Golden Ocean Group Limited (GOGL) Q4 2022 Earnings Call Transcript

Golden Ocean Group Limited (NASDAQ:GOGL) Q4 2022 Earnings Conference Call February 16, 2023 9:00 AM ET

Company Participants

Ulrik Andersen - Chief Executive Officer

Peder Simonsen - Chief Financial Officer

Conference Call Participants

Omar Nokta - Jefferies

Sherif Elmaghrabi - BTIG

Operator

Good time and convey you for opinionated by. Welcome to nan Fourth Quarter 2022 Golden Ocean Group Limited Earnings Conference Call. [Operator Instructions] Please beryllium advised that today’s convention is being recorded. I would now for illustration to manus nan convention complete to your speaker today, Ulrik Andersen. Please spell ahead, sir.

Ulrik Andersen

Good afternoon, ladies and gentlemen and invited to this convention telephone wherever we will beryllium presenting Golden Ocean’s Q4 results. Thank you very overmuch for listening in. In today’s call, we travel our accustomed procedure. Peder Simonsen, Golden Ocean’s CFO, will talk america done nan financial highlights. And hereafter, I will beryllium discussing nan marketplace and nan outlook for nan company.

At nan extremity of nan presentation, I will supply much specifications connected our caller acquisition of 6 modern Newcastlemaxes. So successful nan adjacent 20 minutes, we will show you that contempt macroeconomic factors presenting a challenging backdrop, Golden Ocean generated coagulated results successful nan 4th fourth that we proceed divesting older tonnage and recycle nan proceeds into equity for modern tonnage. And that contempt an expected slow first half of nan year, nan semipermanent barren bulk fundamentals stay strong.

With that, let’s return a look astatine nan main highlights for nan quarter. In Q4, we recorded an adjusted EBITDA of $112 million, which resulted successful nett income of $68 cardinal aliases $0.34 per share. We achieved mean clip charter balanced rates of $21,000 per time for our Capesizes and $19,000 per time for nan Panamaxes. Like nan different 3 quarters successful 2022, these net are good supra nan benchmark indices. For nan Capes, it is $7,000 per time per alloy and for nan Panamaxes $5,000 per time per vessel. The premiums are driven by our modern fuel-efficient fleet, fixed paying contracts and scrubber premiums. Rate guidance and looking astatine this 4th Q1, we person truthful acold secured $13,000 per day for 63% of our Cape days and $15,000 per time for 73% of our Panamax days.

Looking up into Q2, we person secured $21,000 per time for 19% of our Cape days and $18,000 per time for 14% of our Panamax days. During nan quarter, we insert into a $250 cardinal installation refinancing 20 vessels. We besides completed nan waste of 2 older Panamax vessels while entering into an statement to get 6 modern Newcastlemax vessels for full value of $291 million. I will talk this transaction later successful nan presentation.

Finally, we repurchased 460,000 shares and announced our eighth consecutive quarterly dividend we will salary our $0.20 per stock for Q4. Dividends stay a cardinal constituent of our superior allocation. And we are pleased to beryllium capable to grow nan fleet while delivering connected our committedness to return rate to our shareholders.

Now, I walk nan connection to Peder who will dive into immoderate of nan numbers and financial specifications of nan quarter.

Peder Simonsen

Thank you, Ulrik. If we move to our profit and loss, we have, Ulrik mentioned, achieved nan Cape rates of $21,400 for nan quarter, which compares to $22,700 successful Q3. Our Panamax and Ultramax mixed achieved $19,000 for nan quarter. Our full fleet-wide TCE complaint was $20,400, which was down from $23,000 successful Q3 and our afloat twelvemonth TCE was $24,300. We had 2 ships barren docked successful Q4 versus 6 ships barren docked successful Q3, which resulted successful off-hire days of astir 120 days successful Q4 versus 272 days successful nan erstwhile quarter. We person 5 ships expected to barren dock during Q1 2023. This resulted successful TCE revenues of $180.2 million, which compares to $195 cardinal successful Q3.

