Earnings Call: Q1 2020

Apr 7, 2020

Welcome to today's PagSetVising twenty twenty Quarter one Trading Update Conference Call. I'm pleased to present Chief Executive Officer, McFerran. For the first part of this participants will be in listen only mode and afterwards there will be a question and answer session. Mr. McSergren, please begin. Thank you, operator. Welcome and thanks for joining us today. As mentioned, my name is Mats Berglund. I'm the CEO of the company. And I'm joined by Peter Schultz, our CFO. First, let me apologize for uploading the announcement and presentation a bit late, but you should have it now available on our website. And please turn to Slide two of the presentation. And this shows our TCE earnings in our core fleet with the Handysize rates to the left and Supramax rates to the right. We made USD 8,020 per day on our Handysize ships in the first quarter, and we have 32% of the days for the rest of the year covered at $9,000 per day. You compare to last year's numbers that are to the left in the same graph, you see that the 2020 Handysize rates are slightly lower than 2019, but not by much. We look on the right side of the graph, we have our Supramax core TCE earnings. And you can see that in the 2020, we made USD 11,310 per day on our supermaxes, and we have 58% of the days for the rest of the year covered at $11,180 per day. And here, when you compare with last year, you can see that we actually have higher rates than last year. And that has primarily to do with the scrubber benefits that we enjoy on most of our own Supramax ships. We have scrubbers on 28 of our 35 owned Supramax ships. Let me also highlight for you the two bullet points that are below the graphs on Slide two. That starting from 2020, we present the TCEs generated by our core business and the margins generated by our operating activities separately. On this slide, what I just went through is our core business TCE and the operating margin we will come to in the next slide. Also starting 2020, we compare our Handysize TCE performance against the new 38,000 deadweight Baltic Handysize Index. Tonnage adjusted to match the average vessel size of our own core Handysize fleet. Please turn to Slide three. So this shows our KPIs showing the operating margin for the first time. We haven't shown that to you before. And operating is when we combine a spot cargo with a spot ship. We will explain that in more detail a bit later in the presentation. And we are also starting to show you not only the last quarter numbers, but also the average for the last twelve months for comparison. So our handysize outperformed the index per day with $2,580 in the first quarter and about the same in the last twelve months, 2,660. Our Supramaxes on the other hand outperformed the index per day with 5,080 per day in the first quarter and $2,790 in the last twelve months. Again, the reason for the really large outperformance the primary reason is this rubber benefit that was particularly large early in the first quarter. Our operating activity generated a margin per day of $9.60 per day in the last quarter and $9.70 per day in the last twelve months. We had two thousand nine hundred and twenty operating days in the quarter and 14,170 in the last twelve months. We give you all the days at the end of the presentation. So don't worry, you have all the information in the back of the deck. I do want to say before leaving these TCEs and the performance in the first quarter that I am extremely pleased with these results and these earnings and this outperformance that we generated in the first quarter. The team has done a very good job, in my view, escaping much of the bad market in the first quarter. Please turn to Slide four. This shows our outperformance on the top two graphs over a longer time period. And you see the blue outperformance. You can see that, that field is pretty large in the 2020. So good strong outperformance in the first quarter relative to the longer historical period. In the lower two graphs, we want to highlight that it's not only on the TCE that we are very competitive. It's also on OpEx, on G and A and on finance cost. And here we benchmark ourselves with all our peer companies that have handysizes and Supramaxes that disclose their companies publicly. And we come out with a benefit of more than $2,000 per day, both in Handysize and Supramax. Highlighting this because very important in tough times like we have today to have a very competitive cost structure, and we feel we have that. Slide five shows the development of our core fleet over time. As you know, we have been primarily growing the Supramax fleet in recent years. While in Handysize, we have sold the older smaller ships and we trade up by buying younger, larger, primarily 38,000 deadweight ships. In the third in the first quarter, we took delivery of one Handysize and two Supramax ships that we permitted to buy last year, but they delivered this year. And we sold one Handysize that is expected to exit our fleet in April. You will recall that our own fleet has grown significantly all the way from only thirty four seventeen ships when this Handy delivers or exits the fleet in April 2020. We are, however, now pausing our strategy to continue to buy secondhand ships due to the unprecedented