MPC Container Ships ASA

OSE:MPCC

Earnings Call Transcript 2023-Q2

[Operator]

Good day and thank you for standing by. Welcome to the MPC Container Ships Second Quarter 2023 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to our first speaker today, Constantin Baack, CEO of the company. Please go ahead.

[Constantin Baack, Chief Executive Officer]

Thank you, operator, and good afternoon, good morning, everyone. This is Constantin Baack, CEO of MPC Container Ships and I'm joined by our CFO, Moritz Fuhrmann. I would like to welcome you to our second quarter 2023 earnings call. Thank you for joining us to discuss MPC Container Ships second quarter earnings.

This morning, we've issued a stock market announcements covering MPCC's second quarter results for the period ending June 30th, 2023. The press release as well as the accompanying presentation for this conference call are available on the Investors section of our website.

Please be advised that the material provided and our discussion today contain certain 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 we start with today's presentation, a few words from my side reflecting on the second quarter of the year. We are pleased to present another solid performance and a strong second quarter financial results. Our consistent positive performance despite a gradual decline in the container market is a testament to our robust backlog, successful chartering activity and sustained good operational performance owing to the unwavering dedication and great efforts from our entire team onshore as well as the crews on board of our vessels.

We continue to distribute dividends to our shareholders in line with our distribution policy. For the second quarter, the Board declared dividend of US$0.15 per share, totaling roughly US$66.6 million. This brings dividends paid year-to-date to $231 million, reflecting a dividend yield of 34% for the year so far. Our flexible balance sheet and agile operations and portfolio management has also enabled us to capitalize on attractive market opportunities. We will elaborate on that in the presentation.

Given the prevailing uncertainty in the container market outlook, our focus remains on maintaining prudent capital allocation and enhancing long-term shareholder value as we remain in what we think ideal position to balance strategic and selective fleet optimization efforts with continued accretive shareholder returns. We will now guide you through a more detailed review of the second quarter, provide a market update as well as the company outlook during today's presentation.

On this note, I would like to hand over to our CFO, Moritz Fuhrmann, to run us through the first agenda point.

[Moritz Fuhrmann, Chief Financial Officer]

Thank you, Constantin. Now moving to some of the highlights in the quarter two of '23. We're very happy to deliver yet another strong financial quarter characterized by high utilization of our fleet. The net profit came in at US$101.5 million and the Board as just mentioned has declared another recurring dividends of $0.15. While we continue to deliver on our operational excellence, we have been quite busy on executing on a number of transactions, driving further our fleet optimization while at the same time retaining a low leverage on balance sheet.

As part of the fleet optimization, we have sold a number of older ships in the fleet while being able to acquire a smaller fleet of five modern eco-vessels for what we believe is an attractive price. And in addition, we will continue to invest into the existing fleet to retrofit to enhance the commercial profile of our vessels.

Looking at the markets for a moment, the global macro picture remains somewhat unclear going forward. However and despite the negative sentiments spot freight rates have seen an upward trend as of recently where time charter rates have been more or less moving sideways since the last quarter and moving around -- above historical levels for the time being.

Going forward, our revenue backlog stands at US$1.2 billion as of 30th of June with 94% of open days of days fixed for '23. And based on the most recent portfolio optimization and we will get to it later, we will revise -- we intend to revise our financial guidance for the full year to US$675 million to US$690 million in terms of revenue, and from an EBITDA perspective to US$490 million to US$510 million.

Moving to the next slide and looking at some of our KPIs, again, gross revenues up from last quarter and year-on-year reflecting the commercial sentiment of AS Nadia that has been recognized in the second quarter in the amount of $32.4 million.

The net profit is also reflecting a book loss of US$18.4 million that is associated with the recent sale of AS Emma, which we'll deliver to the buyers and to new owners in November of this year. The adjusted net profit, which is also the basis for our recurring dividend comes in at $87.7 million and is in line with last quarter, and again, the basis for declaring a dividend recurring of $0.15.

Looking at the balance sheet. Total assets are from last quarter, primarily driven by newbuilding installments paid in relation to our four vessels on order in Korea and China, while at the same time, leverage ratio continues to go down and now stands at 13.3% as we continue to repay under our relatively steep repayment profile.

On the operational side of things, OpEx has slightly increased relative to the last quarter, which is essentially a function of shifting effects from the first quarter, but also some start-up costs in relation to the acquisition of the five vessels, the modern vessels that we announced over the summer. And obviously, also happy to report that utilization is trending upwards since our fleet in Q2 has been commercially fully utilized.

Looking at the commercial activities in a bit more detail. On the sharpening side of things, we continue to fix our vessels at rates above historical levels as well as decent durations. Just one example to mention is the AS Claudia that we could fix for US$16,000 for close to 12 months with a redelivery window of three months.

Notably, since our Q1 reporting, we have conducted two commercial settlements with the respective charter of AS Nadia, as just mentioned, but also most recently on the just acquired AS Anne. Both vessels will continue trading on their sub-charters with MSC and CMA and since the under-settlement has always been conducted in July, it will be reflected in the Q1 figures.

