MPC Container Ships ASA (OTCPK:MPZZF) Q2 2022 Earnings Conference Call August 18, 2022 9:00 AM ET
CompanyParticipants
Constantin Baack – CEO
Conference Call Participants
Frode Mørkedal – Clarksons Platou Securities AS
Operator
Good day, and thank you for standing by. welcome to the MPCC Q2 2022 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Constantin Baack. Please go ahead.
Constantin Baack
Thank you, operator, and good afternoon, and good morning, everyone. This is Constantin Baack, CEO of MPC Container Ships, and I would like to welcome you to our Q2 2022 earnings call. Thank you for joining us today to discuss MPC Container Ships second quarter earnings. This morning, we have issued a stock market announcement covering MPCC’s second quarter results for the period ending June 30, 2022. The release, as well as the accompanying presentation for this session, are available on the investor media section of our website.
Please be advised that the material provided in our discussion today contains certain forward-looking statements and indicative figures. Actual results may differ materially from those stated or implied by forward-looking statements, due to the risk and uncertainties associated with our business.
Before I start with the presentation, let me direct a few words as a little preamble. We are pleased to report another strong quarter for MPC Container Ships, in which we have been able to continue to sustainably grow our earnings and profits amid macro uncertainties. Consequently, we have announced a recurring dividend for the second quarter 2022, which is around 15% higher than in the previous quarter. Year-to-date MPCC has as such declared dividends of more than $350, million emphasizing our commitment to return capital to shareholders. Despite geopolitical and macroeconomic uncertainties, the container charter market continues to be historically strong. We’ll touch on the market in more detail as we go through, but I would like to emphasize that in particular, our segment of the container market is still robust at elevated levels, although charter periods have decreased slightly over the quarter. Nevertheless, charter rates are still at multiple of pre-pandemic levels, and available tonnage remains very thin.
And on that note, I would like to start with today’s presentation, commencing with Q2 year-to-date company highlights, followed by a market update, and 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. As one of the leading intraregional tonnage provider, we presently own and operate a fleet of 68 vessels, which includes our four new buildings, and JV vessels, with a total capacity of roughly 150,000 TU. Over the past years, and past quarters, we have rolled out a clear and solid charting strategy, creating value for our shareholders. Over the past quarters, we have focused on reshuffling the balance sheet, and we now have a very solid balance sheet, with moderate to low leverage and 34 unencumbered vessels providing us with a high flexibility and discretion for our capital allocation decisions, in particular, the ability to return capital to investors. We have furthermore locked in long-term charters in order to build a sizable contract or charter contract and projected EBITDA backlog of $1.8 billion and $1.4 billion, respectively.
Shipping is a cyclical and certainly capital-intensive business, and therefore, we believe that having a very clear and rational set of principles when it comes to decision-making and capital allocation, is key and is required to continue to develop our company. And we firmly believe we have walked the talk in that respect by executing on a clear strategy, which centers around mitigation of residual value risk, and placing an emphasis on the development – or sorry, on the deployment of capital in certain phases, and placing an emphasis on returning capital to shareholders in other phases. And that remains our clear priority going forward. In addition, and finally for this slide, we continue to operate in our well-established corporate setup. We put high priority on transparent corporate governance, strong ESG commitment, and certainly our strong execution capabilities.
Please turn to the next slide, Page 5 of the presentation. As already alluded to in my initial words, we are pleased to report a strong financial performance in Q2 2022. As you can see on the left-hand side, in the table, with basically all KPIs significantly above the compared period in last year, both in terms of performance indicators, but also balance sheet items as illustrated by the various multiples shown in the table on this slide. From a performance standpoint, at $152 million, revenues were around 2.2 times, and hence, significantly above the Q2 2021 levels. Similarly, EBITDA, and also earnings per share, came in significantly above prior year’s levels. As I said throughout the bench, most of the KPIs have improved. That also includes some operational KPIs like vessel utilization, and also the average TCE that we were able to generate during this quarter. Furthermore, on the back of that, we have also increased our revenue and EBITDA guidance for the full year 2022 to the range of $570 million to 585 million when it comes to revenues, and $470 million to $490 million when it comes to EBITDA for 2022. Looking at the financial position of the company, as per end of Q2, we had a cash balance of around $86 million, and the same applies on a positive note, to the development of our equity ratio, now standing at 73%, and the financial leverage at 22%, both improvements compared to last quarter, but also to the second quarter 2021. Further details on our Q2 financials are made available in the appendix of this presentation, and are also accessible through our website via our Q2 financial report.
