EGLE (2021 - Q3)

Greetings, and welcome to the Eagle Bulk Shipping Third Quarter 2021 Results Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the call over to Gary Vogel, Chief Executive Officer; and Frank De Costanzo, Chief Financial Officer of Eagle Bulk Shipping. Mr. Vogel, you may begin. Gary Vog

Thank you, and Good morning. I'd like to welcome everyone to Eagle Bulk's Third Quarter 2021 Earnings Call. To supplement our remarks today, I would encourage participants to access the slide presentation that is available on our website at eagleships.com. Please note that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and are inherently subject to risks and uncertainties. You should not place undue reliance on these forward-looking statements. Please refer to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties that may have a direct bearing on our operating results, our performance and our financial condition. Our discussion today also includes certain non-GAAP financial measures, including adjusted net income, EBITDA, adjusted EBITDA and TCE. Please refer to the appendix in the presentation and our earnings release filed with the Securities and Exchange Commission for more information concerning non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures. Please now turn to Slide 6. Dry bulk freight rates continued to strengthen during the third quarter on the back of robust commodity demand, which was further supported by the ongoing container spillover trade as well as elevated congestion due to the ongoing supply chain bottlenecks and COVID related port restrictions around the world, but in particular, in and around China. The Baltic Supramax Index rose by almost 34% during the quarter to average approximately 34,000, representing a 13-year high. Given our active management approach to trading the fleet and our significant operating leverage, we generated record earnings for the quarter with net income totaling $78 million or $6.12 per share. Not only does this represent the highest net income we have achieved in a single quarter, it also eclipses the company's best ever annual result. Following our recent announcement on the institution of a cash dividend policy equal to a minimum of 30% of Eagle's net income, our Board of Directors declared a cash dividend based on the third quarter's result of $2 per share. Separately and as previously reported, we executed on a comprehensive refinancing on October 1, which has allowed us to significantly simplify our capital structure, lower our interest costs and extend our bank debt maturity to 2026. Please turn to Slide 7. Our record financial results were driven by our ability to improve TCE performance by 35% quarter-on-quarter, resulting in a net TCE achieved of $29,088. As we've discussed previously, given the rapidly rising market environment we experienced through the third quarter is an inherent lag effect between our TCE performance and the BSI as the majority of our fleet is employed on voyages lasting anywhere from 30 to 60 days and sometimes longer. Looking ahead into Q4, freight rates have come off with the BSI currently trading under 30,000, which is still very conducive to cash generation. For Eagle, as of today, we have fixed about 75% of our available days for the fourth quarter at a net TCE of $32,400 per day. Bear in mind that our cash breakeven level through the first 9 months of the year is at around 11,000. On this basis, notwithstanding the recent pullback in rates, we are on track for exceeding this quarter's performance in Q4. Please turn to Slide 8. In terms of operating performance, we produced a record $91 million of EBITDA or $19,400 per ship per day for the 3 months ending September 30. This represents an increase of 45% compared to the prior quarter. Given the fixed cost nature of our business, we maintained significant operating leverage with essentially all incremental net revenue generated flowing to the bottom line. Please turn to Slide 9. Asset prices have also continued to increase in recent months, with values for 10-year-old Supramaxes up around 17% on the quarter and approximately 115% year-to-date. It's interesting to note that this price strength has occurred on the back of a record number of transactions. Year-to-date, almost 840 dry bulk vessels have been bought and sold, totaling $14 billion in volume. Please turn to Slide 10. In terms of sale and purchase, we took delivery of our final pending acquisition last week, the motor vessel, Valencia Eagle. We estimate that the 9 vessels which we acquired between November of last year and May of this year have increased in value by over $80 million. Separately, we sold and delivered the motor vessel turn, a 2003 built Supramax and our oldest vessel in the fleet just ahead of our statutory dry dock. Our fleet currently totals 53 ships averaging 9 years of age with 89% being fitted with exhaust gas cleaning systems or scrubbers. As a result of the growth and renewal of the fleet, our fuel efficiency has also increased significantly over the last 5 years. As always, we will continue to evaluate vessel S&P and M&A deals and look to execute on an opportunistic basis. With that, I would like to turn the call over to Frank, who will review our financial performance.