Looking astatine our operating expenses, we recorded $58.1 cardinal successful operating expenses versus $59.3 cardinal successful Q3. As mentioned, we had less barren dockings this quarter, which we expensed, but we had higher disbursal investments successful power redeeming devices and sensors, which totaled $2.8 cardinal successful Q4, which is $2 cardinal successful Q3.

On nan moving expenses, we spot that though nan COVID-19 related costs person disappeared, we are starting to spot higher ostentation effects successful our OpEx figures. Our OpEx ex-dry dock was $6,300 per time $100 per time supra nan erstwhile 4th and barren dock constituted $440 per time versus $790 per time successful Q3. On our wide and administrative expenses, they ended up astatine $5 million, up from $4.8 cardinal successful Q3 and nan regular G&A came successful astatine $537 per day, nett of recharge of costs to affiliated companies.

Our charter prosecute expenses came down from $19.2 million, which was chiefly owed to alteration successful chartered-in rates, while we person an summation successful chartered-in ships for nan quarter. This resulted successful an adjusted EBITDA of $112.4 cardinal versus $118.2 cardinal successful Q3. On our nett financial expenses, we recorded $17.6 million, which was up from $14.4 cardinal successful Q3, which is attributable to higher LIBOR and SOFR reference rates connected our floating complaint loans.

On our derivatives and different financial income, we recorded a summation of $11 million, which compared to a summation of $17.3 cardinal successful Q3. Most notable was a derivative summation of $2.7 million, which relates chiefly to liking complaint swaps, which was down from $11.4 cardinal successful Q3. On nan results from investments successful associates, we recorded a summation of $7.4 million, which was up from $5.9 cardinal successful Q3 and this relates to investments successful SwissMarine, TFG and UFC. Our nett profit came successful astatine $68.2 cardinal aliases $0.34 per share. And arsenic Ulrik mentioned, a dividend was declared of $0.20 per share. For 2022, we recorded a afloat twelvemonth nett profit of $462 cardinal aliases $2.30 per stock and dividends relating to 2022 of $1.65 per share.

Moving to our rate flow, we saw a nett summation successful rate of $5.8 million. We saw beardown rate travel from operations of $125.6 million, which compares to $98.7 cardinal successful Q3. We saw that falling inventories pinch falling bunker prices had a affirmative effect of $28 cardinal connected moving superior versus a antagonistic $26 cardinal successful nan 3rd quarter. We besides saw rate travel from operations see dividends from associated companies of $2.2 million.

On our rate travel utilized successful financing this netted astatine $114.3 million. This was nan consequence of nan dividend costs recorded relating to Q3 of $70.3 million, indebtedness and lease repayments of $40.7 million, including $11.4 cardinal successful indebtedness repayments relating to nan waste of Golden Ice and Golden Strength. Cash travel utilized successful investments came successful astatine $5.5 million, chiefly relating to nan income proceeds of Golden Ice and – recorded successful nan 4th and costs of newbuilding solvents of $16.8 million.

Moving to nan equilibrium sheet, we recorded a rate of $138.1 million, which includes $3.3 cardinal of restricted cash. In addition, we had nan $100 cardinal of undrawn disposable in installments accommodation astatine 4th end. Debt and finance lease liabilities totaled $1.2 cardinal astatine nan extremity of Q4 and nan mean fleet-wide loan-to-value nether its indebtedness accommodation came successful astatine 44.5%, pursuing an mean valuation driblet connected our fleet of astir 9% quarter-on-quarter. Our book equity was recorded astatine $1.9 cardinal and a ratio of equity to full assets of astir 59%.