uncertainty that we're currently faced with the virus outbreak. In spite of values being under pressure, we will hold off for a while with buying more unless we see something really compelling and really interesting opportunity, we will look at it. But otherwise, expect our fleets to be paused at this level for a period until we know more for the outbreak and how it will develop and be contained. We are continuing to reduce the number of ships we have on expensive long term charters. We are happy to see fewer expensive long term charters. And for your information, we had an average of two zero five Andes and Supras on the water on average during the first quarter. Slide six shows the Handysize spot rates, not our rates, but the spot market rates to the left and the Supramax spot market rates to the right. And we just recap the first quarter development in the bullet points below there. The market started poorly early in 2020 and was undermined by the typical Chinese New Year dip and then compounded by reduced demand and disrupted logistics caused by measures taken in China to contain the COVID-nineteen outbreak. But rates bottomed a while after Chinese New Year in late February and that strengthened for about a four year period as Chinese activity gradually returned. Four week period. Four week period, what did I say? Year. Four year period, sorry. We wish that. It was a four week period that rates strengthened. However, now the COVID-nineteen is causing an increasingly widespread lockdown of economic activity around the world and rates have weakened since the March and is now approaching the multiyear low levels of 2016. We'll come back to outlook later. Please turn to Slide seven. Here, we try to address what is the impact from the virus on Pacific Basin. Again, demand, I'll come back to. But to start with, practically ports remain largely open and operational so far throughout the world, although lockdowns and quarantine rules is an increasing challenge in several ports around the world. It's a very fluid situation. It's changing a lot and it's tricky to operate. We're operating okay, but it's tricky. We have had a few delays on our ship so far, but so far nothing really significant to touch wood. The biggest challenge we have is crew changes. And it's very difficult to change crews due to these quarantine rules and lockdowns and travel restrictions. But the authorities are allowing longer work periods and some countries including China have started to relax their restrictions. We have managed to do crew changes on a few ships this week. So slowly, it's starting to be possible, although tricky. And for us, so far, we're doing it in China. We really want to thank and recognize all our seafarers across our fleet for their patience during these tricky times when they have a hard time coming home to their families. On the shore side, many of our offices are working from home or we split the teams, but our business remains fully operational and our customers can depend on us to provide our first class service currently at economy price. Please turn to the next slide and we'll talk about how we what we think the virus does to the demand side. So far, we have dodged the bullets pretty well, so to speak. And again, I'm very pleased with how we performed in the first quarter relative to the markets. Going forward though, we will feel the impact and we fully expect that the effects of the containment measures and today's weak spot rates will negatively impact our second quarter earnings. You saw that we have some days booked already at very decent levels, but what we're putting in the book now is at significantly lower levels due to the spot rates having come down as a result of the lockdowns and the lower volumes that are being shipped. By commodity, we feel that agriculture products will continue to be strong. We feel it will not be affected much, maybe not at all, since food supply and animal feed is needed regardless of how the economic situation is. But construction material shipments will be impacted by GDP reductions and that includes steel, cement, logs, bauxite, nickel, copper. And coal will also suffer in our view from lower energy consumption and competition from cheap oil and gas. By geography, it's obviously good to have China back in action. China is the world's largest and most important country for drybulk. European volumes will be affected by the lockdowns, but at least ports remain largely open so far. And North America impact will come next in our view. South America East Coast is probably largely okay at least so far because they're mainly exporting grains, which is an essential cargo and demand will continue, while the West Coast of South America is probably more affected because it's very mining focused and the mines are reducing their production volumes as a result of the weaker economic development. South Africa, okay, so far for what's considered essential cargoes. New Zealand is affected because logging harvesting logs is not considered essential. So we're seeing reduced demand of log exports from New Zealand. Again, a very fluid situation as these lockdowns happen in various countries. There's a bit of confusion in many times whether the cargo can be imported or exported. It typically clarifies a few days or a