Thank you, Gary. Please turn to Slide 12 for a summary of our third quarter financial results. The continued significant improvement in the charter rate environment drove our top line growth in Q3, with revenue, net of both voyage and charter hire expenses totaling $142.4 million and net income coming in at $78.3 million, representing a more than eightfold increase as compared to the prior quarter. Earnings per share for the third quarter was $6.12 on a basic basis and $4.92 on a diluted basis. Please note, the diluted share count now includes 2.9 million shares from the convertible bond. Adjusted net income, which excludes noncash unrealized gains on derivatives of $6.3 million came in at $72.1 million for the third quarter or $5.63 per share on a basic basis. As Gary mentioned earlier, adjusted EBITDA came in at $91 million for the third quarter. Let's now turn to Slide 13 for an overview of our balance sheet and liquidity. Total cash, which includes $25.6 million of restricted cash, was $125.6 million at the end of Q3, representing an increase of $41.8 million as compared to the end of the second quarter and an increase of $36.8 million from year-end. The change in cash versus prior quarter in year-end was driven by cash generated from our strong operating results, offset in part by the $25 million RCF pay-down, vessel acquisitions and debt service. I will cover the movements in greater detail on the cash walk slide. Total liquidity improved by $51.8 million from the prior quarter to $191.6 million. Total liquidity is comprised of total cash of $125.6 million and $66 million of undrawn revolving credit facilities. Total gross debt, excluding debt issuance costs at the end of Q3 was $472.8 million. As previously reported, we executed a new $400 million credit facility on October 1, replacing our Norwegian bond Ultraco Bank credit facility and the Holdco RCF. The new facility includes a $300 million term loan and a $100 million revolver, of which $50 million was drawn at closing. However, as reported yesterday, we have now fully paid down the revolver and have $100 million of undrawn availability. Please now turn to Slide 14 for an overview of our cash flow from operations for the third quarter. Net cash flows provided by operating activities was $90.3 million in Q3. The chart highlights the timing driven variability that working capital introduces to cash from operations, as depicted by the difference between the dark blue bars, which are the reported cash from ops numbers and the light blue bars would strip out changes in operating assets and liabilities, primarily working capital. Although as the chart demonstrates, the volatility caused by working capital largely evens out over time. The difference between the 2 borrowers in this quarter can be explained by a significant amount of cash collections in late September. Please turn to Slide 15 for our Q3 cash walk. Let's focus on the top chart, which covers the cash movements in Q3. The revenue and operating expenditure bars are a simple look at the operations, with the net of these 2 bars coming in at $91 million, the same as our adjusted EBITDA. Moving to the right, the $18 million for vessel S&P bar represents the $26.9 million cost for the acquisition of 2 vessels, in part offset by the proceeds of $9.2 million on the sale of one vessel. You can also see that we paid $25 million on our RCF and $12 million in debt service in the quarter. The bottom chart covers cash movements year-to-date. Please note in the appendix of this presentation, we include information on the cash and debt movements for the October 1 global refinancing. Let's now review Slide 16 for our cash breakeven per ship per day. Vessel expenses or OpEx was $5,401 per ship per day, excluding onetime nonrecurring expenses related to vessel acquisitions and sales, the termination of our relationship with the crewing agency. We are consuming additional lubes given vessels are steaming at faster speeds, and the prices have increased on the back of the rise in base oils. In addition, due to the COVID-19 pandemic, we continue to face higher operating expenses across several areas, including lodging and transportation costs related to crew changes, along with the costs related to the procurement of stores and spares. Finally, we have increased our spending on spares to preemptively limit off-hire as much as possible in what is a very strong rate environment. Drydocking came in at $917 per ship per day in Q3, $560 higher than prior quarter as we completed 2 drydocks with an additional 2 in progress. It is worth noting that there are significant challenges regarding COVID protocols and quarantine requirements for ships going into facilities for drydocks and the installation of ballast water systems. We do not see this abating in the near term, and therefore, will likely increase off-hire times for these events for the foreseeable future. Cash G&A came in at $1,527 per ship per day in Q3, marginally lower as compared to Q2. It is worth noting that our G&A per ship calculation is based on our own vessels, whereas we operate a larger fleet, including our chartered-in tonnage. If we were to include the chartered-in days in our calculation, G&A per ship per day would decrease to about $1,363. Cash interest expense came in at $1,387 per ship per day in Q3, which was marginally lower quarter-over-quarter, driven by an increase in ownership days and a decrease in interest expense. Finally, cash debt principal payments came in at $1,780 per ship per day in Q3. This concludes my comments. I will now turn the call back to Gary.

