MPC Container Ships ASA

OSE:MPCC

Earnings Call Transcript 2022-Q1

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the first quarter 2022 earnings call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Constantin Baack. Sir, please go ahead.

[Constantin Baack, executive]

Thank you, operator, and good afternoon and good morning, everyone. This is Constantin Baack, I'm CEO of MPC Container Ships, and I would like to welcome you to our Q1 2022 earnings call. Thank you for joining us to discuss the first-quarter earnings. This morning, we have issued a stock market announcement covering MPCC's first-quarter results for the period ending March 31, 2022. The release as well as the accompanying presentation for this conference call are available on the Investors & Media section of our website.

Please be advised that the material provided in our discussion today contains forward-looking statements and indicative figures. Actual results may differ materially from those stated or implied by forward-looking statements due to the risks and uncertainties associated with our business.

Before I start with the presentation, I would like to state that we are very pleased to report another strong quarter for MPC containerships in which we have been able to sustainably grow our earnings and profits amidst macro uncertainty. And consequently, we have announced an increase in our recurring dividend for the first quarter 2022, which is 18% higher than in the previous quarter. The container market continues to be strong with the availability of vessels remaining tight yet due to the uncertainties, freight rates and time charter rates took a little bit of a briefer recently. But we are -- but we will definitely touch on that as part of the market section. And on that note, I would like to start today's presentation by commencing with the Q1 company highlights, followed by a market update and then concluding with a company outlook.

Turning to Slide 4, which provides a snapshot of our key pillars in terms of fleet financial standing, strategic focus and corporate setup. I would like to run through some of the key ingredients here. As one of the leading intra-regional tonnage providers, we own and operate a fleet of 67 vessels, which includes our 2 new buildings and 5 vessels held in a joint venture with a total capacity of around 150,000 TEU. Over the past 1 to 2 years, we have rolled out a very clear and solid strategic strategy, which we believe created a lot of value for the company and our shareholders. Over the past quarters, -- we are focused on reshuffling the balance sheet, and we now have a very solid balance sheet with a low leverage and more than 30 vessels unencumbered. This has been done in order to provide high flexibility and very high discretion for our capital allocation decisions, in particular, the ability to also return capital to investors.

We have furthermore locked in long-term charters in order to build a sizable contract and projected EBITDA backlog of $1.7 billion on the revenue side and around $1.4 billion on projected EBITDA basis. Furthermore, cyclical and capital-intense businesses like container shipping should, in my view, be based on clear and rational capital allocation principles and investment principles when it comes to decision-making and capital allocation. And we firmly believe that we have walked the talk in that respect by executing on a clear strategy, which centers around mitigation of residual value risk and investment decisions and placing an emphasis on deployment of capital in certain phases and placing an emphasis on returning capital to shareholders in other phases. That does not mean we do not pursue growth measures at this stage, but it means we are now in a period of selective growth focusing on a per share accretive transactions as part of our ambition. Finally, we obviously operate in what we believe is a very well-established corporate setup with transparent governance and a strong ESG commitment.

On that note, I would like to continue with Slide 5. Please turn to the next slide. We are -- again, we have illustrated here a few performance measures and financial positions as well as some of the highlights for this quarter. Basically, all KPIs are significantly improved compared to Q1 last year, both in terms of performance indicators, but also in terms of balance sheet items. And this is further illustrated by the multiples shown in the table on the slide in blue -- with $143 million in revenues for Q1 2022, we were around 2.8x higher than the same period in 2021. Similarly, at $137 million for Q1 2022 EBITDA is more than 6x above the respective Q1 2021 figure. Furthermore, also the net result at $170 million and earnings per share at $0.26 per share reflects a significant increase in our performance. Utilization stayed fairly stable at around 99%, and the average time charter equivalent generated with our fleet is 2.4x compared to Q1 2021 and around 8% higher than the same figure for Q4 last year.

As per the end of Q1, the lower part of the table on the left, the company had a cash balance of around $80 million [more] overall, the balance sheet figures have strengthened further with an equity ratio of around 70% and the financial leverage of around 20%. Further details on our Q1 financials are made available in the appendix of this presentation, but also in the Q1 2022 financial report, which is available on our website. A few comments on the quarter. We have been able to benefit from a strong charter market during the first quarter by concluding 23 predominantly long-term charters. This includes quite a number of strategic forward fixtures with key liner partners reaching into 2026 and 2027 on our secondhand fleet and into 2031 for our 2 new buildings.