One additional comment to be made. On the most recent picture on the list, as you can see, AS Roberta is one of our smallest vessels in our portfolio, which is fixed on a very decent rate with, however, a relatively short duration. However, this was done in order to keep maximum commercial flexibility on this particular investment.

On the S&P side, moving to the next slide. We have continued on our portfolio optimization path as we acquired five modern eco-vessels at attractive prices, of which four vessels have already been phased into our fleet. The remaining five or the remainder of the five vessels is expected to join our fleet in August '23.

The acquired vessels, including AS Nina and AS Claudia, which have been placed into our fleet earlier this year have an average age of 7.5 years and hence enhancing the overall fleet age. And at the same time, we will continue to invest into our existing fleet through retrofit measures that will improve the carbon footprint of those respective ships.

On the flip side, we have divested five vessels in total. These were either owned in our joint venture structure or are considered nonstrategic from an MPCC's perspective. And the average age on those ships is actually more than 18 years. So consequently, we have achieved a net fleet growth from a TEU perspective, while adding significantly younger vessels to the fleet.

Looking at the cash flow bridge. As you can see, quarter-on-quarter, our cash has gone down, now standing at a healthy level of $93 million. Main driver for the cash reduction was the takeover of AS Anne, the first Lomar ship that we have taken into our fleet on the 30th of June, which we acquired for a total consideration of the $41.75 million, which was initially, I should say, initially fully funded all equity. The respective tranche and the acquisition financing was only drawn after quarter end. And as earlier mentioned, the settlement of the AS Anne in the amount of the $20-plus million was also only recognized after the quarter end.

Looking at the next slide, especially our dividends. We continue on our path to return substantial capital to our shareholders as the Board has declared yet another recurring dividend of $0.15 or talking nominal number $66.6 million. That brings us to a total number since Q4 '21 of $670 million in a combination of recurring dividends but also event-driven dividends.

As we are entering a market phase, which is probably characterized by somewhat uncertainty for the time being, the Board has decided not to distribute further event-driven dividends. However, this is obviously not affecting our recurring dividends, which are driven by operational performance.

And if we look on a year-to-date basis in terms of capital distributed and assuming you were acquiring the stock in Jan '23, you would have already achieved a compelling dividend yield of 34% and same for investing into stock in early '22, you would have achieved a very compelling dividend yield of 60%. I mean needless to say, going forward, we will continue and it's our clear intention to continue with the return of capital to shareholders.

And on that note, I'm handing over to Constantin, who is giving a little update on the market.

[Constantin Baack, Chief Executive Officer]

Thank you, Moritz. I would now like to continue with a brief market update. So please turn to slide 10. Looking at the global economy with high inflation and high interest rates, it is certainly more difficult to take a positive view in the short-term despite the IMF describing the global economy as robust and slowly recovering. In general, growth prospects are polarized between developed countries with a slightly weaker growth outlook in emerging markets or developing countries with a stronger growth outlook, which obviously will have an impact on -- also on containerized trade.

However, on a macro level, GDP growth forecast have recently been slightly upgraded. The IMF's latest outlook in July has now foreseen 3% growth for 2023. So some of the key parameters are not too negative. Continuing with some observations from the container freight market and here, you can see that on the left-hand side on this chart, the graph on this slide shows the key indicators for the ocean freight, namely the freight index or freight rate index and the annual world seaborne container trade volumes as the red line.

Looking at current freight rates, one can observe that just recently spot freight rates have risen during the last couple of weeks on the back of general rate increases, most pronounced on the Transpacific. The increase also starts to be reflected in the CCFI, which is the dark blue graph that we have illustrated here. And since August, the freight rate index has increased by around 1.5%.

Looking ahead, obviously, it's always a very challenging exercise and some of the market research and experts expect spot rates for the three mainland trades to bottom out over the next couple of quarters, reaching pre-COVID levels before starting to rise again towards the end of next year or early 2025.

Having said that, it's always very difficult to predict, obviously, rates and volumes going forward, but that is at least the expectation. And we share the view that over the next couple of quarters, certainly on the freight side, we will see a bit more choppy waters.

In terms of liner profitability, which is obviously a very important ingredient for our very own analysis because also our customers average freight rates have come down for basically all carriers. However, on a global level, volumes seem to be increasing again and operating margins whilst down from the very highs of last year, we are still well above pre-COVID levels and we will probably see one of the two or three most profitable years for the liner industry. So that's just to sum up the freight market.

If we then turn to page 11, please. We are now looking at both the S&P market as well as the charter market dynamics in a bit more detail, both in terms of rates, periods and values. Looking at the chart on the left-hand side, it becomes apparent that S&P prices and charter rates have also come down quite significantly from the historic highs of last year.