week after, but tricky situation to operate. Now I also want to tell you what are we doing in this situation, what's our actions. Well, expect us to continue to redeliver expensive charters and probably reduce our chartered fleet a bit, right? Expect us to do less arbitrage in operating activity, as we call it. We will revert to a bit more of using our core ships to carry our contract cargoes and charter in short term a bit less because we're you're taking a risk today when you charter in a short term ship against a slim margin if you get stuck somewhere due to some quarantine or lockdown and your slim margin can soon be turned into a loss. So a little bit of risk reduction and operating fewer ships going back to using more our own ships for our contract cargoes. We're also reducing speeds in spite of the fuel price being very cheap to kind of extend the voyages that we're on. And very importantly, we are spending time emphasizing to our customers that we represent a safe haven and a reliable choice for our customers in these turbulent times since, one, we have our own in house managed ships And secondly, we are strong financially. And we consider ourselves very well positioned not only to ride out this storm, but also to take advantage, maybe win over some customers in this turbulent situation. Slide nine shows the supply side. Demand is obviously the big factor these days, but at least the supply is slowing down. But it is slowing down from a level that is too high in our view. The only positive thing with the virus, if there is such a thing, is that the weak rates is causing scrapping to go up and new build ordering to go down. So the supply side will slow down due to the virus. We also want to remind you that it does look better for our smaller ships than it does for the larger ships in dry bulk. In Slide 10, we show you the fuel prices to the left and the vessel average speeds to the right. The IMO 2020 rules did cause average speeds to slow down. You can see it clearly in the graph to the right late last year and early this year, offsetting a bit the net fleet growth. However, fuel prices and spreads have now reduced with the fall in the crude price. And this is causing vessel speeds to no longer slow, possibly to even increase a bit. As you can see at the tail end of that graph to the right, we do think that will flatten out again because rates are such that it makes more sense to extend the voyages that you are on as we are doing. We do want to highlight again that we did benefit from the early large spreads on our scrubber fitted Supras. As you can see on the graph to the left, spreads were between the spread between VLSFO and heavy fuel oil was about $300 a tonne, which is significant. We had our scrubbers ready in time to capture and take the benefit of that. And you saw our significant outperformance and higher earnings on the Supras in the first quarter. And we have also hedged a portion of this fuel price spread at the higher levels that we saw when we did the scrubber investment decision a long time ago. And we do also want to highlight that crude prices and fuel prices are not expected to remain this low. The forward curve points upwards. It is strong contango in both the crude and the fuel price curves. Slide 11. Here, we try to help you assess how we are doing by comparing what our cost levels are to the left with our core TCE first quarter actuals and cover levels to the right. Just quickly to go through our core fleet costs on the left side here. Our owned vessel costs are in the bar to the left. And I've just taken them from our annual report, right? So we disclose our costs. They are substantially fixed, maybe a slight escalation on our own cost, but not much. And in the second bar, you have our long term chartered in cost. This is also just taken from the commitments table in our annual report. And then in the third bar, you have the blended cost between these two. Fortunately, we have more owned costs than these expensive long term charters. So the blended cost is closer to the owned cost level at $8,020 per day. And this is not a mistake, everybody. Our actual earnings in the first quarter twenty twenty was $8,020 per day. So exactly the same as the blended cost. It's just a coincidence. And our cover rates, 32% of the days for the rest of the year covered at 9,000. So about the same revenue as cost on the core fleet in the first quarter. Note that these costs that we show to the left are before G and A, right? So we are running about €15,000,000 per quarter G and A that we need to cover by contributions from our various businesses. On the next slide, we do the same for our Supramax fleets, the core fleet, Slide 12. Our owned cost $8,580 our long term chartered in expensive $11,990 expensive in this market, should say, maybe not that expensive historically. And the blended cost is about $9,000 per day, only five long term charter in ships left. And we compare that with our earnings in the first quarter, 11,310 and the cover levels for 58% of the days for the rest of the year at 11,180. So here, we do generate a positive contribution to the G and A costs. On Slide 13, I would just like to take this opportunity since we're starting to present the numbers in two different ways. I just want to make sure