Having a look astatine our rate breakeven and nan caller financings announced this quarter, we – successful summation to nan Newcastlemax transaction and associated financings, we person put successful spot a caller $250 cardinal in installments facility, which is secured by 20 Panamax and Capesize ships pinch a group of top-tier shipping banks. The installation has 5-year tenure, a 20-year repayment floor plan and a in installments separator of 185 ground points supra nan SOFR rate, which constitutes a 50 ground points simplification of nan 3 accommodation that we are refinancing. This contributes positively to our rate breakeven reduction. We are evidently exposed to floating liking rates and ostentation connected our OpEx and G&A, but we are continuously trying to push down costs wherever we can. And connected our in installments margins, we are successfully doing so.

If you look astatine our rate breakeven for nan coming year, we estimate nan rate breakeven connected our Capesize and Newcastlemax fleet of $14,300, and $10,500 for our Kamsarmax and Panamax fleets. We do spot that nan summation successful SOFR and LIBOR rates person started to travel off. And if you look astatine nan guardant curves, we do expect those to commencement to travel down again if nan guardant rates are a proxy for wherever nan marketplace is moving. We are also, arsenic mentioned, seeing immoderate effect of ostentation connected our OpEx and G&A. But we do expect that nan refinancings going guardant will mitigate nan mostly of these increases from wherever we guidelines today. And we do besides spot nan effect of a short-term summation successful rate breakeven owed to nan caller Newcastlemax acquisitions financing, which will travel down erstwhile we refinance nan ships.

Regardless of that, we maintained nan absolute best-in-class rate breakeven levels successful nan industry. And arsenic you tin see, together pinch nan superior substance economics of our fleet, puts america successful an optimal position for nan expected marketplace recovery.

And pinch that, I’ll springiness nan connection backmost to Ulrik.

Ulrik Andersen

Thank you, Peder. We will commencement pinch a speedy reappraisal of nan marketplace developments successful Q4 past year. The Cape marketplace followed an different shape past year, it was stronger successful nan first half than successful nan second, thing we seldom see. The economical slowdown successful nan world system was 1 facet weighing connected demand, but also, and possibly much crucial, little Chinese alloy request and nan unwinding of congestion impeded nan Cape rates from rising.

Demand from bauxite and ember was strong, but not capable to dress up for nan mislaid robust ore ton mile. The Cape marketplace averaged $15,000 per time during nan quarter. The Panamax marketplace saw amended fortunes, but without excelling. U.S. Gulf logistical issues and wide muted atom exports put a damper connected nan market. On a affirmative note, nan inefficiencies successful mineral flows created by Russia’s warfare successful Ukraine did subside, while ember continued to beryllium successful demand. The Panamax marketplace averaged $16,000 per time during nan quarter.

The soft commencement to 2023 should travel arsenic nary astonishment to those pursuing nan barren bulk market. Q1 typically brings seasonal headwinds arsenic acold upwind successful nan Northern Hemisphere hampers building activity. And certainly, this twelvemonth has been nary different. However, optimism is slow returning aft 3 important events, signaling that China is prioritizing maturation erstwhile again. Firstly, nan discontinuation of nan Zero-COVID argumentation extremity of past year; secondly, nan easing of nan 3 Red Line argumentation successful nan existent property sector; and finally, nan easing of nan Australian ember import ban. Naturally, a increasing Chinese system will summation nan request for barren bulk commodities, astir notably robust ore.

We are not retired of nan woods yet, and it will return clip earlier nan Chinese efforts to revive nan system translates into expanding demand. We must besides support an oculus connected developments successful nan Chinese existent property sector, but we are starting to spot signs of betterment of nan barren markets successful nan 2nd half of nan twelvemonth is realistic.

Another parameter that things are turning astir is nan GDP maturation forecast. The request for barren bulk commodities is highly correlated pinch GDP growth. And looking astatine nan IMM forecasts, which were precocious revised upwards, by nan way, world GDP is group to turn by astir 3% successful 2023 and 2024. Zooming successful connected nan important emerging Asian economies, maturation supra 5% is expected some this twelvemonth and nan next. And finally, India’s GDP is forecast to turn by much than 6% successful 2023 and 2024. The forecast stay patient by humanities standards astatine astir nan 20-year mean and should support barren bulk commodity demand. As mentioned, things will return time, but we stay assured that nan historically debased bid book, truthful I’ll talk astir connected nan adjacent slide, mixed pinch nan comeback of nan Chinese system intends that nan freight marketplace will assistance itself backmost into profitable territory later this year.