We'll elaborate on that in a bit more detail later on in the presentation. With a handover of the 3 vessels to new owners in Q1 2022, we have also successfully concluded profitable strategic vessel sales, generating $64 million in gains. Since 2 of the vessels were JV vessels, the net effect gain on our Q1 2022 figure is $39.9 million. The net proceeds of these transactions have already been or will be distributed to shareholders and part of that has already been distributed as part of the event-driven distribution in Q1, and we have today announced another event-driven distribution, which I'll elaborate on in a few minutes.

Furthermore, we have executed what we believe is a unique opportunity in the newbuilding segment, where we have ordered 2 5,500 TUE white beam eco designs, which are ready to be converted to operate on green methanol once such fuel is widely available, but the charters concluded were very attractive in our view, completely derisking the investment over the initial charter period, which is extremely unusual in historic terms if you look at new buildings. And this is also why we have been able to carry out these newbuildings sticking to our mitigation of residual value strategy, whilst obviously looking at attractive transactions in line with, let's say, also the upcoming decarbonization regulations.

Overall, and that is at the bottom of -- on the right bottom side of this presentation, year-to-date, we have declared $271 million or around -- roughly around NOK4 per share in distributions of which $200 million have already been paid during the first quarter and an additional $71 million have been announced today for payout in the course of the next couple of weeks as per the respective stock exchange announcements. Now let me continue with some additional macroeconomic developments and operational updates from a macro standpoint, the global economic growth has been revised downwards recently to 3.6% for both 2022 and 2023.

Overall, robust international trade is expected with respect to growth rates of 5% and 4.4%, respectively, for the next -- for this year and next year. There are obviously a few uncertainties, one being obviously the prevailing congestions and we'll elaborate on the market dynamics in a bit more detail later on in the presentation. And there are obviously quite a number of geopolitical uncertainties prevailing as well in light of the Russia-Ukraine conflict that have an effect on the overall economic landscape and outlook certainly in terms of inflation and also interest rates. But we'll get to that in a bit more detail later on, but certainly events that are worth highlighting for Q1 this year.

On the portfolio and operations side, we have handed over 3 vessels that we had already concluded the sale in the end of last year. [indiscernible] [AS Palina], AS Patria, again, 2 of these [indiscernible] are held in our 50-50 joint venture, hence, only part of the proceeds have been or will be distributed to shareholders. But all of these vessels have been successfully handed over in the course of the first quarter. There are no further sales transactions outstanding at this point in time. 2 new buildings contract that we discussed that in detail on the last slide. So that is a milestone transaction for us, and we believe this transaction has a very attractive risk return dynamics for MPCC and our shareholders for that matter.

From an operational standpoint, obviously, the operations as already addressed during the past quarters is still affected by COVID-related challenges and certain -- and now recently also geopolitical tensions, we still were able to provide or to actually operate with a very solid fleet utilization of around 99%, and the continued emphasis and focus will be placed on OpEx, CapEx and very importantly, [Safaris] welfare, which our crew has and other crews on this planet have obviously already suffered under the COVID implications over the last years and now with the geopolitical tensions this adds up. And therefore, all the efforts that have been done on our side on the OpEx side has only been made possible with the commendable efforts and flexibility of the crew serving on both of our vessels for which we are clearly grateful.

Looking at the next slide, corporate developments, -- certain changes in terms of governance and ESG your update on governance and ESG. We have held a few AGMs in the first quarter to get our dividend plan approved, and the AGM has approved the dividend authorization for the Board on which basis we are now acting and basically deciding and making the distributions. Furthermore, we have had some developments in the Board with Peter Frederickson being elected as a new board member replaced in Darren Morten. And we have also continued with our ESG efforts. We have published our next ESG report in March. -- and various measures are in execution supporting our ESG strategy as set out in our report. On the distributions, we have already touched on that, so I will not run through the details again. We will also look into that going forward as part of the company outlook.