that all of you understand the difference between the core business of ours and what we call our operating activity. The operating activity, by the way, is also important to us. So it doesn't we don't call it core, but it's a very important activity. In the core business, this is all about our owned and long term charter ships and our cargo contracts, right? That's what our core business is. We own the ships. We have some on long term charter. And we win cargo contracts that are everything from six months to one, two years, even ten year cargo contracts, have some. But we also use short term chartered in ships to optimize our core business. So let's take an example where we have a contract cargo to load in a port and our closest core ship is ten days away, we don't necessarily take that own ship and ballast it ten days to pick up the contract cargo. If there is a third party ship in closer position and we can charter in that ship for that one voyage only, we consider that if it frees up our own ship to then do a third party spot cargo closer to where that own ship is positioned. This is what we call arbitrage. And we do this if the combined result of these two voyages is higher than ballasting ten days to pick up our contract cargo with our own ship. Because of this optimization is all done to optimize the TCE earnings on the core fleet, we are including the margin that we make on that short term charter in to carry that contract cargo in the core fleet TCE from now on. And that goes whether that margin is positive or negative, right? We may well charter in a ship on a short term charter to carry a contract cargo and make a loss on that short term charter. We may still do that if the combined results taking into account the voyage that the owned ship can do and make a higher result combined, right? So it makes sense to include the short term ships that we use to optimize our core business in the core business TCE. Turning to the operating activity. This is not core ships and it's not contract cargoes. This is providing a service to our customers even if our owned or long term charter ships are not available by opportunistically matching that spot cargo that we have from our customer with a spot ship and make a margin on that business. So if we contrast these things that I've listed on this slide, right? On the in the core business, the costs are largely fixed, and we disclose them. The key KPI for the core business is the time charter net per day. The leverage in our core business is obviously significant, right? Here's where we make the big money in a strong market because the costs are significantly fixed. We call it asset heavy here. We own the ships. It's our own crews. It's our own quality. It's our own safety. And this is really what we are all about. This is why we can safeguard reliability. This is why we win cargo contracts. And this is how we build our brand name. It's about 85% of our current vessel days. In our operating activity, on the other hand, the costs fluctuate with the freight market. And it's the margin per day that is the important KPI, not the TCE level itself. And that's why we're starting to disclose that to you. We might do an operating play on a backhaul leg only and the TCE is extremely low. It doesn't matter if we can charter in a ship at an even lower price. Another month, we may make an operating play at the front haul leg only where the TCE rate is very high, but obviously we also have to pay a very high rate to charter in the ship for that leg only. So again, it's not the TCE level that's important, it's the margin itself. And by excluding this operating activity and the short term ships from our core TCE, you will get a much better and more valid information. The TCE that we now disclose going forward, you can use to contrast against the fixed costs that we have on our core fleet. And it will be a much more meaningful information for you, and it will be easier to model our business. The operating activity is asset light. It's hardened to control quality. The benefit with it is that you can make a contribution regardless if the market is weak or strong, right? So having an operating activity is very important and very good since it can contribute to our results regardless of the market level. And again, it enhances and expands the service to our customers. And again, currently about 15% of our vessel days. So with that, I'd like to ask Peter to explain with this new way of reporting how we model our business and then also to touch on our balance sheet and liquidity position. Peter? Thank you very much, Matt. So if you turn to Slide 14, there is a table on this slide, which sets out a simple model on how to forecast and analyze our business. So if you look, for instance, in the first line there called Handysize contribution, to calculate the Handysize contribution, you need to take our core TCE, which as Matt explained is the TCE on our owned and long term ships and the margin on the short term nonoperating ships and multiply that with the owned and long term revenue days. There is no need, of course, because the margin is included to include short term days in this. These numbers in this particular presentation, you can find on Page two or on Page eleven and twelve. You'll see the TC there. The