Looking at Q2 in particular, it is fair to say that the quarter has started quite promising with time charter rates slowly and steadily increasing across all sizes and segments and charter periods also starting to increase again. The availability was and still is tight. However, the picture has changed over the last couple of weeks with a bit more volatility in the market, both when it comes to rates and periods.

The HARPEX as a good indicator is basically down by around 9% in mid-August from the end of June levels, illustrating slightly softer markets over the last couple of weeks. Charter durations have decreased as of late, also for the 1 to 5,000 TEU container segment, the segment in which we are mainly involved.

We are currently looking at somewhere eight to nine months on average versus 11 to 12 months in April, May. Secondhand prices, the market has shown continued strong interest. We have seen almost 180 deals closed in 2023 so far versus around 280 in the full year of last year. So there's still quite some activity.

Secondhand prices stayed relatively stable at elevated price levels over the last couple of months, but a decline in line with the volatility in the charter market can be expected going forward. Looking at the idle fleet as a key indicator as well, it's still at historically low levels. We are currently at an idle fleet of around 1% in terms of TEU compared to the total fleet as of end of July and that compares with 3.3% back in February 2023. So we are in a fairly good state when you look at the overall idle fleet.

On the right-hand side here on this chart, you can see the availability of charter vessels since 2020 and 2023 forecast, including a rough estimate for 2024 as an indication only. As you can see, vessel availability in the market is reduced compared to historical averages. Yet we expect more vessels being available to the charter market as we have seen shorter charter fixtures being concluded as of late. So we expect a higher number going into 2024.

Overall or summing up kind of the charter and S&P market during the first half of 2023, we have observed a bit of up and down in the charter market and the market at this stage is somehow lacking a very clear direction. Having said that, charter rates are still well above historical leverage levels, yielding positive cash flows across all sizes in the container market.

Let me continue with slide 12 and some demand and supply dynamics. We have taken a bit of a closer look here. On the left-hand side, you can see the supply and demand dynamics for the total market. And on the right-hand side, we have looked at it through the intra-regional lens by looking at supply growth up to 5,000 TEU as well as the demand growth for intra-regional TEU throughput.

It's worth noting that both graphs, whilst they include net fleet growth, accounting for delivery, slippage and scrapping or scrapping assumptions, they do not account for any other wildcard factors or special factors influencing supply such as slow steaming, yard capacity utilization or adjustment of trade rotations or cascading, nor do they cater for certain demand dynamics triggered, obviously, by geopolitical and macroeconomic impact factors.

Hence, the supply-demand pictures shown above could potentially be distorted depending on multiple wildcard factors. Having said that, there's no clear line in the sand between the total market and the intra-regional market. However, they are certainly a different driver. At the aggregated level, as you can see on the left-hand side, excess supply must be expected, at least until early 2025. That is the expectation of the market, again, taking or not taking into consideration wildcard aspects.

And if you look at the more intra-regional lens, we can see that demand forecast is expected to outperform supply growth on intra-regional trades over the next couple of years, how -- due to, amongst others, the relatively strong demand growth expected. Having said that, obviously, those markets are somewhat interlinked and we will see some degree of cascading and it doesn't mean one market -- the bigger market is not performing whilst the smaller market is performing. One has to look at it in a bit more nuanced way that those markets obviously work in tandem.

We'll drill a bit deeper now on slide -- on the next slide, which is slide 13. Looking at specific supply dynamics and the order book as well as the current yard situation, we have included the analysis of the age profile of the segment as well.

So on the left-hand side here, you can see -- left part of the left chart, TEU on the water by age and by size from top to bottom, the largest ships at the top with a way younger fleet profile than the slightly smaller vessels by virtue of history, basically. And on the right-hand side on this chart or right side of this chart, you can see the order book, including the deliveries ranging from '23, '24 to '25.

And overall, order book is sizable with around 30% of order book to fleet ratio. However -- and that becomes transparent in this chart, the order book is geared towards the very large vessels. Limited scrapping potential for larger vessels is expected as most units above 12,000 TEU have only been built from 2010, 2012 onwards. In the smaller sizes, it is a different picture.

The order book is less pronounced while the age profile is -- the fleet is way older. As an example, more than 1,000 vessels below 3,000 TEU are above 20 years of age, illustrating a replacement need. And at least from our assessment, we believe that is the smaller size segment, the order book is not sufficient to replace the aging tonnage over the next five to 10 years.

That doesn't mean that we will see a great or perfect market over the next two years. But certainly, structurally, we believe this is a very interesting development. In addition, we think there is quite scrapping potential of vessels around 1,000 TEU and below as these vessels will find it a bit more challenging to comply with new regulations in the long-term and the whole retrofit investment case appears less promising and that's why we expect to see quite a bit of recycling in the very, very small sizes.

On the right-hand side, you can see global shipyard capacity that is basically maxed out into 2026. I mean if you want to order a ship now, you can be very, very lucky and maybe get 1 slot still in 2025. However, that window is closing as well. So adding to the picture that I've just explained in terms of the order book, especially in the smaller sizes, we see also the yard capacity being a constraining factor when looking at further new orders going forward.