Now, on the right-hand side, a few year-to-date updates information. And I will not run through all of them, but let me highlight a few. Again, the update of the guidance I had already mentioned, we have also seen improvement of many of the operational KPIs, a continued focus in a market that still is affected by certain COVID implications, in particular in Asia, but also by inflation, as one example. We continuously focus on OpEx and CapEx and, of course, seafarers welfare. We have concluded six dry dockings year-to-date 2022, with another seven likely to happen in the second half of this year. We have executed on our distribution plan, as mentioned previously. Year-to-date, $271 million in dividends have been declared and distributed to shareholders until that date. And today, we have declared, firstly, a recurring dividend of $0.15 per share, or roughly $67 US million for Q2. And we have also declared an event-driven distribution of $0.04 per share, or roughly $17 million US. That has been resolved by the board, and whilst in our earlier press release today, we have still mentioned that the handover of Serafina, which is linked to this event-driven distribution, is pending. It has, in the meantime, been successfully handed over, and therefore concluded today.
On that note, let me continue with the next page, basically running you through our value approach, with three strategic pillars being distributions, financial flexibility, and accretive growth measures. I already stressed that we’ve placed a clear emphasis on returning capital to investors. At the moment, we have – we look at a very strong cash generation and EBITDA backlog, and we have, again, increased our dividend for this quarter compared to the previous quarters. We are committed to our very clear and stringent distribution policy of distributing 75% of adjusted net profit as a recurring distribution on a quarterly basis. In addition, and to the point I mentioned just earlier on the AS Serafina, we will also continue to selectively consider the sale of vessels, if accretive, and if we believe the price is attractive in this market environment, and then also distribute capital back to investors on that basis. Furthermore, and obviously subject to the share price development, we would also, as part of our distribution strategy, consider share buybacks, but again, that is subject to share price development over time. Financial flexibility, we operate on, I would argue, an industry low leverage of roughly 20%. We have done debt repayments of $45 million year-to-date, and the debt outstanding, on a gross basis, is $190 million as per the balance sheet date Q2, with the net debt position being around $100 million as per the balance sheet date end of Q2. We will maintain and put a clear emphasis on maintaining a very high balance sheet flexibility, which includes unencumbered vessels or a large number of vessels being unencumbered, and also having ideally flexible instruments like the two revolving credit facilities that we have in place at hand. In addition, there are no debt maturities until 2024. So, we have a very clear and transparent runway when it comes to our debt obligations and our flexibility.
Finally, and very importantly, we will continue to adhere to a very rational portfolio management approach, as evidenced by the selective sale of certain vessels. We have sold and handed over three vessels for around $106 million in proceeds in the first quarter this year. And the AS Serafina, which has effectively been handed over now in Q3, but as also been alluded to earlier, will generate, or has actually generated $34 million in gross proceeds. And out of that, we will add dividend out and pay this event-driven distribution in connection with the recurring dividend in the course of September. Furthermore, we have also executed on our selective fleet renewal. We will always adhere to our principle of mitigation of residual value risk. So, we have done so in the two new building projects that we have executed in year-to-date 2022, one being two 5,500 TU vessels, where we look at a CapEx of around $144 million, and an EBITDA backlog roughly in the same figure. So, full derisking over the initial charter. We believe that is an attractive and interesting way to allocate capital selectively, but only in conjunction with a charter commitment.
Furthermore, we have announced the contracting of two carbon-neutral new buildings, 1,300 TU, where we look at CapEx of around $80 million, with a very solid 15-year charter against this commitment, with an EBITDA backlog of around $140 million. So, those would be transactions that we deem accretive and attractive, but we believe they will have to be very selectively chosen going forward. As I mentioned earlier, the clear priority in terms of capital allocation remains on the distribution, and any commitment we have taken so far on those two new buildings has zero impact on our ability to pay dividends and the volume of our dividends going forward for the next couple of years.
On that note, let me move forward to the next slide, Slide 7, where we have kind of illustrated the distributions of dividends year-to-date. From left to right, it’s the dividends we have paid in in February and March as event-driven and recurring, the dividend we have paid end of May, and the dividend that is expected by the end of September 2022. The grayish part are event-driven distributions or dividends related to vessel sales. And the blue part of the column relates to the recurring dividend. As you can see, the recurring dividend in line with our improved profitability, has increased quarter-by-quarter, and we expect that to be very solid going forward on the back of our existing charter backlog. The cumulative yield, looking at today’s market cap and the dividends paid year-to-date, or announced today, translates into roughly 33%, which is a very significant yield in our perspective. And overall, we have cumulative distributions over around $355 million or $3.5 billion NOK year-to-date on that basis. Or accumulative distribution in NOK per share of just a shade below 8 NOK for 2022 so far.