Demand for barren bulk commodities has grown consistently complete nan past 30 years, connected average, 30% much than world GDP. In different words, historically, it was not a deficiency of request causing barren bulk shipping markets to suffer, it was nan shipowners sealing their ain religion by contracting excessively much. This is not nan business today. The highly affirmative proviso business persists, pinch maturation rates successful nan coming years astatine 30-year lows.

Particularly, nan Capesize conception looks favorable pinch nan lowest bid book of each barren bulk classes. In nan Capesize segment, Golden Ocean is, by a margin, nan largest proprietor successful nan world, a position we cemented this week acquiring 6 Newcastlemax vessels. Another logic for supply-side optimism is nan commencement of nan IMO 2023 regulations, which will trim nan ratio of nan fleet arsenic nan mostly of nan world barren bulk fleet will beryllium forced to slow down to comply.

The nonstop effect of CII and EEXI is difficult to quantify. But each different things equal, it will require much vessels to move nan aforesaid magnitude of cargo if nan world fleet connected mean is slowing down. The effect of nan IMO regulations will turn complete clip arsenic nan period for compliance increases. We expect constricted effect this year, but from adjacent twelvemonth and onwards, we expect a meaningful effect. Naturally, pinch specified an charismatic proviso side, nan marketplace does not request spectacular growth. Normalized request maturation will beryllium capable to outpace nan proviso and create very beardown supply-demand fundamentals. So putting proviso and request together, we expect an extended play of sustainable, patient earnings.

The world whitethorn beryllium facing headwinds successful position of ostentation and slowing economies which intends we are having a soft commencement to 2023. However, it is not capable to offset nan semipermanent outlook for barren bulk pinch China, arsenic discussed earlier, erstwhile again focusing connected growth. While we admit macroeconomic factors, we are encouraged by nan lifting of nan Zero-COVID argumentation which will boost request for barren bulk commodities, chiefly robust ore.

At nan aforesaid time, we are looking astatine a historically affirmative alloy proviso situation, and location is thing that tin alteration that earlier 2026 fixed nan deficiency shipyard capacity. The affirmative proviso dynamics mixed pinch Chinese growth, expanding ember request – expanding and very connected mild dense bauxite export from West Africa and nan effect of IMO 2023 regulations intends that it’s difficult not to beryllium upbeat.

As we usually explicate successful our calls, we ever activity to unafraid fixed-paying contracts erstwhile levels are attractive. And we do that successful immoderate segment, beryllium it Cape aliases Panamaxes, that offers nan champion value. We do not want to beryllium afloat spot exposed astatine immoderate time. For Q1, we person 66% of our alloy days fixed. At an mean of astir $14,000 per day, this is good supra nan quarter-to-date marketplace and, of course, nan existent spot market.

Since nan move of nan year, we person secured fixed-paying statement sum for Q2. And mixed pinch our acquisition of 6 Newcastlemax vessels, each pinch GCs attached, we person raised our sum to 19% connected nan Capes, good supra rate breakeven levels. For nan Panamaxes, we person 14% of nan Q2 alloy days covered astatine $18,000 per day. In different words, we person built a span done Q2 into nan expected stronger 2nd half of nan year.

Before looking astatine our caller acquisition of 6 Newcastlemaxes, let’s talk astir rate travel generation. Golden Ocean has nan industry’s lowest rate breakeven and nan largest and astir modern fleet. It intends we person important rate travel potential. For instance, looking astatine nan clip charter balanced rates we person achieved past year, contempt a challenging macro background, whitethorn I adhd would connected an annualized basis, make $360 cardinal successful free cash. This is simply a nonstop output of 19% connected today’s stock price. It’s Board determination what we do pinch early earnings, but we have, for nan past 8 quarters paid dividends moreover erstwhile acquiring caller vessels. So it is simply a adjacent presumption that dividend continues to beryllium a apical privilege erstwhile it comes to our superior allocation.

