d'Amico International Shipping SA

MIL:DIS

Earnings Call Transcript 2021-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the d’Amico International Shipping First Quarter 2021 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Paolo d'Amico, CEO of d’Amico International Shipping. Please go ahead, sir.

[Paolo d'Amico, executive]

Thank you. Good afternoon to everybody. Thank you for being with us today. Let's go straight to the presentation. Now if you -- with your permission, I would jump off the executive summary because we repeat ourselves later on during the presentation itself. So if you don't mind, I will leave the floor immediately going to Page 6. I'll leave the floor to Carlos Balestra Mottola, our CFO, and then I will join you at the second part of the presentation. Carlos, please go ahead.

[Antonio Carlos Balestra Mottola, executive]

Yes. Good afternoon to everyone. Yes, as usual, just a quick glance at our fleet composition at the end of the first quarter, we had -- we controlled 38 vessels. As always, our main segment is the MR segment, the workhorse of the product tanker industry and representing 68% of our controlled fleet. We have also, in terms of control, 74% almost of our fleet is either owned or bareboats or controlled through bareboats, which are just different financing arrangements from our perspective and the remaining rolled through that it's mostly long-term time charters and only one short-term TC.

It is a young fleet. The average age is of 6.7 years, relative to an industry average, which is for both MRs and LR1s of 11.8 years. And it is a mostly Eco fleet, around 75% and IMO class 76% relative to 39% for the industry. It's a young fleet, as we mentioned several times, since we ordered 32 newbuildings since 2012 that were delivered between '14 and '19.

In terms of CapEx commitments, going on to the following page, we don't have any more newbuildings on order. So we are much lighter in that respect also in terms of maintenance CapEx, realized that we had $12 million in 2020. This decreases by 50% around in 2021 to $5.9 million and by another 50% in 2022 to $3.1 million and so that is helpful, especially in the current weak markets.

Going on to the following page. We are also lighter in terms of debt repayments, the daily debt repayments fell markedly between '19 and '20 after we finished reimbursing the medium-term facility with Intesa, it will drop further over the course of the next few years, in particular, between '22 and '23 because of a working capital facility that we have, which has quite a fast amortization profile that we will finish reimbursing in 2022. We don't have any balance to refinance in 2021. That is also positive, but we do have $65 million to refinance in 2022, and we will start working on this in the second half of this year.

In terms of purchase options on Page 9, we had 9 lease vessels with purchase options, one of these was exercised, from the High Priority, we have 8 remaining, which 7 are in the money -- or theoretically in the money. And also 7 of these are already exercisable with Cielo di Houston, which is a JOLCO, it's a slightly different structure, which is only exercisable from March 24.

We don't have intention now at this very moment to exercise other options given the current weak markets, but we monitor the situation closely. And once we see the market moving in the right direction on a sustainable basis, we will definitely look into this possibility to obtain some, hopefully, important savings on our interest expenses.

Going on to the following page, our TC coverage as per previous presentations, this is falling throughout 2021. We did, however, manage to slightly increase this fix and vessels OTC during the quarter so that we are now at 45% covered for the second quarter of this year, at a profitable rate for us of 15.4% on average.

And the coverage falls so ever to 35% in Q3 and then to 22% in Q4. We have ongoing negotiations to increase this coverage. And yes, we should be able to do so at quite attractive levels relative to today's spot market. The percentage of our Eco fleet has been increasing since Q1 '18. It is now for 2021, as I mentioned previously of around 74%, and it will increase further.

This analysis here doesn't assume any vessel disposals. But if we do -- as we plan, dispose of some of older vessels over the course over the next few years, then, of course, this percentage will rise even faster. And this is important today, especially in today's environment with higher oil prices. The Eco premium has increased significantly, and it's today closer to around $2,000 per day on a 1-year TC basis.

Way onto the following page, we show our fleet profile, the evolution. The fleet decreases slightly as some of our TC-in vessels are -- we delivered to their owners. Nonetheless, our exposure to the spot market overall exposure rises, given we have less coverage as we move forward.