Now let's continue on the chartering activity, portfolio highlights and fixture activity on Slide 8. We have had a very intense quarter in terms of charter activity as we have not only fixed positions that became open in Q1, but also a large number of forward positions, excluding some interim employment and positioning voyages, but including the long-term charters on our renewables, we have concluded more than 20 fixtures in Q1 2022 alone. You can see the number of fixtures, average charter rates, average TEU fixed, and average periods for the last 5 quarters in the table below the graph. What this shows is that rates improved, periods got longer from quarter-to-quarter and Q1 2022 is basically a continuation of what has already been visible in Q4 2021. And that is a shift in fixing pattern more towards also forward fixtures. Recently due to the macroeconomic uncertainty, the freight and charter market has taken a little bit of a breather, as I mentioned earlier, but rates are still at significantly elevated levels, but more on this in the upcoming market section.

And on that note, I would like to move on to the market section on Slide 10, starting off with some observations from the container freight market. The graph on this slide shows the key indicators for Ocean Freight, namely the freight rate index and the annual throughput box rate increased to record highs here is shown the CCFI. So the China containers trade index reflecting China's nationwide experts of the entire shipping routes, including also contractual freight rates. So also the contract business, very important. Seasonal patterns and covert lockdowns basically led to less TEU trade volumes and thus a current softening of the index, but still, as I said, on very elevated levels and robust international trade growth is expected going forward.

If we now look at the boxes below the graph, freight rates are very elevated, and the latest reading is still well above 3,000 index points at the end of April. In terms of trade growth, we expect 4% for 2022. And a few liner indicators, which are obviously also important is, for example, [Maersk] expects more than 70% of long-term contracts in 2022 out of all contracts. And they have recently announced that they believe that could go up until almost 80%, but this is obviously just an indication and guidance.

Furthermore, we have seen record liner earnings, again, with the example of Maersk earning $9 billion in the first quarter alone, the same pictures with other liner companies. So from also a customer perspective, we see a lot of our customers basically operating with a net debt of 0 having a very healthy balance sheet, and that is, I think, very important when looking at the years ahead.

Please turn to Page 11 of the presentation where we now look at the charter market dynamics in a bit more detail, both in terms of rates and periods. On the left-hand side, spot time charter rates increased to record levels, currently softening due to what I would say is a bit of a wait-and-see position by the charterers driven by macro and geopolitical uncertainties, but that has also been leveling out in the previous week. So a lot of that will have to be reassessed once China reopens in terms of the current lockdown and the zero COVID policy, which is currently expected for early June, but that will certainly have an impact on the market as a lot of volumes will then have to be shipped out of China, which are currently creating a backlog. On the right-hand side, you can see that the periods increased significantly, and the lighter blue line redelivery spreads are basically negligible at this point in time.

Moving forward to the next slide, Slide 12, where we now look at some structural changes in the charter market that can be observed or that we can observe, especially recently, and I think that is very important. On the left, the bars show the percentage of forward fixtures of total number of fixtures in Q1 2022, they have been almost 60% forward fixtures of, in total, 190 fixtures in Q1. That is a very significant number and certainly shows a trend towards scarcity of assets going forward, which is actually reflected on the right-hand side. And there, we have used different sources to analyze the availability of charter vessels in the past and a bit of an outlook. Again, this is indications from our own analysis. So we basically have observed in the years 2019, 2020 and 2021, roughly 1,500 charter vessels being available to the market throughout the respective year.

Early this year, there was more around 450 to 500 vessels of which due to the significant forward fixing activity, we believe there's only around 200 to 250 vessels left for the remainder of the year, and that is talking end of Q1. So with 3 more quarters ahead, which is a very limited number of vessels going forward. If we kind of continue that assessment because all the vessels that get chartered are or most of the vessels are generally on long-term charters. If we prolong this view for 2023, we currently expect somewhere between 350 and 400 vessels coming open in 2023 and available to the charter market, which would mean even more constrained than it was going into this year already. So this is a bit of a, let's say, a new picture in terms of the charter market dynamics. And certainly, the forward fixing has wiped out availability not just for the quarters ahead, but also well into 2023. Very important development in our view when looking at the sustainability of the charter market.

Now looking at some disruption and congestion figures, which probably everyone is looking at for quite some time now. And you can see the -- on the left-hand side, we have illustrated the Clarkson Sport Congestion Index, which is, again, at record level driven by lockdowns in China and obviously, the Russia-Ukraine conflict, obviously, to a lesser extent, relevant, more relevant in China. But when China opened slowly in June, we expect 2 months at least of, let's call it normalization. It needs time. We will see a significant increase in TEU volumes out of China. That is at least what we expect. And they will then arrive in the U.S. West Coast and most likely lead to an increase in congestion over there. leaving aside the labor union negotiations where the outcome is yet to be seen. And we do believe that, that will lead to further congestions and disruption of the supply chain going forward.