dates we have summarized in the appendix on Page 17. You obviously need to take costs out, and you would be using the blended cost between our owned and long term ships. And again, you find that on Page eleven and twelve in this presentation. Again, the cost of the short term ships that we take in are not relevant because the margin is included in the TCE. The Supramax contribution is calculated in exactly the same way. So I won't go through that in any detail, and the information is in the same place in the presentation. What you then having added up those two businesses contribution, the core business contribution, as we call it, We then have to add our operating activity. Here, we lump Andesite and Supramethys together, and we basically take our operating margin across these operating ships, short term ships times the number of days. The margin, can find on Page three of the presentation and the days again on Page 17. We also, as you know, have two post Panamax ships that we earn revenue on. They are a stable business around $4,000,000 a year on bareboat and time charters, and you can add that to the previous contributions. And then of course, you have to deduct the G and A. And as Matt mentioned previously, that is running approximately at $15,000,000 per quarter. So if you add that all up, you should get to our underlying result. It is important to remember, and we've been talking about this for some time, that the sensitivity here is still 35,000,000 to $40,000,000 for every $1,000 TCE up or down. And that takes into account that we have about 20% to 25% sort of fixed forward cover at any point in time. If you have any further questions about this methodology, feel free to contact us after this call. So let me just move on to the balance sheet and cash, etcetera. We spent a large part of last year adding to our liquid resources. We added new revolving credit facilities. We issued a larger convertible bond. So despite 2019 being a very heavy year for us when it comes to investments in scrubbers and new ships, we ended the year with a very high level of liquidity of $383,000,000 So looking forward going forward from the beginning of the year, we have a number of regular cash outgoings. We have about $50,000,000 in regular maintenance CapEx, and we have about $155,000,000 in amortization and interest. This is sort of the run rate, if you will, of our CapEx and loan book. During the year, we have a few non regular sort of one off cash commitments. We acquired some ships last year, and they are paid this year. They were paid in the first quarter. And also we have some final payments on the scrubber. That all goes that all is about $55,000,000 in total. We also have a revolver to repay in November of about $60,000,000 but we do plan to roll that over closer to the time. And we have a dividend payment of close to $30,000,000 planned for May. We do expect all of these cash commitments, whether they're regular or one off, to be comfortably met by our operating cash inflow and existing liquidity. If you recall last year, we had operating cash inflow of $174,000,000 which wasn't a particularly strong year, but our business model allows us to have a good cash inflow even in weaker markets. Do remember what I said before that this the sensitivity of 35,000,000 to $40,000,000 you can apply to the operating cash flow as well as to the underlying earnings, dollars 35,000,000 to $40,000,000 per 1,000. So we are very comfortable about our liquidity position and our ability to meet our regular and one off cash commitments. And we do believe that our balance sheet, our general outperformance, our business model makes us a very safe and reliable partner for customers, for suppliers and financial institutions. I think we will be seen as a haven in turbulent times. And of course, as Mats mentioned earlier, we are positioned to take advantage of opportunities if we see very compelling opportunities in these turbulent times, and we do have the balance sheet to do that. So with that, I hand back to Matt. Thank you very much, Peter. And with that, we end the presentation and invite for questions and hand over to the operator. We will now begin our question and answer session. We have the first question comes from the line of Paris James from HSBC. Please go ahead. Thank you, operator. Thanks, Matt and Peter. I have two questions actually. First, maybe on agricultural cargo. I mean, do you think that this trade could be impacted by a couple of months or quarter due to potential delays in sowing or harvesting, given the substantial part of the world is under lockdown in one way or the other? And my second question is related to Slide 12. I presume when you talk about core costs, we are referring this to 2019. Is it fair to gross up the depreciation and finance cost by, I don't know, maybe 5% or so to take care of majority of your fleets are now scrubber installed. So perhaps your depreciation and finance cost will gross up when we have to apply this in 2020 numbers? Thank you. Thanks, Parash. On the first question, whether agricargo may be affected by delays, sowing, harvesting, etcetera. We do not think so at this point. The big grain growing areas, countries are very automated, huge machinery operating, not that many people, not crowded places, not