And therefore, the sensitivity for every $1,000 per day change in TC equivalent earnings also rise, this is only $6.7 million for the remainder of 2021, but it rises to $12 million in 2022.

Going onto the following page. On the cost side, we did give some good results over the course of the last 2 years between '18 and '20 and '21 in the first quarter. We had some exceptional items that weighed on these results. It's -- the figures are, however, lower than they were for the first quarter of '18. We did mention that we benefited from having a younger fleet, several new vessels debuted over the course of the last few years, a homogeneous fit, more technology, condition-based maintenance, allowing to increase the average life of our spare parts.

And we also benefited from a strong dollar over the course of the last few years, and this is partly reverting now. And that is also one of the factors that explains the increase that was in the first quarter of this year relative to the first quarter of 2020.

In addition to some, let's say, exceptional COVID-related savings that we had in the first quarter of last year, since both crew rotations and inspections of vessels were more limited than usual because of the COVID situation. Go on the G&A, we also achieved some important savings over the course of the last few years, which were confirmed in this case in the first quarter of this year despite the weakening dollar.

On the financial, going onto our financial position. Important to highlight that we ended the quarter with $56 million in cash and cash equivalents, which is still a very comfortable position relative to our minimum cash covenants on our loan facilities of $25 million, and the ratio between the net financial position and the fleet market value increased from 65.9% to 68.5%. It increased as a result of the losses in the first quarter, and it increased as a result of the decrease in asset values, which, however, we're already seeing some signs of recovery in that risk as we cover the market overview data, we will talk more about that.

But the ratio of 68.5% is still a healthy ratio given we have a very young fleet, and it's much better in any case at the 73% we had at the end of '19. So it's not something we are concerned about.

And going onto the following page, the key P&L line items, we -- the net result, lost $28 million, which, excluding nonrecurring items, is a loss of $9.3 million. And in the first quarter of last year, the loss -- the profit was $6.3 million, excluding nonrecurring items of $1.5 million, including such items.

So on the key operating measures on our top line on the daily TC spot rate for the period was just shy of $10,000 per day, which, of course, is not brilliant, and it's a reflection of, of course, as we mentioned, the very weak markets, very low volumes refined. The ongoing lockdowns in the first quarter also in some key consuming developed economies.

But of course, also in some very important and populous emerging markets such as India and Brazil, and Brazil, in particular, is a very important importer of refined products. And so the effects of the spot -- weak spot market were mitigated by the TC coverage.

We had almost 50% of our available discovered through TC contracts at an average rate of 15.8%. So our blended rate of 12.8%, 50% is still well below our financial and P&L breakeven, but it's much better than what it would have been had we not had such a good level of coverage.

And I pass it over to Paolo to the market overview.

[Paolo d'Amico, executive]

Thank you, Carlos. On Page 17, we saw basically that since 2016, which was really a very bad year, the market recuperated quite a lot. And this is just before the second half of last year when COVID came in. COVID was already in, but we started unwinding the storage, and the market as a result collapsed.

Talking about oil demand, we are slowly recuperating -- is -- we are expecting to an expansion of 5.7 million barrels per day on 2021 to 96.7 million barrel per day total, which is a good demand increase since where we were last year, we were basically at 91 million barrel per day.

And as far as refining capacity, we expect that between April and August '21 is expected an expansion of 6.8 million barrels per day to 82 million barrel per day total. This is because slowly with the vaccination going on, people are starting moving again, and we'll see later on that, for instance, driving in United States is very close to where it were before COVID.

At Page 19, as you can see, there was a big built up last year of storage of crude and both of crude and products, which is due to the collapse of a price on the first half of last year. If you remember, the barrel went even negative for a few days. And so traders and oil companies have been taking before onshore storage capacity, and then we start chartering in tankers, reducing supply, and this created a bullish market up to the second half of last year when all the storage was there, talking about only products, clean products.

At December 2019, on storage, we had 25 million barrels. And then on early May 2020, that storage went up to 75 million barrels. So it went up 3x. Now we are back again to 25 million barrel, more or less.