On the right-hand side, this is the global supply chain pressure index from the U.S. [sat], also a very elevated level, a little easing in the past month since December, but still at a historically high level. And that index combines global transportation costs and with supply chain-related components like delivery times or backlogs, et cetera. So this in combination keeps the index quite elevated. And in terms of block capacity, always a very important indicator, that's the box at the bottom, I think that is very important to also see 11.3% block capacity that translates, however, even more inefficiencies because that's just the capacity that is blocked and it is missed elsewhere. So the disruption becomes evident when looking at these figures. And in our view, this disruption will not ease down over the next quarter. It will take time for that to be settled.

Finally, on the market, a bit of a perspective on supply and demand, obviously, we have seen a very significant ordering activity. On the left-hand side, we see the total market due to the order book deliveries in 2023 and 2024. Free growth will exceed demand growth in the aggregate. On the right-hand side, we have taken a more intra-regional perspective because the order book is pretty much geared towards the large ships, certainly above 12,000 TEU -- so fleet growth is much lower, as you can see on the right-hand side, as the order book is, as I said, biased towards the larger sizes.

And the order book on the smaller side is at around 15% catering for demand expectations, which are relatively good for intra-regional trades, we see a supply shortage, which will probably be, to some extent, addressed by some cascading and optimization of trades and trading pattern. But very importantly, and I think that cannot be -- that cannot be underestimated as the expectation of new regulation. We expect, in particular, the CII regulation to have a significant effect on the effect of trading capacity. And we have run a few internal [indiscernible] that show that, for example, for the Caribs, smaller feeders will need to adjust the speed effectively by somewhere between 8% and 15%. And that will certainly have a significant impact on the effect of trading capacity in certain trades, meaning capacity will be taken out of the market.

Now let me move on to the company outlook. I would like to continue. So please turn to Page 16, which provides an overview of the fixed and open days in a form that we have presented in the past as well as the contracted revenues and projected EBITDA backlog from Q2 2022 onwards. Let me start from left to right. Left, you can see the 3 quarterly columns. Obviously, Q1 2022 is already done. You see the respective revenue and TCE figures in green and gray box above that column. And you can see on the right-hand side, by here the contracted days versus the open days and the respective contracted forward revenue and contracted forward TCE.

What is worth noting is that the contracted TCE is actually increasing as the vessels that we have been able to fix for longer periods are the ones that have also already higher charter rates. So meaning that, for example, the 17% of fixed days in 2025 already represent more than [$180] million in revenues. So that leaves 83% of the days open, meaning we already have a very stable, let's say, profitability outlook for the years ahead, not just 2022, but also 2023, 2024 well into 2025. And that is, I think, very worth noting, and that is increasing by each picture that we conclude.

Now on Slide 17, if we then look forward, what are the open positions and I alluded to it earlier that we have been able to fix quite a number of positions forward. And that you can see on the left-hand side in the blue circles where we have shown the vessels that we fixed for the respective quarters. So you see full-year 2022, we have already fixed 18 vessels and have 6 open positions left. And those 6 positions in Q3 and Q4. We believe that, in particular, with a possible easing of the lockdown in China that there will be significant demand for extra loaders and for more capacity. We will see how that will play out in the charter market. But we believe that with our fleet in the second half of this year, we are very well positioned for that matter.

And we have also been able, and that's the last column here of the 13 positions for next year, we have already forward fixed 2 vessels that are on 2023 expiries, so well ahead of the expiry as we speak. We have then also looked at the current period market. We have looked at figures from Clarksons in terms of charter rates and periods have applied that to the 6 open positions that are still open in the course of 2022. And at the bottom right, you can see what that potential looking at the current market dynamics in terms of period and rate translates into roughly [$264] million in revenue potential and roughly [$212] million in EBITDA potential for the 6 positions. If you were to apply the same figures for the remaining open position in 2023, that would roughly be a revenue potential of [$450] million and EBITDA potential of around [$340] million for our vessels.