Earlier successful nan week, we announced nan acquisition of 6 modern Newcastlemax vessels. On my past descent today, I will explicate nan rationale down nan transaction and really it ties successful pinch our strategy. In nan past 3 years, Golden Ocean has acquired aliases contracted 34 modern and fuel-efficient vessels, while we person been trading 11 older and less-efficient vessels. We person been connected a ngo to beryllium caller and go highly competitory and guarantee we person a future-proof fleet that tin comply pinch biology regulations and charters requirements. We person financed this fleet renewal done divestments. The 11 vessels we person sold person released $124 cardinal nett proceeds, which we person recycled into nan equity for nan 34 acquisitions. It intends we’ve been capable to turn nan fleet by 36%, while having paid $840 cardinal successful dividend.

The latest transaction is simply a continuation of that strategy, and a transaction which we judge is good timed and good structured. To statesman with, we person been capable to get these modern vessels astatine an charismatic value good beneath nan marketplace level, taking advantage of what we judge is simply a impermanent weakness successful plus prices. Further, nan acquisition is system successful a measurement wherever we get instant rate flow, supporting our dividend capacity and protecting america against near-term uncertainties.

However, successful nan mean run, nan vessels will beryllium charter free extremity of 2025, astatine a clip erstwhile influx of vessels will person been historically debased for years and wherever nan requirements for CII regulations person go overmuch tighter than today. The vessels are ace businesslike and will person nary CII compliance issues. Also, they bid a premium to modular Baltic alloy of up to 139%, and connected apical of that comes nan premium from nan scrubbers. Acquiring these vessels will, therefore, not only amended our rate travel procreation potential, but besides lend 2.5 percent points towards our ambition of reaching a 30% simplification successful emissions earlier 2030.

Before opening up for questions, I would for illustration to soon wrap up 3 main points from today’s release. Golden Ocean outperformed nan marketplace again successful Q4, beating nan indices by an mean of $7,500 per time crossed our full fleet. Despite a soft commencement to 2023, we spot signs that nan marketplace could rebound soon, driven chiefly by nan reopening of China. Golden Ocean continues to attraction connected returning superior to our shareholders done dividends and stock repurchases, but we do truthful while prudently investing for nan early arsenic proven by our acquisition of six modern vessels this week.

Before I manus nan connection complete to nan operator, please remember, you tin travel Golden Ocean and myself connected LinkedIn for news and updates connected Golden Ocean. Operator, complete to you.

Question-and-Answer Session

Operator

[Operator Instructions] Now, we are going to return our first question. And nan first mobility comes from nan statement of Omar Nokta from Jefferies. Your statement is open. Please inquire your question.

Omar Nokta

Thank you. Thank you, operator. Hey guys. Thanks for nan update. I did want to inquire conscionable a spot astir nan marketplace and really we are seeing things create present recently. And conscionable from your perspective, and you touched connected this during nan presentation. But successful general, what do you deliberation has changed successful nan barren bulk marketplace that caused nan seasonal debased that we are successful now to beryllium a spot much pronounced and lead to specified a large driblet successful earnings? Has it been robust ore specific? Is it coal? Is it conscionable crossed nan board? What would you say, conscionable benignant of broadly speaking, has caused rates to travel disconnected truthful aggressively this twelvemonth versus past year?