On Page 20, we show that vehicles are rolling again. I mean, in the U.S., they are driving, again, as they used to drive before. Even the trucking is -- I have to say, the tracking never stopped because due to e-commerce, the trucking activity has always been very, very big. And we have also driving in ferries, like Japan, Hong Kong. What we have to say is that due to the fact that people are avoiding or trying to avoid mass transportation like underground or buses, the number of cars on the streets are more.

Page 21. This is the longer-term demand growth. This is what we saw before the COVID, and we saw an increase of close to 3% since year 2000. Then, of course, COVID came in. But now we expect a rebound -- a strong rebound within this year and next year.

This Page 22, very strong potential upside on asset value. Of course, asset value, they diminished again over the last months, but we are seeing more and more activity going on, on the sell and purchase market. So again, investors are going back to tankers, and they are -- there is more and more liquidity in the market.

23 -- Page 23, there's a dramatic change in the refinery landscape. This was already going on before COVID, but when COVID accelerated things. You will see more and more closure in Europe. And we are seeing a few closures, all, let's say, changes from a refinery -- oil refinery to bio refinery in the United States. And instead, we are seeing more -- an increase, which was already in the cards before COVID in refining in between the Middle East and the Far East.

And saying Far East, I would say, mainly China. Talking about closures of refinery. New Zealand is losing the only refinery they had. And Australia, out of 10 refineries, they previously had, they are closing down 6, so we will stay with 4. This means that a lot of products will be moved by other refining hubs to Australia and New Zealand, more ton miles.

Possible -- probably the refining hubs will be Singapore and Korea. But due to the increase of their refining capacity, expected also out of China. So Oceania basically is losing a lot of its refining capability.

On the supply side, Page 25, we have always -- we have a very low fleet growth. This is due to 2 things. One, the fact that, of course, the market situation. Two, newbuilding price anyhow, they are going up because shipyards they filled up their building capacity with containerships, LNGs, LPGs. And so they are not hunting for new orders.

And the final reason, which is a general reason in setting is that we do not know yet of the future technology for -- on our future fuels. Of course, we are still in a very early stage. So some owners are taking the risk of dual-fuel engines with capability of burning LNG. But LNG, as you know, is only a medium-term solution. It's not a definitive one.

Somebody is already thinking about ammonia, but nothing is absolutely clear. And on top of that, always is still very expensive. So you have a bottleneck -- a technological bottleneck, which will take some time before it will be solved.

And this is creating -- on Page 26, is creating a confluence of forces constraining the fleet supply. Because in the meantime, the fleet is getting older. And we should expect an increase of demolition. Demolition, which today is very well paid because it's well over $500 per lightweight, which is a good number.

You don't see as much as somebody would like of demolition volume for the simple reason that the scrap yards are concentrated in -- between India, Pakistan and Bangladesh. And India, as you know, is through a terrible period on lockdowns and COVID anyhow. So we have lost a lot of their personnel.

And not only they are on a very serious deficit of oxygen because whatever oxygen is produced in the country is funneled directly to the hospitals. And of course, is sanitation oxygen, it's not an industrial one. But it means that all the production of oxygen in India is 100% focused on the hospitals and not in industrial use.

So demolition, as you can imagine, there is a lot of welding and unwielding, if you want to use. And so there is a lot of oxygen needed, and there is no way you can substitute that. So it's very much limited. Another element, which is going to constrain the fleet supply are the new regulation coming in.

We have these new indexes. In the past, ship were delivered, described only because of the speed and consumption. And tomorrow, you have a further element, which is emissions. How much this ship will be emitting of CO2. The ship -- the fleet, as I said, is getting older.

You have -- if you see on Page 26, you see that by 2024, the fleet over 15 years will be over 50%. Now 15 years is a commercial date for us because after 15 years of age, many terminal -- oil terminals do not accept the ships anymore. And as a consequence, many charters, I would say, all the top charters, they don't charter any more ships that old.

