future charter-rate assumptions are a significant estimate and were identified as a critical audit matter.
- Common dividends were $0.05 per share quarterly in 2023, or $0.20 for the year; preferred dividends were $2.00 per share for each series. Future dividends remain at board discretion and are subject to cash needs, debt restrictions and preferred-share priority.
- Two charterers, Olam International and Cargill, accounted for 26.87% of 2023 revenue combined. The CEO controlled approximately 43.35% of common shares and also controlled the Managers, creating concentration and related-party governance considerations.
Important facts for investors to verify
- Review the audited statements and notes for the precise debt maturity schedule, cash restrictions, newbuild payment obligations and sale-and-leaseback financing terms.
- Confirm the current charter coverage, index-linked exposure and realized rates as 2024 fixtures replace existing contracts; distinguish contracted revenue from future spot-market assumptions.
- Assess whether operating cash generation can cover debt service, newbuild commitments, preferred dividends and common dividends under lower-rate scenarios.
- Monitor vessel market values against loan collateral thresholds and covenant headroom, alongside floating-rate debt exposure and refinancing needs.
- Check newbuild delivery progress, total remaining capital expenditure and any changes to the orderbook or vessel-sale plans.
- Evaluate the sensitivity of vessel impairment estimates to charter rates, operating costs and salvage values, and the company’s response to evolving emissions rules.
- Review customer concentration, related-party management arrangements and the implications of CEO voting control for minority shareholders.