Ulrik Andersen

Yes. Hi. Ulrik here. Thank you for nan question. You are right, it has been an exceptionally anemic commencement to nan year. I mean Q1 is seasonally nan weakest quarter. So, that arsenic specified is not a surprise, but intelligibly rates are now very, very debased and besides little than I deliberation astir person expected, surely ourselves. The logic why we are wherever we are is chiefly owed to deficiency of robust ore exports retired of Brazil. They are really pumping astatine debased levels besides compared to past year, and we are simply not seeing a batch of activity. So, this would beryllium nan main, I could say, culprit. Clearly, location is nary thief from a congestion aliases thing other either. So, we are faced pinch a very inactive market, and that is of course, causing nan pressure. From a affirmative perspective, you tin opportunity we don’t spot bauxite aliases ember volumes being deed arsenic hard, but we cannot expect nan markets to beryllium bully without robust ore. It is that simple. And correct now, location is nary robust ore flowing arsenic we speak.

Omar Nokta

Okay. That’s helpful. I conjecture because we person seen evidently stronger alloy prices and higher robust ore, and I conjecture this, but it’s not yet translating into nan freight market. And I conjecture nary indications conscionable yet of higher demand. Obviously, nan backdrop is location aliases nan basal communicative is there, but arsenic of correct now, still charters connected nan sidelines waiting for things to prime up?

Ulrik Andersen

Yes, that’s right. I mean we person to eat through, tin you say, a small backlog of vessels earlier this turns around. And we spot nan aforesaid indicators. We didn’t mention it present connected nan call. But clearly, nan robust ore prices is different factor. And erstwhile we commencement lining up nan various factors, we person a bully thought and a bully denotation that things will turn. I deliberation we person been – erstwhile I look astatine nan analysts retired there, location are immoderate that are very engaged and past location are immoderate that are bullish. And I deliberation we are a small cautious and person besides been trying to, tin you say, coordinate our strategy, our chartering strategy according to that. We person a adjacent magnitude of ember for Q2. So, we person fundamentally group ourselves up to hold for that, they tin say, effect of China chiefly reaching nan freight markets. We don’t person a crystal shot here, and we don’t cognize if it happens successful Q2 aliases Q3 aliases Q4. Our strategy is, arsenic I say, group ourselves up to wait. And past eventually, we judge that we will see, tin you say, nan effects of what is going connected in, yes, chiefly China, select down to nan freight rates. But if we look extracurricular robust ore, location are besides immoderate different things that we are, tin you say, affirmative astir ever-increasing request for coal. China has opened up now for Australian coal. That is bully news for nan larger-sized vessels. We person of course, bauxite, which is really starting to go a factor. It is simply a agelong haul funds. It’s really much to mile dense than from Brazil, and we deliberation that will supply a CAGR arsenic well. All we request now is simply a small thief from China, and past we get that flash successful nan cookware and hopefully commencement – rates will commencement taking off. But I americium not going to beryllium present coming and opportunity that’s going to hap connected nan 25th of March aliases 25th of April, but we spot nan signals and we are positioning for that upside. And I deliberation that’s nan connection if you yourself want to position arsenic a shareholder aliases an investor, past we are good, better.

Omar Nokta

Good. The ingredients are there. I admit that color. And possibly conscionable pursuing up past connected coal. As you mentioned, China has reopened up nan ember imports from Australia. One of nan large things driving ember complete nan past possibly a twelvemonth aliases 2 years has been conscionable nan precocious value of earthy gas, and we person seen LNG prices coming down here. Do you spot immoderate imaginable headwind to nan ember communicative of switching from ember backmost to gas? Is that having an effect yet, aliases do you spot that having a bigger risk?

Ulrik Andersen

We don’t spot that astatine all. On nan contrary, I deliberation – we deliberation that nan world sewage a spot of a daze really pinch what happens aft nan penetration of Ukraine and abruptly information of supply. Energy proviso is correct up location connected nan apical of nan agenda. I deliberation peculiarly India is absorbing here, but besides China, of course. We – our analysis, our take, and you tin past beryllium – show maine what you think. But our return is that because China – nan logic why China is opening up for Australian ember is because they are going into a spot of a maturation shape and that nan summation successful nan home accumulation past twelvemonth is not sustainable complete time. It’s debased value and they person had a batch of accidents. And truthful we spot that arsenic a awesome that China will import much arsenic well. So generally, actually, no, connected nan request side, we are very positive. We deliberation nan largest constraint is astir apt nan proviso side. Will location beryllium capable ember to really – to pump retired is astir apt nan question. Everything that gets pumped retired will get shipped arsenic we are comparatively assured about.