So we expect this pickup on demolition. We expect, of course, then as a consequence of all this, let's say, a shrink of a fleet. And as far as new building orders, as I said, apart the technological constraint today is by far more -- is by far cheaper to buy a second-hand ship than going on the yard and building a new one.

And this is a good thing because if the new investor want to come in or even all the investor, but investor want to come in and buy tankers, they will be moving on existing vessels and not oversupply more the market.

And the final Slide #30 is the long-term fundamentals. This is something that we have been talking already a lot in the past. It's something we believe is there. It's being stopped by COVID.

But once we will all be back again and what is very much missing is Europe and what is very much missing is long-haul flying, which, unfortunately, is not happening yet. We hope that this summer is going to increase something, but we do not know how much.

But once the COVID will be out of a wave of fundamentals in which we believed before, and we still believe in it today, we will be back. And I think we will be bringing back the market, not only an equilibrium, but in a rewarding position.

Carlos, if you want to say something under the NAV?

[Antonio Carlos Balestra Mottola, executive]

Yes. No, thank you, Paolo. Just to the last slide of our presentation, Page 32, we show the evolution of our NAV. And yes, it has been falling -- it has fallen over the last quarter. Of course, given the market situation and the decrease in asset values that we covered in the presentation. So it fell from $240 million to $213 million. On a per share basis in U.S. dollars, it fell to $0.17 per share and our share price, well, that was at the end of March was at $0.13, if converted into dollars, which was equivalent of stock price of 25%, which is still a significant discount.

And of course, we are talking about very depressed NAV, which can spring up very fast in once the market starts recovery. And we start generating cash and the asset values start rising. So I believe that covers the key points in the presentation. So I -- we pass it over to you for the question-and-answer session. Thank you.

[Operator]

[Operator Instructions] The first question is from Matteo Bonizzoni of Kepler.

[Matteo Bonizzoni, analyst]

I have 2 questions basically. The first one is on this issue of the -- basically, the decrease of the fleet market value, which we have seen over the last quarters and which has, let's say, accelerated as of Q2, Q3 last year. So we see this ratio of debt to the fleet market value, which has reached 68.5%. Okay. You don't have particular refinancing needs in the short term.

Can you remind us what would be a ratio, which could be, let's say, dangerous for you, I think, is in the 70% to 75% range, looking at the historical empirical evidence over the last years? And you have said that you are confident to see a stop of this decrease of the asset values.

Do you see -- do you think that we could see some stabilization or recovery already in the second quarter or more in the second half of this year? I would like also to know if you could tackle, let's say, this issue also via divest disposal or selling this back or anything?

And the second question is on a different topic. I was looking at your P&L structure. There is a significant decrease of the chartering higher cost that has been actually over the last quarter. But in this quarter, it has been very evident to just $0.3 million, which -- I mean, there has been also a decrease of the chartered in fleet, but the decrease of the cost for the chartering has been dramatically higher. So can you provide a little bit of explanation about this trend?

[Paolo d'Amico, executive]

Yes. I believe I can cover these point. So regarding the decrease in the market value, it is true that this is a trend that we have been seeing over the last few quarters. But if you go to Page 22, you can also notice there a slight uptick in the last readings in the graph.

And that is associated with the -- with a recovery in asset values, which is based on the -- first of all, on the expectations of an improving market. And second, I think that the very important factor is the fact that the newbuilding costs have been rising very fast. As we covered in the presentation, the construction costs, the steel -- iron ore prices, steel prices have been rising very fast.

And also, the depreciation of the dollar contributes to an increase in costs. And therefore, we are seeing that yards today, they are asking for much more to build a vessel. And not only that, I mean, they also have very few close delivery slots.

So if you want to buy a vessel today to be able to trade it next year, let's see, because you expect an improving market next year, well, you are not going to be able to buy one from a yard. I mean if you do find a slot, and there are very few left for delivery next year.

It will be towards the end of next year. Otherwise, we are going to have to wait for 2023. And that is also because there was a surge in new building orders for container vessels. And which -- which some of them are built in the same yards in which product tankers are built.