Thank you, Frank. Please turn to Slide 18. As indicated earlier on the call, the BSI posted a significant increase during Q3 to average approximately $34,000 during the quarter. Both the Atlantic and Pacific markets pushed up simultaneously, which speaks to the broad demand backdrop. In the Atlantic, rates increased by 51% to average $34,128 and in the Pacific, rates increased 24% to average $32,414. Relative strengthening in Atlantic during the third quarter can be attributed to the factors we discussed on our last earnings call, specifically, increased grain exports out of East Coast South America and a strong market in the med, which was driven by elevated minor bulk exports, such as slag, cement, gypsum, salt and steel products. The containers spillover trade continued to positively impact our markets, more specifically, Intra-Pacific and backhaul rates with cargoes such as semi-finished steel parcels, fertilizer and bags, bag cement, dry chemicals and bags and lumber moving on small and midsized conventional bulk carriers. Congestion remained elevated during the period with a number of ships at port reaching a new record of 36% as compared to around 30% pre-COVID. Congestion is primarily attributed to COVID related restrictions and general supply chain issues and bottlenecks caused by increased trade flows and exacerbated by shoreside labor issues. As we look ahead into Q4, we've experienced an increase in market volatility, with freight rates trading off their recent multiyear highs. We believe this downtrend is due to a number of reasons, including an easing of congestion, increased tonnage availability and a decrease of cargo flows. The increase in tonnage availability appears to be primarily driven from Chinese flag vessels entering the international market. Many of these ships typically operate in the local cabotage trade, which is dominated by China's large domestic seaborne coal trade between North and South China. Decrease in cargo flows within the Pacific has come about from what appears to be a short-term pause in Chinese seaborne coal purchases as well as seasonal decrease in nickel or cargoes as the Philippines has entered its rainy season. Looking ahead, there's been no official announcement or indication that China will increase their coal imports in the short term. However, this recent decrease in Chinese seaborne coal buying may end up being a short-term strategic maneuver to help cool pricing. Year-to-date, the BSI has averaged roughly 26,900. Although we expect to see elevated volatility in the near term, we remain constructive on freight rates given the positive underlying fundamentals. Please turn to Slide 19. Fuel prices continue their upward momentum as demand for oil products increased across the spectrum. HSFO and VLSFO are now trading around $450 and $590 per ton, respectively. The fuel price spread between HSFO and VLSFO took a dip in Q3 on the back of elevated relative demand for HSFO as Asian power generation plants switched from consuming higher-priced gas to cheaper residual oil. However, we've recently seen a normalization in relative prices, with spot fuel spreads now trading around $140 per ton, a new high since the crude oil collapsed in mid-2020. With 89% of our fleet fitted with scrubbers, the price differential between HSFO and VLSFO is an important value driver for our business. At current fuel spread levels, we generate around $1,700 per ship per day in incremental value across our fleet, equating to about $32 million of value per annum. Please turn to Slide 20. Net fleet supply growth increased slightly in Q3. A total of 100 dry bulk new building vessels were delivered during the period, down about 20% quarter-on-quarter and 5% year-on-year, partially offsetting this, a total of just 9 vessels were scrapped during the same period, more or less unchanged as compared to the prior quarter. This low level of scrapping is not surprising given the strength in the underlying spot market. In terms of forward supply growth, the overall order book stands at just 6.5%, and it's even lower for the Supramax/Ultramax segment. For 2021, dry bulk net fleet growth is expected to come in at 3.5%. This assumes scrapping a roughly 5.8 million deadweight tons, down about 2 million deadweight tons from previous guidance and only about 1/3 of last year's amount. Again, this is primarily as a result of a stronger rate environment. For 2022, dry bulk net fleet growth is expected to be just 1.5% given the rapidly depleting order book and somewhat higher scrapping. A total of 92 dry bulk ships were ordered during Q3, the same as the prior quarter and largely in line with the quarterly average over the last 5 years. Although we expect some level of ordering to continue, we still believe it will be somewhat muted, given new building price levels, both on an absolute basis and on a relative basis to secondhand pricing, the prolonged delivery time, given the lack of yard slots and the ever-increasing uncertainty around future carbon pricing and regulations regarding emissions. Please turn to Slide 21. As we've spoken about before, and you can denote from this slide, dry bulk demand is inextricably linked to global GDP. Global growth expectations for 2021 were slightly lower to 5.9%, down 10 basis points since our last earnings call. For 2022, the IMF is estimating global GDP growth of 4.9%. Please turn to Slide 22. Dry bulk demand growth has been revised downwards slightly since our last earnings call, with 2021 growth now estimated at 4.1%. This has been driven by downward revisions in iron ore and grains, but offset in part by increases in coal and minor bulks, such as steel, cement, scrap and nickel ore. It's worth noting that minor bulks, where Eagle derives about 2/3 of its demand from, is expected to come in at 5% this year. For 2022, demand is forecast at 1.8% for dry bulk overall and 2.4% for minor bulks. It's important to look at this in concert with the expected low fleet growth numbers I mentioned a few moments ago. Notwithstanding near term volatility, we're optimistic about the prospects for continued global growth, which is being supported by massive amounts of stimulus. This positive demand picture, combined with a record low order book supports our constructive view on market developments looking ahead. In closing, we are energized about Eagle's strong position following our multiyear fleet renewal and growth initiative as well as our new comprehensive financing. And on the back of these, we're looking forward to continuing to execute for the benefit of our shareholders. With that, I'd like now to turn the call over to the operator and answer any questions you may have. Operator?