Omar Nokta

Got it. Okay. Well, convey you. That’s very helpful. I will walk it over.

Ulrik Andersen

Okay. Thank you for your liking today. Thank you.

Operator

Thank you. Now, we are going to return our adjacent question. And nan mobility comes from nan statement of Sherif Elmaghrabi from BTIG. Your statement is open. Please inquire your question.

Sherif Elmaghrabi

Hi. Thanks for taking my question. Just 1 for me, you mentioned emissions regulations are going to person a bigger effect connected nan fleet complete nan adjacent fewer years, really starting adjacent year. So, person you fixed immoderate thought to what you mightiness request to do pinch immoderate of nan oldest vessels successful your fleet? Could we spot retrofit? Do you expect them to beryllium successful compliance for immoderate time, aliases is nan strategy continued monetization?

Ulrik Andersen

Thank you for nan mobility and a very applicable and a bully question. Maybe I tin conscionable very quickly elaborate connected nan constituent pinch nan CII. The logic why we don’t deliberation CII will beryllium – that effect for this twelvemonth is simply a operation of, of people nan period is still comparatively debased for compliance. And secondly, nan markets are very anemic astatine nan moment, and it intends that location is nary request for afloat steaming. The vessels are already slow steaming arsenic it is. So, that headdress that galore group person put connected their vessels will not really person immoderate impact. So, nan constituent is that arsenic we spell forward, each twelvemonth these thresholds will summation by 2%, which doesn’t sound for illustration a lot, but it is really a batch erstwhile you spot complete 2 years, 3 years. And truthful you will person an aging fleet, you will person a tighter threshold, and ultimately, you will spot much vessels getting into a territory wherever it would go much difficult to clasp afloat commercialized flexibility. And from Golden Ocean’s constituent of view, we are – this is not thing that we person woken up and realized, tin you say, coming aliases yesterday, it’s thing we person been moving pinch complete nan past mates of years, right. I mean we person been, arsenic I person said connected nan call, divesting 11 vessels and invested successful 34 modern vessels successful an anticipation of this regulation, but of people also, different biology regulations that we expect will effect nan market. So, we person – we will proceed divesting our oldest tonnage. And nan tonnage successful nan mediate group, you tin say, we will upgrade and we person been upgrading pinch debased friction, paint, sensors, caller stocks, fusion systems and truthful connected and truthful forth. And past finally, we person nan newbuilds, are nan astir modern ones, which we don’t request to do thing pinch per se. But of course, if location is an upgrade that has a short payback time, we will instal that arsenic well. So, it’s a operation of respective things. And past clearly, successful nan longer run, we will request to look towards different propulsion systems, and we are monitoring that abstraction arsenic well. But arsenic agelong arsenic location is nary clear, genuine, early impervious exertion retired there, we judge that nan champion position you tin person is to person nan astir modern fleet, nan astir upgraded fleet, because past you – location are 2,000 Capes retired location aliases more. So, location would beryllium an highly agelong tail of vessels that will person problems earlier you do. And it’s not realistic to image a business wherever each Capes go obsolete overnight. So, that is benignant of, successful wide pencil strokes, really we look astatine CII and for that matter, different regulations of – biology regulations.

Sherif Elmaghrabi

That’s very fair. Thank you.

Operator

[Operator Instructions] There are nary further questions astatine this time. And I would for illustration now to manus nan convention complete to our speaker, Ulrik Andersen for closing remarks.

Ulrik Andersen

Thank you, operator. Thank you everyone for dialing successful and listening. And we will beryllium proceeding and seeing you again soon. Thank you very much.

Operator

That does reason our convention for today. Thank you for participating. You whitethorn now each disconnect. Have a bully day.