Let me wrap up the market section with a bit of a summary. On the left-hand side, you see a graphic that we have used in the past. Basically on the Y-axis, we have in percentage the order book to fleet ratio for illustrated. And on the X-axis, we have the percentage of the fleet on the water in the specific segments being above 20 years of age. As an example, so the 12,000 to 17,000 TEU segment, you basically have zero vessels above 20 years of age, but you have 70% order book compared to the fleet on the water.

And the more you move towards the bottom right, you can see that and basically resulting from some of the assessments that I've alluded to on the previous slide, you can see that in the smaller sizes, we have a significantly older fleet, whilst we have significantly and hence, higher replacement needs whilst we have a significantly lower order book to fleet ratio.

As such, and it's combined with the demand outlook for intra-regional trade, we believe we are still in the right spot in the right, let's say, segment, sub-segment in container shipping. And we believe that structurally, this is a very attractive field to be in.

Going forward and I will not read out all the wildcard factors, but just to name a few, there are a number of considerations to be made when looking at the future. We have seen also when looking at our very own fleet that regulation has led to slower speeds. We've probably been roughly one knot down in speeds from end of last year. So there is a meaningful reduction in speeds having effect on capacity.

We're also seeing certain shifts in trading pattern, increasing TEU, mile demand, in particular, Southeast Asian countries, but also Mexico, Turkey and new trade lanes being opened. And of course, we also see a good demand shift in intra-regional trades as people want to diversify their supply chains from the previous bottleneck that they have experienced in particular during the COVID crisis in China.

On that note, I would like to now move back to the market update from the -- sorry, from the market update to the company outlook. And so please turn to the next page and I would like to hand back to Moritz, who will further present some details on the outlook for MPCC.

[Moritz Fuhrmann, Chief Financial Officer]

Looking ahead, our backlog in terms of revenue and EBITDA remains robust. Revenue backlog currently stands at US$ 1.2 billion whereas the contracted EBITDA is projected at 0.9% -- US$0.9 billion. As you can see, the remainder of '23 is almost fully fixed with almost 6% of open days. However, also going forward into '24, we have a decent coverage at around $30,500 per day with close to 60% of days already covered.

In connection with the backlog and looking at our counterparties and looking at the resilience and credibility of our backlog, 85% is covered by the top 10 liner companies as well as cargo-backed operators, while at the same time, the average duration currently stands at 1.8 years, giving us a fairly good visibility on our cash flows. And just reiterating what we have said before, liner companies are in very good shape these days, especially relative to a decade ago with strong balance sheet and net debt free positions. And hence, we feel relatively comfortable with our backlog despite the softening in the market since the peak levels seen in '22.

Looking at some of our positions in '23 and '24 in more detail. For the remainder of '23, we only have 10 open positions whereas in '24, we will have 35 open positions. In '24, the exposure is evenly distributed across below 2,000 TEU ships and 2,000 to 3,000 TEU vessels, allowing for both size, but also geographical diversification.

Looking ahead and also spending some time on MPCC. We continue to believe that MPCC remains an attractive value proposition. First of all, the current enterprise value is fully covered by contracted backlog, completely disregarding any steel value of the fleet, which is currently valued at around US$1 billion based on the most recent charter revaluation.

And second of all, when sensitizing open days going forward on the right-hand side of the slide, going forward into '24, but also '25 using historical average rates as well as current market levels, we would still show attractive double-digit dividend yield on the basis of our recurring dividend policy. However, historically, we have also proven right timing when it comes to the S&P market activity.

And on that note, I'm handing back to Constantin running us through the history, but also most recent transactions.

[Constantin Baack, Chief Executive Officer]

Thank you, Moritz. I would like to continue on slide 20 in order to put some of the measures taken in Q2 2023, as alluded to by Moritz and also some of the strategic measures over the past quarters into context in terms of MPCC's overall strategy.

For a ship-owning company, value can be generated by entering the market at the right price levels, but certainly also by executing the right chartering and portfolio strategy in different times of the cycle. And we have illustrated here on slide 20. And let me explain the graph. The gray line is basically the S&P or secondhand index over time. The green line is the newbuilding price index.

And then you can see at the very bottom on the X-axis, the columns represent -- the blue columns represent vessel acquisitions and the red columns represent vessel sales in terms of number of ships. And at the same time, the circles represent -- the blue circles represent acquisitions, the red circles represent divestments and the green circles represent investments in newbuildings and/or eco-vessels.

So what you can see that over time, it is important to kind of do the right thing at the right point of the cycle. From my point of view, it's really about being disciplined in allocating the capital, including returning capital to investors at the right point of the cycle, but at the same time also achieving a long-term value proposition for the company and its shareholders.

The initial phase, certainly until 2020 was more the growth phase where we have deployed a lot of capital. And since Q3, Q4 2021, we have entered into a phase where we have slightly adjusted our capital allocation priorities towards returning capital to investors, but not without constantly optimizing our portfolio. Moritz gave some examples of those measures earlier.