and considered essential cargoes is important, right? In most I don't think we've heard any country that does not consider agri essential cargoes and I. E, it's allowed to continue to we need it for food and animal feed. So the answer is no on that one. Second one, escalation of cost. It's a good point that yes, we've taken the cost straight out of the 2019 actual. So some escalation, yes, but limited so we feel that we are able to keep the OpEx under control there and just a small escalation maybe, Peter, on depreciation? Yes. I mean a little bit because we've taken some investments in scrubbers, not a huge I would say on finance cost, I would probably think it would be might even be reduced a bit given the current interest rate situation. So they might outweigh each other a bit. So I wouldn't expect a huge increase in cost per day at all. Perfect. That's very helpful and clear. Thank you. Thank you. Next, we have the questions from Andrew Lee, Jefferies. Please go ahead. Hey, hi. Thanks for the call and thanks for your time. I may have missed it. Do you have the total revenue days, right, for this year in the presentation or in the like just for this year? That's my first question. Second question is, as you mentioned, right, there's a big, premium on the Supramax because of the difference in the bunker spread. Given where the bunker spread now is like $60 $70 right, how would that translate into the premium? Thanks, Andrew. Yes, revenue, yes, is on Slide 17, also the total days there. So any further questions, you can contact Peter separately there. But you have all the investment days in Slide 17. The super for I the full year. This is for first quarter. Full year four, what do you mean? But normally, what you've normally provided is you provide like total revenue days for, say, for 2020, right? Yes. What you have here know what you're asking, and I think it's been more confusing than helpful to you. But what we provide is instead Slide four, which is our core fleet, right? So you know that they're not Slide four, Ron, Slide five. So we have 94 core Handysize ships and we have 40 core Supramax ships. Those are the core days, right? So when we now say that we have 58% of the days for the rest of the year covered in Supramax, we're referring to the core fleet. And you can just multiply the number of ships with three sixty five, and then you have the number ships. Previously, these short term ships have been included both in the actuals and in the forward, and I think more confusing than not. So the only thing you need going forward is the core fleet, which you know how many ships we have. And then you need the operating days and the operating margin, which we provide to you. You have to guess the future, but we provide you all the history. Is that clear? Yes, that's clear. Thanks. Thanks, Andrew. Then Now what it is, how much would the outperformance be on the Supramax? Oh, sorry. Supra, yes. Yes. So if you it's more like $1,000 per day at the moment, I would say. $60 $70 spread is a bit lower. It depends on where in the world you are, etcetera, right? But if you use $90 or $100 per tonne spread, the benefit is about $1,000 per day and that's after deducting a little bit of the cost of the scrubber as we do prudently as well, right? So assume about $1,000 per day at the moment. But again, the forward curve is pointing upwards and we show the forward spread there increasing 125, 135. But very volatile crude market as you know and it can change quickly. Okay. And then maybe one final question is, I understand the outlook is like a little bit cautious in terms of we don't know what's happening, the economy is slowing down. Would you say that we're near the bottom of rates? Or do you think that there's still more pressure in the near term? I know it's hard to forecast, but I'm just trying to get a sense in terms of do you think that things are bottoming out? Or do you think there's more pressure? I think it's still going rates are still going down. You see the graphs on Slide six, where it's pretty sharply coming down. But it comes down it's already kind of close to OpEx level. So there should be a leveling off effect before long. What we do try to emphasize, right, is that we have been able to escape this weak first quarter. But as time passes, it will also impact us, right? So we will feel the impact of the weaker rate more in the second quarter than we did in the first quarter. But yes, spot rates should be approaching some kind of floor level because when you get to OpEx level, people start to hesitate even doing the business and taking the risk, right? Next we have the follow-up from Taras Jin from HSBC. Please go ahead. Yes. Thank you. Matt, I was just wondering, I mean, the fact that China was the first country to get into COVID-nineteen and the first one to come out of it. We see a lot of indexes which say that the migration workers are back in the city, the power are coming back to the normal. Are you seeing a follow-up of normalcy with respect to China's appetite for drybulk across the commodities be it major or minor? And where do you see or it still will largely depend on China's stimulus for this sector to come back strongly? Yes, we do see China back in action and they didn't go down maybe as far as many people