So again, I'm not suggesting that the market will continue forever like this. However, looking at the scarcity of assets that we foresee for the remainder of this year and for next year, we believe that there is at least a certain stability when looking at the charter market in general. Now from the open positions, I would like to tie that in with kind of a bit of a sensitivity and outlook. We have shown here on Slide 18 in a form that we have done that in previous quarters as well. In this case, 2 scenarios, we have looked at current market rates as per the prior chart -- or prior slide, sorry, blended TCE for our fleet and have applied that for the open days as per Slide 16 and have shown a sensitivity of what can be expected in terms of operating revenues, adjusted EBITDA and adjusted net profit.

And the same, we have used the 10-year historical average for our vessel basket at the bottom scenario. So that in combination with the distributions that we have already declared and/or paid which you can see on the right-hand side and applying our distribution policy, we expect that there is a very significant distribution capacity, not only in a current market rate scenario, but also in a scenario where rates move sideways or soften a bit. And that is something that we believe is significant distribution upside going forward and potential for a very sustainable distribution for MPC containerships and our shareholders.

Before opening the floor for questions, I would now like to wrap up the presentation. So please turn to Slide 19, which is -- which is a summary slide summarizing our view of the current market status and outlook, how we position MPCC in this market and why we believe we are well-positioned for the future. First of all, from a short-term market standpoint, we continue to witness as I said, historically strong container markets despite the discussed geopolitical tensions and macro uncertainties. This is further amplified by what we discussed earlier in terms of global supply chain disruptions, a situation that we believe is unlikely to ease anytime soon. And we have, at the same time, locked in significant charter revenues and hence, we are well-positioned to benefit from a -- with the open positions that we still have from continuously tight vessel supply.

In the midterm, obviously, despite significant order book in larger sizes, we see an encouraging supply-demand outlook for intraregional tonnage. And we believe that the upcoming regulation will have a significant impact on effective trading capacity, especially in intra-regional trades. In this market, we have positioned ourselves as leading tonnage provider for intra-regional trades, and we believe with our low leverage and significant operating leverage and strong secured cash flow generation going forward. We are well-positioned moving forward to take selective growth decisions. As previously mentioned, our strategy is focusing on value-accretive decisions and operations. That means we target investments that achieve double-digit full-cycle equity returns on the basis of fairly low leverage. I guess that is where we are already today to conduct transport an active rational capital allocation and still to opportunistically pursue transactions that are per share accretive within our field and obviously ensure professional asset and portfolio management.

Therefore, we believe we are well-positioned going forward, and we will continue to place a strong emphasis on creating shareholder value by focusing on these kinds of transactions. And with such a compelling risk/reward profile, we will look forward to MPCC's value strategy continuing for the years to come. And now I'm very happy to answer questions. Back to you, operator.

[Operator]

[Operator Instructions] Your first question comes from the line of Frode Morkedal.

[Frode Morkedal, analyst]

Just the first question I had is, in the report, you talked about the recurring dividend. And just to -- I think you just mean a quarterly dividend, but it could be seen as something fixed dividend, but just to -- can you just clarify that? It's not a fixed 13% dividend, right? It's still 75% of the EPS.

[Constantin Baack, executive]

Yes. Absolutely, Frode. Thanks for the question. We have shown that in the appendix, I think it's Slide 21 in the appendix, where we have shown a bridge how we arrive at the adjusted net profit, which then is the basis for the recurring dividend. And recurring refers to the fact that it's quarterly recurring and that the principle is that we want to pay out 75% of adjusted net profit. So it is recurring. It's not recurring in terms of the actual number, but in terms of the actual concept behind calculating the number on a quarterly basis.

[Frode Morkedal, analyst]

Yes. Great. Next question is counterparty risk. I mean if you look at this EBITDA backlog you have $1.4 billion more than the current market cap and very limited net debt you still have, right? So I'm sure you get that question a lot of time, but how do you see counterparty risk whenever rates start to normalize in the future?

[Constantin Baack, executive]

I mean, first of all, obviously, we have shifted also over the last few years from more market and employment risk to a counterparty risk. So therefore, it is one of the key risks that we assess basically on each charter but also ongoing. If you look at the counterparty, let's say, structure at the moment, we have a well-diversified set of counterparties. We have done in Q1, in particular, a few, I would say, strategic forward fixtures in particular, with some of the very strong household names in the market. So it's not just all about rates. It's also about rates and already thinking about the charter book and charter portfolio. So that is something that we do constantly. If you then look at the, let's say, the top 10, 15 liner companies, I would say all of them are probably net debt 0. All of them have longer contracts. And I alluded to that earlier on Maersk, we expect to be up to 80% of this year's contract to be more long-term contracts. So we believe that in general, the counterparty risk has never been lower than it is today because of the, let's say, parallel good earnings of the liners and the owners.