So over the last couple of years, we have acquired 88 vessels for around $1 billion, so roughly $10 million to $12 million per vessel and we have sold around 26 vessels for about $500 million or around 200 - sorry $20 million per vessel. And recently, we have focused on divesting slightly older, less efficient vessels and investing first in our existing fleet by upgrading certain vessels and that will continue for the next couple of quarters in any event, but also to acquire eco-vessels that we believe we'll receive premium earnings going forward.

Let me illustrate that in a bit more detail on slide 21, which is kind of zooming in on the execution of our portfolio measures and capital allocation strategy over the last couple of quarters. We have shown different examples from -- relating to the fleet to distributions and also to leverage.

On the left hand or the left part of the graph is basically Q3 2021. So the beginning of our fleet optimization and distribution phase. So we have started with 66 ships. We have, in the meantime, replaced certain ships, bought new ships, sold ships and have now increased the overall fleet size to 69 ships, of which nine are eco or newbuilding vessels. So we have been able to optimize towards a more modern, younger and more fuel-efficient vessels.

At the same time, we have commenced with our -- with the implementation of our distribution policy. So we have dividend out over the last roughly 18 months, $670 million in dividends underscoring our commitment to returning capital to investors. From a debt standpoint, we have also optimized the balance sheet coming from debt outstanding in Q3 2021, $350 million. So on a pro forma basis and pro forma means assuming the takeover of the eco-fleet that we announced to have acquired in June.

So pro forma debt basis starting from end of Q2 adding the additional leverage, we would be at $256 million debt outstanding. And we would -- that would translate also into 21 unencumbered vessels as well as a leverage ratio on a pro forma basis of 25%. Overall, we have been able to improve the quality and the number of our vessels, still distribute out the significant dividends over the years or over the last quarters and will continue to do so. And thirdly, we have further optimized our balance sheet for the years and quarters ahead.

Now let me wrap up the presentation and hopefully enter into a discussion with everyone. So we are very happy with this quarter. We have had a very solid operational and financial performance. We will continue our path that is a combination of optimizing our fleet, operating on a low leverage and at the same time optimizing the fleet. Whilst obviously keeping a very close eye on demand and supply going forward, we would be a bit more selective on growth, on acquisitions.

And you would probably rather see us on the selling side selectively on a few assets, but we believe maybe not in the next three to 12 months, but in the next two to three to five years, we see a structurally very attractive dynamics in the intra-regional trade when it comes to supply and demand. And that's basically with a very solid backlog, as Moritz has explained, high visibility on earnings in '24. We see ourselves very, very well-positioned going into the future and we are excited about the quarters ahead and to continue to return capital to investors.

And on that note, I'm happy to hand back to the operator in order to take questions through the line or through the web.

[Operator]

Thank you so much. [Operator Instructions] And the question comes from the line of Frode Morkedal from Clarksons Securities. Your line is open. Please ask your question.

[Frode Morkedal, Clarksons Securities]

Thank you. If statement. Yes, I just wanted to follow up on that slide you had, I think you called it 20, but it's 19 I think. Anyway, it's the cyclical chart, right? So it's about capital allocation going forward, right? So MPCC have been clearly into an impressive growth phase, right, so you acquired the initial fleet at the low point of the cycle. And I remember the whole equity story was about asset values closing the gap to newbuild parity. And then the market obviously took off and you basically were able to build up this huge backlog. It's been all about harvesting and dividend out that time, right? So now of course, the cycle is turning lower. So how do you see this going forward? It's in a sense that you are more about growth going forward. Obviously, you still have a backlog that's being dividend up, but it seems like you favor growth again. Is that correct?

[Constantin Baack, Chief Executive Officer]

[Technical Difficulty] we would be selective on growth in terms of our [Technical Difficulty] this margin. We have done a strategic acquisition with Lomar fleet, a deal that we think is extremely attractive. We could basically -- we have agreed on a settlement on part of the charters for one of the vessels and we could basically sell the fleet today at a premium. So that has been a strategic move into what we felt was a very attractive package of vessels. At the same time, we have also sold a number of ships. So I think we are now in a phase where one should consider both, right, sales -- optimizing the portfolio by way of sales and potential purchases. On purchases, I would be a bit more cautious at this stage unless it's a really attractive strategic acquisition and we would rather want to kind of optimize the portfolio but also possibly divesting few more ships. So it's not -- certainly not all about growth. It's about disciplined growth. It's about being disciplined about the portfolio. And I think over the last couple of years, we have shown that it's not necessarily going one way or the other, i.e., only being a seller, only being a buyer, but rather trying to optimize the fleet in a way that is long-term supportive to our distribution policy.

[Frode Morkedal, Clarksons Securities]

Sure. Understood. So on that note, how much weight do you put on like countercyclical approach in terms of investments? You just said that you don't see -- it's not the right time at the moment, but at some point, maybe it is, right? So -- and how important is it to make acquisition accretive, right? So obviously, that would need a charter attached in this period or at this point I guess. So how do you develop that thing?