So that reduced really the availability of berths for deliveries of product tankers in near term. So that, I believe -- so I think that asset -- second-hand asset values will be well supported going forward because of this reason. And the ratio, as you mentioned, is not a ratio which is any cause of worry for us.

We are on all our loans very far away from breaching any loan-to-value covenant. But the loan-to-value covenants for our loans would become a source of worry at around 75% to 80% LTVs depending on the facilities. And -- but we are still very far from those levels today. So not a source of concern for us.

Yes. In terms of cash generation, yes, if the situation, if the weak markets were to persist longer than we anticipate and at very low levels, the sale of a vessel could help us bridge our cash needs. As I mentioned, we ended the quarter with $56 million. So we are in a very comfortable position in that respect still. But if needed, we have some older vessels, which have a very little debt -- residual debt left.

So we will be able to sell these vessels and generate quite a significant amount of cash even at today's depressed levels. So that is something that we will look into, if needed. But of course, if possible, we would prefer to sell later in a better market.

In terms of the charter-in cost, well, I mean, the TCs, which are short-term are the ones -- are the only ones which are expensed on the P&L. So you don't have to look at the -- only the overall number of TC-in vessels, but you have to look at the overall -- the number of TC -- short-term TC-in vessels and their evolution in this quarter relative to the first quarter of last year.

And we also had -- there are 2 other elements, which explain this difference. One is, we had a very high number proportion of off-hire days in this quarter, also on some of these TC-in vessels. So on these vessels, we had no expenses, and we had no income.

And also -- yes, I think that -- yes, finally, sorry, there's another element. In the first quarter of last year, we had some vessels which we had under commercial management, which we were basically TC-ing in and then employing on the spot market, and we were paying to the owners, the net earnings on these vessels.

So we -- these vessels were not part of our fleet. We would only retain 2% of the net earnings in our P&L. The rest would be distributed to the owners. But from an accounting perspective, they inflated our TC earnings and our TC-in expenses with the difference between the 2 being this 2%, let's say, commission that we retained. So that inflated the first quarter 2020 figures.

[Operator]

The next question is from Daniele Alibrandi of Stifel.

[Daniele Alibrandi, analyst]

Yes. Can you hear me?

[Paolo d'Amico, executive]

Yes.

[Daniele Alibrandi, analyst]

Okay. Good. I have 3. So the first one is about the outlook, and whether you are not confident at this stage of a recovery than you were a couple of months ago because the demand for oil is clear, yet to be proven. But at least from the supply side, we've seen the OPEC+ production increase, and this would suggest an anticipation, probably of strong demand to come.

So this is my first question. So it's really to understand with all what you are seeing in the market, if your confidence is increasing versus the last call we did. I also have seen that you have put a new chart on the land traffic in the U.S. So maybe your expectation on the driving season are at high.

So just if you can elaborate on this. The second question is on the seasonality and what we should expect in Q2? And if your expectation are all placed in the whole important winter season that we all know that should -- I mean, should be helpful for tankers.

And if you maybe agree with what the CEO of Euronav just said before is that the oil demand would recover to pre-pandemic levels by the end of this year despite the resurgence of the cases in India. And last question is on ESG. So you worked a lot on this topic. So if you maybe can share with us, if you have set internally some targets that maybe are worth to be mentioned at this stage?

[Paolo d'Amico, executive]

So okay. Let's start with the first -- sorry, can you repeat the first one, please?

[Daniele Alibrandi, analyst]

Yes. Maybe if you just -- it was about your confidence if it is increasing versus over last call at this stage, basically.

[Paolo d'Amico, executive]

You see, first of all, we are -- as product carrier industry, we are, let's call, [ victim ] of more disastrous crude oil market because the crude oil ships are really navigating in negative freight rates and negative earnings. So what is happening that big ships before was a phenomenon very limited, but now it's becoming bigger.

The big ships, the 2 million barrel and the 1 million barrel are moving to clean -- to the clean industry because as newbuilding, they are totally clean. They never loaded a dirty cargo, and what they are doing this year -- doing this since a year, but never as frequent they are doing today, they are loading it with 2 million barrel of diesel in the Far East.