[Operator Instructions] Our first question comes from Randy Giveans with Jefferies.

Congrats, obviously, on the record quarter, very strong rates there. Looking at your 4Q '21 quarter-to-date rates, 32,000 plus very strong again. Now looking at the BSI, that's averaged closer to 38,000 plus a day for the last 6 weeks. One of your peers, without scrubbers, I think they booked around 65% at 37,000 a day. So I know it's hard to beat a rising market, right? But was the rest of the underperformance due to lower hedges via your FFA book. And I guess with that recent drop here in the last week in the FFAs, have you been more active trading those for 4Q '21 and even 2022?

Yes. So I think a bit to unpack there. First of all, I'm not sure who you're referring to, but I think it's important when you compare TCEs between companies, you look at the fleet makeup and whether you're talking about a fleet of strictly Supramax and Ultramax or a blended fleet including [in Capes]. We definitely have a hedge position, which we disclosed in [our queue] of FFAs and cargoes. But which impacted us, that's part of our risk management. As we look forward, and you'll see it in our queue this quarter as well, we've built a bit more of a hedge book going into next year using FFAs as well. Having said that, it's dynamic and we take advantage of the volatility around it. So we think it's also important to look at the TCE quarter-on-quarter. And I think we're quite comfortable with our TCE performance relative to our peers on a normalized basis, as I said, especially when you take up the fleet makeup. But beyond that, I can't speak, unless I know specifically what you're speaking about, who you're speaking about.

Sure. No problem. And then I guess with that FFAs, it seems like there's been some extreme volatility here in recent weeks. Is that a lot of physical paper trading or just kind of financial trading around that to increase that volatility?

Well, look, I think the volatility, there's always a question, is it tail wagging of the dog or the other way around. But I mean, if you look at the physical market, there's been extreme volatility on the physical market as well. We take advantage of that. And I mean, it gives me an opportunity to talk about it. You know we prefer to use derivatives to hedge our book. And even after the quarter, we sold a derivative contract as a hedge for next year and the highest one we did was at $26,000. We bought that back this week. We unwound the hedge, if you will. We call it dynamic hedging. We unwound that hedge at $10,000 less. And that benefit accrues to the benefit of our shareholders. It doesn't mean that we won't unwind our whole hedge book, but dynamically, we can go in and out of that market, always with having a physical ship as a hedge against it, all with a view to creating value and adding to the TCE for the fleet. So we're building a hedge book as we go forward, but it's not a straight-line up because, as I said, we take advantage of the volatility in the market.

Got it. Okay. I guess last question for me. Your debt now extremely low. Congrats on that recent refinancing and everything. Your shares have fallen from 55 to, I guess, under 40. Now it looks like they'll be back above that in an hour here. But over the past month, right, trading well below NAV. So with your ample free cash in the coming months, how you decide on either further debt repayments, share repurchases or maybe doing something with converts?