[Constantin Baack, Chief Executive Officer]

Yes. I mean, currently, the market is trending, I mean, maybe not quarter-on-quarter, but I would say over the last nine to 12 months is certainly becoming a bit softer. At the moment, if you look at vessels with charter attached, you basically pay the cash flow. So we don't think that that is necessarily the right thing to deploy capital at this stage. Having said that, I do expect that the market next year will be a bit more choppy waters and we might see opportunities buying ships at lower prices next year. So to just price or to just buy a vessel at today's face value pricing is something that we would rather not do. Again, if there's a special feature like an eco-fleet that we believe will pay off over time, it's definitely something to consider. But we would want to be disciplined in deploying capital in a market that somewhat lacks direction and still is certainly in terms of asset prices, but also in terms of charter rates above historical averages. So we would want to be disciplined. But at the same time, we also want to renew the fleet as we have done. So it's really a bit of optimizing the fleet step-by-step and not rushing anything at this stage. [Technical Difficulty] should on the acquisition side, wait and see. And [Technical Difficulty] 2023 and going into 2024 [indiscernible].

[Frode Morkedal, Clarksons Securities]

Okay. Next question I have is on the integrity of the backlog. So obviously there's been a few redeliveries, but you got still backlog paid up on [indiscernible]? So -- but how do you -- have you been approached for liner companies yet? Or do you anticipate them to come and ask for a renegotiation at some point?

[Constantin Baack, Chief Executive Officer]

No, not really. I mean, we have -- the charters that we kind of agreed on a commercial settlement have been very unique consolations with the cargo-backed charter, right? And I'm unable to disclose all the details and all the names obviously. But those commercial settlements in our view have been extremely attractive for us because we have been able to re-charter the vessels, some actually were sublet already. So the vessels were continuously deployed in the market and we were able to bring forward some cash flow. So that was a very unique consolation, a very unique consolation when it comes to the charterer and the contract. And other than that, we have not had any talks with anyone about adjusting any charters. So having said that, and Moritz alluded to that, our counterparties are still -- while the market has come down for liner companies, we will probably still see the second best year in history for liner shipping companies. So at least for most of them. So I wouldn't be negative from our counterparties, our own net cash and I don't see on that basis rate should be renegotiated. In addition, our charter backlog has, on average, 1.8 years in remaining duration left and that with most counterparties that are still net cash.

[Frode Morkedal, Clarksons Securities]

Great. That's good to hear. Just a final question, if you may, on the market. How do you see the impact of cascading, let's say, from old Panamaxes coming into the feeder market? Are there any restrictions -- difficult restriction, I guess, like water depth, et cetera, that might preclude cascading hitting the feeder segment?

[Constantin Baack, Chief Executive Officer]

I mean, cascading is always happening, right? I mean it has always happened. It will always happen and I'm not saying we have no cascading. Having said that, if you look at the intra-regional market as such, the daily Panamax vessels or the Panamax vessels that have moved into those trades have rather taken away incremental growth than pushing out kind of vessels in the smaller sizes. So overall, in the intra-regional trades, 98% of the vessels deployed are below 5,000 TEU. And we're actually seeing and continue to see growth in intra-regional trades. The only time over the last years where we have seen a stronger growth in the Mainlane trades have actually been basically post-COVID when we saw all the catch-up effects on the Mainlane trades and the significant consumption figures in -- and exports into the U.S. So we see intra-regional trade being pretty healthy in terms of growth rates. And that's why -- well, there might be a bit of cascading reshuffling of trade. But don't forget that in order to maintain the same schedule and we're talking container shipping, it's logistics. It's not commodity shipping like tankers and dry where you go point-to-point. Here, you have basically bus service and the customers of our customers want to have their goods on time on, let's say, twice a week departure at Shanghai or the like, right? So you really need to maintain the same schedule and you cannot simply upsize every single trade. It's not going to happen and you need to have also -- or consider port turnaround times, for example. And you have longer port turnaround time with larger ships. So to replace a trade for a 2,800 TEU ship with a daily Panamax is possible, but then you would usually have to add a port there or have to take out a port. So it does not necessarily mean that you will see less demand for smaller vessels. So yes, cascading is happening. Am I extremely concerned for smaller vessels? Not really. And I would probably argue that vessels below 1,000 TEU and there are quite a few of them, they have a different commercial trend when it comes to, for example, retrofitting and keeping those vessels compliant with new regulations over the next three, five, eight years. So I expect a bit more scrapping in very small sizes. But I don't see cascading being a game-changer here over the next couple of quarters.

[Frode Morkedal, Clarksons Securities]

Great. That's good color. Thank you.

[Constantin Baack, Chief Executive Officer]

Thanks, Frode.

[Operator]

Thank you. Dear speakers, there are no further questions over the phone. I would now like to hand over to our management team for any written questions.