Now as you know, the shipyards -- the building shipyards are all in the Far East as all of the ships are already positioned there. They fill it up in Singapore and Korea and China. And they send it over either to West Africa or to North Europe, where they ship ships there. And then unload a piece at a time.

And this, of course, is killing because it's taking away cargoes to our industry. So say that the crude market is recovering, is recovering because also the quantities OpEx plats they are going to increase is not this crazy thing, but you have an increase of production coming to the market. And this phenomenon will be limited more and more because the crude ships will move out of our way and will go in their way.

And so this will increase demand for us and the space for us. In the meantime, we expect an increase of demand because in springtime, agriculture starts and that is a lot of diesel. The driving will be starting in U.S. a lot after Memorial Day because it was starting of holidays in U.S., as you rightly say, the driving season is expected, I am asked by a lot of banks like Goldman and JPMorgan to be quite strong this year because the Americas, like everybody of us, we have been closed down home for quite a while.

So we are a little bit desperate of moving around a little bit. So you will see more driving. You will see more driving also, and that is the reason I said before because many do not want to take train or do not want to take planes flying in U.S., domestic flying in U.S. is not as far as before COVID, but is very close to it. But people prefer to drive.

So the consumption of gasoline is supposed to be very strong. Now you can easily say that, yes, the consumption of gasoline is strong, but also the production of gasoline is strong in U.S. because America is a producer and a refiner. So -- but all the East Coast is on shortage of refining capacity. And normally, they buy the gasoline from Europe.

So we should expect a flow from Europe to United States East Coast as we should explain flow also of jet fuel and not only of gasoline from the Far East to California because also California West Coast in general, but the big one is California.

They had a lack of refineries also because they closed quite a number of them. So these 2 things should bring because they are 2 longer trips. Certainly, the Pacific one is longer than the Atlantic one. But the ton mile should decrease. And of course, we are talking about ferries, but it's quite patchable theory, the per mile should be increasing, and so the demand for us will be bigger, and the market should be better.

So this is a very general view. In the meantime, as you know, Europe is a net importer of diesel, and Europe lost some refining capacity over the last 2 years. And so they were already importers before. Of course, the demand of diesel should be here again more or less at anti-COVID levels because diesel is mostly trucking and cars in Europe. What is likely in Europe are airplanes.

And even there, we do expect an increase of flying, not as it used to be before, and all this vaccination is going -- keep going, and we're going to have this green passport. So European tourists should be hitting the road too and probably hitting the road more than they used to do because here again, they don't want to take a plane or they don't want to take any sort of mass transportation.

So if you mix all this, you can expect the increase of demand and a better performance of the market. On -- you wanted to know about the future fields, right?

[Daniele Alibrandi, analyst]

Basically, yes, I asked on the seasonality, but you already answered me. And now, the last was on the ESG, if you maybe have set some internal targets that you just want to share with us, so you did quite a good work on it.

[Paolo d'Amico, executive]

Yes. The last thing on seasonality anyhow, COVID mixed up everything. So what used to be historical seasonality and this quarter, the first quarter is a proof of it because normally the first quarter is the best one of the year.

And instead, this year is a disaster. So it's a proven seasonality, historical seasonality are not working anymore. I mean we've COVID in between. Once COVID will be out, they will be back again.

Now on the rest, yes, I mean, we are still working on it. Everything is very expensive. We don't know yet where we are going to be because our fuels, for instance, which are our main concern that they will become also our cargoes in the future are all very expensive.

And we are very much on the beginning of this new world. The only thing that I can tell you is we have a number of indexes coming in between 2023 onwards. They are going to value our ships for many other things -- I mean, for our things than the historical one, and that will be mostly on CO2 emission.

On this issue, we can say that with a fleet like ours, which is very young, and we have been building it over the last, basically, 6 years, we are very well positioned, and we do not expect any problem. On the contrary, I think this will be another reason why old ships will be -- and obsolete ships will be moved out of the market.

[Operator]

The next question is from Massimo Bonisoli of Equita.