Yes. I think you're right. We come in every day and look at what we can do and what the best use of capital is. If we go back 5 weeks ago when we announced the Board authorization for a share buyback, we've actually been in a blackout period the entire time up to earnings here. Having said that, just to be clear, there's not a specific authorization to go buy a certain number of shares. But clearly, we're aware of where we're trading. So it's a decision as we go forward. The last focus has been to pay down the revolver to 0. And obviously that's now done. So looking at whether it's share buyback or as you said, possibly something on a convert or putting cash on the balance sheet. Or further debt repayment is something that we will need to look at. Having said that, I think I'll use the opportunity to say, I think capital allocation is vitally important. I think the real exciting thing here is what's behind it. The business that supports it. And whether we pay out 30% or even more or pay down the $50 million or buy back shares, it's that every dollar that we generate is for the benefit of our shareholders. And the real story here, in my mind, if you'll allow me, is that we generated $91 million of EBITDA with 53 midsized ships. And that's almost 30,000 TCE with a fleet with no tapes. Those are ships that cost twice as much as Ultras, ships that really have averaged just 8,000 more than the midsized fleet this year. And as we talk about volatility, although we've experienced significant volatility for our market on a relative basis, it's significantly less. So I think it speaks to the, I think, the segment that we're in within dry bulk, the midsize segment and the strength that that's leading, and I'll leave it at that.

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

Just a question on -- like a follow-up question on the capital allocation. You didn't mention any vessel acquisitions. You've been very active in the last 5 years renewing the fleet. What's your view on buybacks versus buying ships? I mean based on our estimates, stock is now trading at a 30% discount to NAV. Just curious if you have any desire to expand or looking at fleet acquisitions, given where the stock is?

Yes. Thanks, Magnus. I think we're always looking at opportunities. Having said that, asset values have moved up pretty significantly. And as I said in the prepared remarks, the 9 ships that we acquired, they've appreciated by over $80 million. We feel we're in a fortunate position. We've been able to not only renew the fleet, but grow it by about 20%. So we don't feel pressure to participate in further growth at this point and clearly don't have a need to refer to the renewal. Having said that, if there are opportunities where we can -- that are accretive and/or it's the long-term period market, which as of today, it doesn't do, but the long-term FFA markets or period market justify being able to write-down that asset significantly, then we would be interested. But as I said, at the moment, it's not a priority for us. We just don't feel a need there. So given the choice between the 2 at the moment, we would think that a buyback of securities, whether shares or convert is more attractive than assets, all things being equal at the moment.

Good to hear. The second question I have is related to the OpEx. So a big jump there in the third quarter. I guess you explained it with buying inventory lubes and also COVID related expenses. What should we expect going forward as a normalized OpEx, it's around 5,000, I guess, the first 9 months was about 5,100. Will it have a 5 in front of it? Or you still think it can be below 5,000 going forward on the normalized basis?

I would say for the fourth quarter, it's going to have a 5 in front of it. I love to under-promise and over deliver. But it's not just one thing here. It's repatriation of the crews is costing more money, everything we talked about. And the more expense for lubes is a good story, right? The ships are moving faster because the rates are in the 30s. And so that's just really an effect of when you run an engine faster, you need higher lubes. In addition, as I said, the base oils are higher, so pricing is up, and that's true across the entire industry. So for now, I think it's going to have a 5 in front of it. And obviously, over time, we expect things will normalize. But it's an extraordinary environment globally that we're in, and there are a lot of benefits for dry bulk at the moment, but OpEx is clearly one of the negatives.

Right. Just last question on chartering strategy. The -- it's tough to beat the index in the rising market. But does the recent pullback create opportunities for your active chartering strategy? Maybe you can elaborate a little bit on that because I know in the following market, I think, historically, you've done better.

Yes, absolutely. Look, we think in a normal market, I think our active management platform will show its true colors. I mean the market's really gone vertical here. And no question, we had some FFA hedges in place to -- as the market rose to protect, and we didn't expect the congestion factor, if you will, to really propel rates to where they went in the last month. So those hedges had an impact. But having said that, volatility, we welcome it. And I talked about it on just a hedge and our lining the hedge and the value it can create around that. But it's also true around the ships that we charter in and the cargoes. So we welcome volatility. It's a little extreme at the moment, but it's something that we think we're able to create value for. And obviously the proof will be in the pudding. So you'll have to see how we -- how it develops over the next quarter or 2.