thought either. Ports remained open and yes, there was a reduction, but they're definitely back. So we're not worried about China, and China will come with further stimulus down the line. So if the rest of the world could have the same pattern, we would be very happy. But it's hard to see other countries may be able to get back as quickly as China were able to do. By commodity, we've seen maybe what stands out is that we could see coal suffering more than other commodities. We don't really track necessarily iron ore, right? But all of the minor bulks have shown good rebound. And it's only coal that maybe have suffered a bit due, I guess, to lower energy consumption there. Okay, fair enough. Thank you. Thank you. There are currently no questions. Operator, are there more questions? Yes. We have one on the line. Next, we have the questions from Andrew Lee from Jefferies. Please go ahead. Hi. I'm sorry. Just two more questions, right? I'm looking at the calculation you said about how to do revenue days in terms of the core fleet. That would mean that your Supramax revenue days sees a significant decline on a year on year basis for this year versus last year. Is that correct to assume that you're not going to because you said that you're not going to buy any new secondhand vessels, you're not going to do long term charters. So that means that the revenue days will be a sharp decline on a year on year basis? No. If it's just the way that you model the business that is changing to exclude the short term days. There will still be short term days there. But as we explained, right, when the reason for why we use a short term ship in our core business is really to boost the TCE of the core fleet. So instead of including the TCE of that short term ship. We just take the margin on that the difference between the revenue and the cost of that short term ship and we add or deduct that margin to the revenue of the core fleet. And so the impact of that short term optimization is impacting the core TCE either positively or negatively. And this means that you can ignore it when you model our business. The effect is already taken into account, which makes it a lot easier for you to model us. But the number we won't hide the dates in any way. We will show the days just like we do on 2017. But no, we do not expect the number of days to go down significantly. We have increased our Supramax fleet compared to last year, right, the owned fleet. So we don't expect a decrease in the days. I mean, the number of short term days can go down if we take in less short term ships for whatever reason. But because we're giving you the core TCE, you don't need that number anymore because the core TCE will include any effects on the short term fleet. So you don't need that number to calculate the contribution and forecast the contribution. Okay. Understood. And then final question is revenue recognition, right? Say if you book a spot contract today, when does it hit the P and L? Peter? Well, follow IFRS 15, which means we do a load to discharge methodology. So we start booking revenue on a contract when we load the cargo. And then we do a percentage completion until we discharge that cargo. Thank you. We have the last question from the line of Carter Chai with CPIC International. Please go ahead. Okay. Thanks for the presentation. It's very helpful. I got a question for Peter maybe. Peter, can you give us a little bit details on the key loan covenants of Park Basin? Is there any possibility that the company might breach some of the covenants because of this very difficult environment? Thank you. I mean, in general, we are very, very far from any covenant breaches generally. The covenant that in a negative scenario we would breach first is the loan to value covenants in our which means we have to have certain amount of value on the ships that we have mortgaged. And that will be impacted by value of fleet, value of ships in the market. So they're not related to cash flow necessarily or equity or cash or anything like that. But we have significant headroom in these covenants today, and we would need to see very significant falls in value to be in breach of those covenants. So it's not something that we are particularly concerned about today. Is pressure on secondhand values, but we have good headroom there. Okay, okay. And then what about your loan payment schedule repayment schedule next year? Sorry, last year? The loan payment, the loan repayment? Yes. So the loan repayment this year, I mean, if you look at Slide 15, we have 155,000,000 of amortization and interest. Of that, probably, I think about CHF 100,000,000 was amortization. And I think last year, the number was perhaps a little bit lower, but not that much lower than that. Okay. What about next year? Year is about €120,000,000 plus the €50,000,000 of the one year unsecured revolver in November. But as I said before, we're looking to potentially roll over that in due course. Thank you. We now begin the closing comments. Please go ahead, Mr. Nachtverglen. All right. Thank you, everybody, again for joining us and for showing interest in our company, and please don't hesitate to revert to us if any further questions. Thank you very much, everybody. This concludes our conference call. Thank you all for attending.