[Massimo Bonisoli, analyst]

I have 2 questions. Number one, on the buyback, today, you announced the, let's say, this new buyback program on a midterm basis, which is sort of a renewal of the previous one. If you just can give us the -- some color on the purpose of the buyback and the speed at which it will be executed just as an indication?

Question number two on the ESG, back on the previous question. You have this extensive presentation in the appendix on the ESG, and thank you for that. My question is just what are the -- your most relevant KPIs in ESG?

And when and in which KPI do you expect to improve the most in the future? I see that you have a favorable comparison versus the rest of the -- or the average of the industry, but just to understand the moving parts.

[Antonio Carlos Balestra Mottola, executive]

Yes. Thank you for the question. So regarding the buyback, we had a program which terminated. So we approved a new one. It is -- the objective is really to have the flexibility to be able to pursue such purchases at the right moment. Currently, our share value given the very weak markets we are experiencing we prefer to hold on to our cash.

But as rates are back in the right direction on a sustainable basis, we might exploit the possibility of repurchasing shares, especially if we feel they are highly undervalued as they are still today, and they have been over the course of the last few years.

So the program that we approved has a 5 years term, which is consistent with Luxembourg law. In Italy, you would not be able to approve such a long program. And it does give us a flexibility to buy quite a lot of shares back. We -- it is unlikely we are going to be exploiting all this room, but we'd like to have the flexibility to be able to do so. So that's in terms of the buyback.

In terms of the ESG, for us, the environment is really a key element of what we do. I mean, long before, I would say, this became a trend that everybody is talking about. We started investing in buildings. And so we have a young fleet and an environmentally friendly fleet on the water today. So a lot of the improvement that can -- could be achieved was achieved because of that.

Further improvements will be achieved as we dispose of some of older vessels. It is part of our strategy. And we are not saying this now, we have been saying this for many years to manage young vessels. So we tend to dispose the vessels as they approach the 15 years of age. Also because, as Paolo mentioned, they are vessels which become commercially less flexible and less appealing, and they cannot call at certain terminals. And they start to operate at -- on marginal trades and with less earnings power.

But also because we operate in a very regulated industry, like many industries are, but I mean we are transporting refined products -- refined petroleum products, which, of course, can be extremely polluting if something goes wrong. And therefore, we are under a lot of -- we undergo a lot of inspections. There's a lot of attention to how we operate our vessels and the part of our charters.

And we're also very proud to be able to operate, and it is part of our strategy with the most demanding charters out there like Exxon and Total, which are very big listed companies, which have very strong brands and the names that they need to defend. And so it is part of their duty to make sure that the vessels they charter are operated by companies that are extremely vigilant on safety issues and environmental issues.

And that is why they like to work with us. And so our key -- our KPIs, the most important ones are those which are related, I would say, to the safety of our vessels. And I would say then in second place, they are the ones which are related to the pollution that our vessels also emit -- to measure the CO2 emissions per metric ton transported.

That, of course, is a function of the design of our vessels. So as the proportion of Eco vessels continues increasing, there will be some improvement there. It is also a function of how well we operate these vessels. And that is also going to be part of what we will have to do in any case going forward because of this carbon-intensity indicator, which will rank operators on how well they manage their vessels.

So you can increase speed or reduce speed to emit less and so forth. And so -- and try to find the optimal routes for your vessels, which will allow you to reduce the emissions, but will also allow you to reduce the consumption of the vessel. So it will be good for the environment, and it will be good for our P&L.

It will be even better for our P&L, not only because we are going to be spending less on that but because we are going to be spending less potentially in the future on buying CO2 credits once the European trading scheme is up and running, probably from early 2022. So these are the metrics that we measure, and that's very important.

[Operator]

[Operator Instructions] Gentlemen, there are no more questions registered at this time. I'll turn the call back to you for any closing remarks.

[Paolo d'Amico, executive]

Okay. Ladies gentlemen, thank you very much. Thank you. Bye-bye.

[Antonio Carlos Balestra Mottola, executive]

Thank you.

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.