Great. Well, that's it from me. And congrats again on the great quarter.

Thanks very much.

Our next question comes from Omar Nokta with Clarksons Securities.

I just maybe wanted to follow-up on the discussion about capital deployment. Obviously, you guys have had a pretty solid quarter and this upcoming one is looking good too and a pretty good dividend right off the bat here. But how are you guys thinking strategically as we wind down this year and as we look ahead into '22? Over the past year, it's been pretty transformative, you acquired ships, obviously, at well time prices. You've refinanced your debt stack and now you've gotten to this point of the dividend. How are you guys thinking about priorities now? Have you -- do you have a series of strategic priorities as you look into next year about what to do? Or is it now more about just hunkering down? You have the 53 ships, you've got the dividend, and it's just moving forward.

Yes. So I wouldn't say it's hunkering down, but it's delivering for our shareholders. And so if that means keeping -- staying at 53 ships or as I've talked about in the past, we're likely to sell our 2 older ships. So -- and go forward with 51 owned ships and obviously chartering around that and deliver real value for our shareholders, and that's an outcome we'd be really happy with. But having said that, it's not the hunker down and say, we're not looking for opportunities. We just don't feel pressure that we need to do more in terms of growing or renewing the fleet. So we feel we're in a pretty privileged position at the moment. Obviously, this market has helped us to deliver both the debt pay down and this dividend, and we intend to take advantage of that and continue to maximize it as we go forward.

Thanks, Gary. And maybe just kind of switching towards capital repayment regarding the converts versus the shares. Is there something that stands out between both of those that would be more appealing, buying the converts versus the shares? Any thoughts on that?

Yes, sure. I mean one benefit of buying the converter is it doesn't take float out of the current market in terms of share liquidity, and that's something that we're clearly cognizant of, given the daily share volume. Having said that, the convert is far less liquid, and it's a lot easier to buy back shares in the open market. So those are probably the 2 biggest things. Otherwise, there's definitely a high correlation between the 2, obviously, given the nature of the convert instrument. And -- but as we go forward, we're clearly going to look at the pros and cons of both of those. And it's not necessarily one or the other either.

Our next question comes from Greg Lewis with BTIG.

Gary, it seems like capital allocation has been picked over pretty well. I guess I would just ask, you did highlight the 2 older vessels that you're thinking about potentially selling. How should we think about the use of those proceeds?

Yes. I wouldn't see the use of those proceeds any differently than cash from operations, frankly. Those ships are worth kind of mid upper teens, I'd say, at the moment. And they're unencumbered as well. When we did the financing, we purposely kept them out with a view that they'll likely be monetized before their next special survey dry dock. One is in mid '22 and one in very early '23. But at the end of the day, cash is fungible, and we don't see a difference there or a need to recirculate it into buying assets. Having said that, just like cash from ops, if we see an opportunity, then we'll use it for that.

Okay. Great. And then just -- I did have a more of a big picture macro question. As I'm looking at Slide 22, I guess, the coal growth forecast for '22 is, I guess, it's between 1% and 2%. Are you seeing things in the market that potentially lead you to believe that that number could be higher or following kind of the rebound in '21, whether it's -- is the supply capabilities from the miners just not there? And the reason I ask is because as we think about coal prices, which are firm, as is other commodity prices. On a relative basis, coal still seems an attractive energy source relative to the other ones. I'm just surprised that that number is not higher.

Yes. Well, if 2021 has taught us anything of that is, is that trying to project demand, especially coal demand, where we've seen the changes in velocity this year are pretty extreme. In terms of supply, even with the growth this year, the significant growth this year and next year, the next year still is a number below where we were in 2019 pre-COVID on a global coal basis, marginally below. So in terms of supply, I don't think that's the issue. We're seeing significant change in those coal trade flows this year, especially because of, obviously, the China Australia issue around coal. But there's still significant growth intra-Asia coal from Indonesia, China and Indonesia, Vietnam and India. And those are trades that we're particularly in. So I think from a midsized dry bulk segment, I think it's more positive in terms of volumes for next year. But in terms of trying to project it exactly, I think there is upside in that, but I think there's also a downside in it in that it's very hard seeing the fuel mix and price mix and what we've seen this year.