[Constantin Baack, Chief Executive Officer]

All right. Then let's have a look at the questions here and I will start and Moritz will then take over a few. There's a question from [indiscernible] regarding market outlook and I would say, question ranging around the uncertainty and whether or not we expect headache for the next year with a huge surplus of ships. Well, obviously -- and we alluded to that in the presentation, there are certain -- there is certainly a significant order book that will come into the market over the next 12, 24 months and that is something that will lead certainly to a shifting in certain trades. And I would think we might see a bit more choppy waters next year when you look at the overall market and maybe also going into early 2025. Having said that and I mentioned that when I went through the order book and the yard capacity and certainly the age profile, I think in the smaller segment, we have a slightly different dynamic when it also comes to scrapping and to the need to replace the existing tonnage. So do I expect choppy waters over the next couple of quarters? Probably yes. Am I concerned about that? Not at all. Firstly, we have a very solid backlog. And secondly, that might be a market to Frode's question earlier, where it could again be interesting also to deploy capital and buy ships anti-cyclical at a low market. So that's the first question here through the web. Then there is another question here from Frode Dud relating to the webcast that we hosted on June 18 regarding the portfolio measures that was an extraordinary webcast where we alluded to the acquisition of five modern -- the 5 modern eco-ship designs. He missed that call. Is it possible to get the webcast now? Now it's not possible. I mean we made some points with regards to those ships. I think as a rule of thumb, these ships are probably 30% more efficient than conventional proprietor ships. We believe that going forward, they will earn a premium. We see a very high interest from liner companies for those eco-design vessels. And we want to continue to selectively renew the fleet and optimize the fleet as we believe that that will pay off and basically support a sustainable dividend capacity for MPCC going forward. So that's with regards to the announcement in June 18. And if you have further follow-up questions, Frode, there is a presentation on the web that heads out all the dynamics of these transactions. Then there is another question related to that from Frode Dud with regards to the proceeds, for example, from the settlement of AS Nadia and AS Anne and vessel sales, what can be expected. He is raising extraordinary debt repayments or potential share buybacks or event-driven distributions. As Moritz has mentioned during the presentation, we would, at this stage, also in light of the high interest costs, we would allocate some of the capital or a large part of the capital also to reduce debt and save interest costs. We have 2 revolvers that we intend to repay, leaving us with the ability to redraw those revolvers, but that would probably be the first priority in terms of use of proceeds out of those sales. That doesn't mean we would not use proceeds from the sale for potentially event-driven distributions going forward. But for the time being, we would want to make use of this by reducing our existing revolvers. Then there is a question -- last question from Frode Dud and then I was -- sorry that -- well, he's asking about the difference between the eco-design and features like scrubbers. Well, eco-design, as I said, is 30% more efficient and scrubbers is just a way to comply with certain regulation and being able to burn a different fuel type, which is slightly less costly. So there is a significant benefit. There's a US dollar per day benefit for our customers, depending on obviously the consumption and the fuel price, but we clearly see eco-designs being favored by our customers going forward. Then there's a question about the contract with the Patta Group. I alluded to that. We felt that that is a very attractive way to bring forward cash flow and to re-charter the vessel at good terms. That vessel is -- the AS Anne is currently on charter with CMA. We believe that there will be continuous interest for these eco-vessels. Then there is a question by Noah Smith. Congratulations on the outstanding results. Do you consider to engage in the bulker market as announced recently? Thank you. No, we will not. We will continue to operate in the market that we know in the market that we have successfully managed to establish and build the company and operate the company and generate significant shareholder returns and that is in the container market focus on the intra-regional segment. We will continue to walk the talk as we have done since day one of MPC Container Ships, continue to stick to our recurring distribution and continue to operate container vessels and not workers. There is, maybe, Moritz, do you want to take the next one?

[Moritz Fuhrmann, Chief Financial Officer]

Yes. We have a question from Gatz Ulo. Investors must be prepared to lower the expectations in the future with regard to dividend yield. When do you think we will experience a significant drop in dividend yield? Will it be from '24 or later? I mean, that question, obviously, goes hand-in-hand with different -- the future market development since the vessels rolling off and we will fix at the prevailing market rate and sitting here right now it's impossible for us to predict exactly what the market will be. What is clear, the rates that we see now, but we also have an expectation going forward was certainly below the rates that we have been able to fix in 2021, '22 and maybe also '23. Those levels have obviously been unseen before and we don't expect to be coming back anytime soon. So yes, the answer to the question is we will experience a drop in dividend yields. However, I believe a dividend yield year-to-date of plus 30% and not taking into account the potential dividend for Q3 being paid in Q4, but also going forward, as you could see in the analysis that we have in the earnings call deck, running some potential sensitivities on open days, we're still showing a very, very healthy double-digit dividend yield, which I think speaks for itself and is quite compelling from an investor perspective. Next question is from Frederic Plato. Would you please be able to guide on dry-docking CapEx for full year '23 and full year '24? So for the remainder of '23, we are calculating with dry-docking CapEx of between $5 million and $7 million, so not much left. But the number for '24 is relatively high, given the number of dry-dockings that are coming up next year and we are budgeting with a number of around $60 million overall for '24. The next question is from Trum BidaWhat was the rationale behind the divestment of AS Anne given the fact that this divestment has been recognized as a loss in Q2 and this ship is rather young compared to fleet average? I think we have mentioned before that from an MPCC perspective, this particular ship design, the Panamax is not considered a core asset. That was one of the reasons why we have decided for divestment despite the book loss. And in terms of the book loss itself, it's a rather unique situation given the -- and that was part of the former Songa transaction where the vessel was acquired by a combination of cash and shares. And there has been a period where the market cap of MPCC during this transaction went up, eventually leading to a relatively high book value of this vessel and now resulting in a book loss of US$18.4 million. But needless to say that this is noncash effective. And as you can see, we have normalized this event out of the dividend calculation. So it's not impacting investors from a dividend perspective.