Having said that, on certain contracts, we have obviously addressed that. As an example, our 2 new buildings where we have a heavily front-loaded charter structure, basically generating this 70% of the overall contract value over the first 2.5 years. So we have catered for that as part of the structure of a number of charter parties. But I think in general, counterparty risk is obviously important yet, I believe the counterparties are in a very strong condition at present. And that is, for example, a complete different scenario than it was after the financial crisis in 2008, where you had highly levered counterparties, et cetera. So I'm positive on the counterparties looking at the market as it stands today and also the outlook, in particular, due to the way lower leverage on the balance sheet of our counterparties as well as the more good earnings and more visible backlog also for our customers.

[Frode Morkedal, analyst]

Yes, I agree. I mean given the strong balance sheet of the line of companies, there's no reason to start renegotiating in the rates. The final question I have is on your strategy going forward. how do you envision positioning your fleet in the next few years, I mean, in terms of renewing, selling ships with these new carbon regulations coming up. I know you sold a lot of ships, and that's been very helpful. And if you could talk around that...

[Constantin Baack, executive]

Yes. No, I mean, obviously, the way we look at it, and that's why last year, we have been a buyer and a seller of ships because we took a view at the point in time when charters were up for renewal. So when charters are up for renewal and you can actually get an attractive price in the S&P market, we would also consider selling ships for the time being, especially in the first quarter, the charter market has been extremely strong. And it's not just that we were able to fix charters at attractive periods and rates, but also way forward. So basically generating a very significant, I would say, incremental value and added value for the company. So it really depends on the charter market environment, whether to consider a sale or a charter. I think the first quarter has shown that at least in our view, we have taken the right decision to also forward charter out a significant number of vessels strategically with good counterparties, and that is what we have done.

Going forward, we will obviously reassess that. We will reassess that subject to market developments, but to kind of settle a vessel with cash flow just for the cash flow just to bring forward some cash flow and give away the, let's say, optional value at the end of the charter, and this is how the S&P market in general prices transactions is something that I would think from today's perspective is not the right thing to do because we can continue to pay out significant dividends, harvest a lot and still have a sizable fleet with more upside down the road. And as I alluded to, with the new regulation and our firm view is that the new regulation will, in particular, lead to slower speeds on smaller vessels -- because of the intricacies of the trades because of the way the formula works.

And therefore, we believe trading pattern will be adjusted going forward, and that is actually an upside. So I would not necessarily say that we need to sell the vessels now to the contrary. I think at the moment, it's a very attractive chartering pitch. Having said that, if there are opportunities to selectively grow and to look at it, transactions like the 2 newbuilds that derisk themselves immediately do not have any implications on kind of reducing the dividend going forward because they have no impact on net profit going forward because it runs through the balance sheet and rather extend the, let's say, earnings potential into 2031 for those specific vessels, I think these are transactions that we would look at.

And I do believe that similar transactions can be developed. But we want to be selectively, we don't necessarily need to grow as quickly as we have done over the last 5 years. But we will -- I have no doubt that we will find attractive opportunities. If you look back over the last 3 to 5 years, we have always been able to do so, but we will not be in a rush to grow the fleet at any price. We will stick to our principles.

[Operator]

[Operator Instructions]

[Constantin Baack, executive]

Operator, if there is no questions through the line, there are a few questions through the web, which I'm happy to run through maybe the next step.

There is a question by Eirik Haavaldsen. He says, as far as I know, MPCC was formed as an asset play with a specific period before liquidation. Has that changed?

Yes, that has changed. We have -- I think it was in 2018 with the uplifting into the main board of the Office Stock Exchange, the, let's say, limited lifetime of the company has been removed by the EGM. So that has changed. I'm happy to follow up through the IR box, if there are further questions on that, Eirik.

Then there's a question by [indiscernible]. First of all, given the recent softening of indexes, have the time periods asked by the charterers come down as well?