And our next question comes from J. Mintzmyer, Value Investor's Edge.

Congrats on a fantastic quarter all around. So great questions so far. Not a whole lot to add. I just want to do a little bit of housekeeping on the FFAs. Just to clarify, I think you said you're going to include those in the 10-Q, which should help a lot. It looks like you added about 10 or 11 ships at a quarter, about a 1,000 days quarter-over-quarter. Is that fair? And is that kind of the rate you expect to do going forward, always doing about 10 to 11 ships per quarter?

Yes. I don't have the specific number. I mean we took a number -- delivery of a number of acquisition ships over the last few quarters, and some were fully in the quarter, some towards the end, and we just took delivery of the Valencia Eagle last week. So that was the only ship that delivered post third quarter. But we don't see significant -- we don't see any more -- there's no more ships that we've acquired from an S&P basis to add. Obviously, the number of days that we -- from a chartering basis is slightly -- is the number of charter-in ships has been fairly static lately. But otherwise, we don't expect things to change very much.

Okay. Certainly makes sense. And when you say 75% fixed at $32,400, I think, getting to what Randy was talking about, are you already incorporating the FFA loss for Q4 into that? Or do you need to add that additionally on top?

Yes. So that's a pro rata basis, the number of ships that we have fixed. So if you think about it, if you're 50% into the quarter, then it would be 50% of the FFA days that we've done, plus all the physical fixing of ships and cargoes and things like that.

Got it. So there's a little bit, obviously, of spot left, and then there's going to be a little bit more drag from the final FFAs. And I'm sure we'll see that obviously in the 10-Q. Turning real quick to the convertibles. I think everybody's pegged on this. Everyone sees that there's this enormous opportunity. Your NAV is -- it depends on what analyst and what data source, but I mean $70 a share is a number that seems reasonable. You're trading at a 45% discount. You have a great balance sheet. So not only is it price to NAV, you're also looking at enterprise value to gross asset value, massive discount, right? So the convertibles are out there, but you don't have a call provision, right? So there's nothing you can do to force those in. How would you go about mechanically, if you were trying to do a repurchase via that route? Do you just have to reach out directly to the holders and work something out? Is there some sort of formal tender process you could do? What would that potentially look like?

Yes. Well, we could buy them in the open market. Alternatively, we could make a proposal to holders, more formal and certain amount type of proposal, but we are able to buy converts in the open market as well.

All right. I look forward to seeing what you do there, Gary. I know anytime you talk to me, I want to talk about repurchases. And with a 45% discount to NAV, it's just -- it's screaming. So I'm really, really happy to see the $50 million program, and I look forward to next quarter's results.

Thanks, J. I appreciate it.

[Operator Instructions] Our next question comes from Liam Burke with B. Riley.

Gary, could we go back to the macro? You have a versatile fleet, obviously, you carry major bulks as well as the minors. How do you look at the volatility in the iron ore trade affecting the fleet and how you look the business going forward?

Yes. I mean if there's one cargo that doesn't directly impact us of all the major bulks, its iron ore, right? It's a fairly small part. It was about 10% of our cargo mix. But frankly, it's not from the major trades. It's not Brazil, China, it's not Australia, China. So it's really not as significant for us. Having said that, as iron ore prices come off, then the ships, the smaller cargoes and the trade that we tend to do become less attractive. So you'll likely see as iron ore prices come off, us doing less iron ore going forward. But again, it's a relatively small part of our cargo mix. So directionally negative with lower pricing, but not significant impact for us.

Okay. And then you talked about selling the older vessels. How does adding new assets fit into the mix? Or are just asset values too high here?

Yes. I mean I touched upon it before. They're quite high, and we feel quite satisfied where we are. Having said that, if the forward markets, whether it's the derivative markets or the long-term period markets are supportive to write-down asset prices to levels we believe are attractive in terms of long-term depreciation, then we'd be interested. But just to go out and buy assets at this point, we don't feel the pressure to do so. And I don't think you'll see us doing that on just -- in the immediate basis just where rates are relative to where our asset prices are.

And I'm showing no further questions at this time. I'd like to turn the call back to Gary Vogel for any closing remarks.

Thanks, operator. We don't have anything further. So I'd like to thank everyone for their time today. And wish everyone a good day.

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