[Constantin Baack, Chief Executive Officer]

I'm happy to take over the next one. We have a question by Anders Levy with regards to picture for AS Roberta. AS Roberta was fixed to $10,500 per day for a short duration, 1.5 to 1.8 months. Is there hope for an increase in the rates in one to two months' time? Can you give some more information on MPCC's decision on this charter? Well, first of all, you have seen in our presentation that we have also fixed quite a number of vessels for 12 months-plus just recently and I think it is fair to say that a fixture that is shorter can be related to market circumstances, but also can be a strategic decision, possibly to keep the optionality to also sell the vessel at some stage. So especially shorter fixtures have always to be seen in that context without obviously us talking openly about selling ship A, B or C. But you can rest assured that in case of AS Roberta that was also linked to a strategic decision to keep the charters short in this market environment. So there's certainly a potential to also get longer charters for similar vessels in today's market environment.

[Moritz Fuhrmann, Chief Financial Officer]

Next question is from Peter. Order book to fleet ratio looks okay for feeders compared to bigger ships. But if you look at absolute numbers, is it not true that '23 and '24 is at all-time-highs regarding newbuilds and the feeder segment as well? Well, if we look at the nominal numbers in the up to 2,000 TEU bracket, 2,000 to 3,000 TEU, but also 3,000 to 6,000 TEU and draw a comparison between right now and what has been the order book from a nominal perspective at pre-Lehman in 2006 and 2007, it's fair to say that the order book at that time was almost twice as much as the current order book from the feeder perspective. So the answer to the question is that right now we have -- both from a relative perspective but also from an absolute perspective, we're looking at the significantly lower order book relative to the years before the Lehman crash.

[Constantin Baack, Chief Executive Officer]

There's the next question by Thomas Ing on EEXI, whether EEXI is getting stricter per year and by how much? No, EEXI is not getting stricter, that is a design measure that is being applied. So that is already in effect and vessels have to comply throughout this year initially. So that is not getting stricter. What is getting stricter the so-called CII. And then the second part of his question in general is engine power limitation having an effect of the sailing speed or if the headroom between the current sailing and the maximum speed? Smaller vessels previously have been designed to run fast. Quite a large chunk of our existing vessels have designed speed above 22 knots. So there has been headroom because they have usually not operated at 22 knots. So there has been a headroom between the current sailing speed. On average, our fleet currently runs between 13.5 and 14 knots. Some run as fast as is probably 18 and others run as low as 12. So we are somewhere in that vicinity and very limited implications from the EEXI in itself on trading pattern. At this stage, the CII is different, but that we will see how that plays out over the next couple of quarters and years. And then there are a number of questions around the -- and there are a number of questions around the Panama Canal and whether or not that will affect the charter markets. I mean first of all, I think just to put the Panama Canal into perspective [Technical Difficulty] $170 billion in cargo volume passes through the Panama Canal, which is 40% of the US container traffic. So it's a very relevant part of the containerized network obviously. Usually, the draft in normal conditions, draft is probably 15.2 meters. And currently, the draft restriction in locks is 13.4 meters, which is significant and reflecting obviously of the conditions currently locally. And the transit days per day or the vessels transiting per day is limited to roughly 30 to 32 vessels at the moment, which is usually more high 30s or 36 or 38 possibly. And as of today, more than 100 ships are still queuing up. No easing is observable. And the canal authorities have just recently extended the limitations due to the draft until beginning of September. So yes, it will impact charter durations of round voyages. It will possibly also impact freight rates to that matter. But the exact implication remains to be seen, but it certainly has an effect on the market and the longer the situation lasts, the more relevant that will be for the overall market.

That at least leaves no further questions open from our standpoint when looking at the list here in the web. I don't know, moderator, if there are any questions through the phone line.

[Operator]

No, dear speaker, there are no questions.

[Constantin Baack, Chief Executive Officer]

Okay. Then also on behalf of Moritz, I would like to thank everyone for participation, for supporting us. We look forward to the second half of 2023 and beyond. And thank you very much for your attention and take care. All the best. Bye-bye.

[Operator]

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.