In general, I would say the market is softer. The market is softer in terms of activity and the market is softer in terms of rates or rather periods to some extent, but really more on the forward basis. If you have spot vessels, you could still obtain attractive charters. I think, as I said earlier, the market has taken somewhat of a breather -- some charterers have taken a wait-and-see attitude also in light of a combination of the Ukraine-Russia situation as well as the lockdown in China. Because of the lockdown, simply the cargo is not being shipped.

And therefore, it's just natural that the market is a bit calmer. And in general, it is fair to say that fewer vessels are available to the market, which in turn will, in my view, lead more to a stabilization of the charter market. But I would not rule out that periods and charters might soften somewhat. But I don't think that, that will be a significant shift south, especially in light of the current China situation and continuous disruptions and the fact that only few vessels are actually available in the charter market.

There's a question by [Stefan Strand]. Will you also start share buybacks?

We have looked and basically also with this quarterly distribution announcement, we have looked at alternatives. We believe that share buyback is always an option. However, we also believe that a dividend is a very reliable tool to be let's say, reliable partner to the investor community, so everyone knows what to expect. That doesn't mean we would not consider share buybacks. But we are obviously very kind of committed to our distribution policy and the key pillar is paying a reliable dividend going forward. Having said that, we will obviously also continue share buybacks, and I wouldn't rule out that, that is also on the menu going forward.

Then the question by [Ray Buna]. MPCC has 2 new builds on order. Can we expect the company to also buy the remaining newbuilds currently on order by MPC capital?

The answer is no. These newbuilds have different owners MPC Capital has just arranged for the transaction, there's a completely different set of owners behind it. And I think the price by now is significantly higher than the price of renewables that we have ordered, meaning we have significant hidden reserves in our 2 newbuilds. And I would not expect any acquisition of those newbuilds by MPCC. I can actually rule that out.

Then there's a question by [Hiege Haltuz]. Firstly, with the company now trading at a substantial discount to NAV, are you evaluating further share repurchases.

I guess I have answered that question already when [Stefan Strand] asked that. Secondly, Tim mentioned in the earnings call extra MPCC newbuilds pictures, then the 2 already communicated. Any comments on this or just a mix up from [SIM] with MPC Capital. The latter is the case. Only 2 vessels are owned by MPC containerships. The other vessels are completely unrelated to MPC containerships and have different shareholders. I think that must be a mix up on the Tim side.

There is another question by [indiscernible] here. How do you expect vessel values to develop during the next years? This is the first question.

In general, that obviously boils down to the charter market development. I do believe that we will continue to see a more stable charter market than we have seen over the last 12 years, just due to the fact that fewer vessels are available. I do believe that there's more stability, and that is obviously applicable for rates and periods. Obviously, vessel values are closely linked to charter periods and rates as they are basically a reflection of future cash flow. So at the moment we see periods getting shorter. I do expect that we will see also lower vessel values.

At the same time, as we see periods getting longer and forward fixes getting done. I can also expect that vessel values might be lifted again. So I think it really boils down to the charter market developments ahead with a very low number of vessels being available to the charter market in remaining 2022 and 2023, I think it is a good basis for expecting also sustainable or stable -- more stable vessel value environment.

Next question is, do you think new climate regulations will affect vessel values in a negative way, especially when it comes to older ships?

I do believe that vessel values are a reflection of the future cash flows, as I said. So it really boils down to the charter. I mean, a vessel with a charter and I think that is why I firmly believe that our valuation will and should actually remain stable because we have assets which basically are supported -- their value is supported by the locked-in cash flow.

And I think that is very important -- a spot vessel might have -- there might be implications if the cash flow is gone, but there's, in my view, also a significant upside, as I said earlier -- due to the new regulation triggering slower speeds and hence, requiring more capacity and hence, the effective trading capacity will be reduced, which, in my view, also provides for significant upside on asset values and charter rates.

At this stage, no further questions on the web. Operator, is there any further question coming through your line?

[Operator]

Yes, there are no more phone questions. No more further questions.

[Constantin Baack, executive]

Okay. And there are no questions -- or additional questions through the web. I would like to thank everyone for their interest and questions and the discussion. As I said, we are looking forward to more solid quarters for the year 2022 and beyond. And I would like to thank you, operator, for moderating the discussion. And everyone, have a pleasant day and all the best. Take care.

[Operator]

This concludes today's conference call. You may now disconnect.