Let me now continue with a short market update. Recently, geopolitical and macroeconomic uncertainties have increased globally. There are certainly two market developments, being inflationary pressure from the COVID-19 rescue packages, as well as the Russia-Ukraine conflict that put significant upward pressure on certain prices, energy prices, et cetera and simultaneously put pressure on the global economy. Consequently, the general macro-outlook in terms of GDP growth has been revised downwards. Having said that, if you look at the container market, that is now on Slide #9, the weakening of the global economic environment, and the induced market uncertainty, has also had some impact on the container vessel industry. And this is visible in particular with the slight softening of freight rates, as can be seen on the top left of this chart. At the same time, rate and also congestions, as well as disruptions on the right-hand side, remain at record levels. So, whilst there is a softening, the level is still extremely high on both the disruption figures, as well as the overall freight rates. As you can see on the top left, especially spot rates, so the red line is the SCFI, and the blue line is the CCFI. So, one is the spot rates, and one is the contract rates. So, longer-term rates, especially the spot rates, have come down. However, as I mentioned, freight rates remain at very high levels historically, and certainly well above pre-COVID levels as well. On the right-hand side, you can see port congestion, which remains at record high levels. Will the situation improve anytime soon? I doubt it. While port congestion, for example, at the US west coast, has improved somewhat, it remains at record levels at the US east coast, and certainly driven by Russia-Ukraine conflict, and COVID-19 policies in Asia. It is also at record levels in the EU, as well as Asia.
Please turn now, though, to Slide 10, where we now drill a bit deeper on the intricacies of the charter market and vessel availability. While freight rates have already softened somewhat, time charter rates are still near record high. The reason is that with the market surge over the past 24 months, vessel availability has decreased to almost negligible levels, as you can see on the right-hand side. Usually, if you move into a new year, start of the year, you have around 1,500 vessels available to the charter market across sizes and sectors, and that has been reduced significantly due to the significant number of fixtures that have been concluded over the course of the last couple of months, in particular, the first quarter of this year. So, going forward, we expect for the rest of the year, way fewer fixtures than one would usually see, leading to a stability in the charter market. And also, for 2023, we do not expect to see anywhere near the 1,500 vessels that would usually be available to the charter market in historic years. We believe that will be below 500 vessels based on our own analysis. Having said that, also in terms of idle vessels, we are at a very low point. Only 66 vessels are idle. A lot of vessels are also in dry dock situations. So, we are certainly positive when it comes to vessel availability, and hence stability of the market. That relates to time charter rates and simple vessel availability, if we now look at – more specifically also at charter periods and re-delivery windows, as well as forward fixtures, which is something that we have stressed over the last quarters in our quarterly reporting. We have seen quite a contraction in charter periods. So, rates remain extremely stable, but periods have come down somewhat, which is also linked to the fact that there’s more hesitance and somewhat uncertainty on the side of the liners, not necessarily because there are more vessels available to the market, or there’s less demand. So, we clearly see that bit on the left-hand side, and on the right lane, where you see the reduction in charter periods that is obviously a development that is a downturn compared to last quarter. However, still at very, very – historically, very high rates. And therefore, we believe this is nothing to be overly concerned about going forward. So, periods are still prolonged compared to previous years, and fixtures still get done. However, both the periods have been a bit shorter, as well as the forward-fixing activity, and that’s on the right-hand side, has also come down a bit. During the first quarter, we have fixed 18 out of our 24 open positions for this year. Q2, we have only done one fixture, and we have five more fixtures ahead for the rest of the year. So, we see that there’s a bit less traction when it comes to forward fixing, and we have a bit more back to normality where you fix vessels 30 to 40 days ahead of charter expiry.
On that note, let me turn from a more specific charter market – from charter market details to the bigger picture in terms of supply and demand development. We do see a healthy midterm outlook in particular for our size and segment. On the left-hand side here, you can see the overall market where there’s obviously a significant supply growth versus a demand growth that is lagging behind. It’s expected to lag behind for the years to come. Having said, that does not factor in any implications from new regulation, such as slow steaming, which we expect will be a very tangible reaction by the market. And if you listen to the CEOs of the big liner companies, everyone expects that to impact the capacity in the market by somewhere between 5% and 15%, depending on the trade, depending on the vessel size, et cetera. So, that is not factored in here. And we also believe that there might be a bit of slippage when it comes to vessel deliveries into the market. So, this is a static analysis for the total market, which we believe still has some headroom to develop, and the gap between supply and demand coming down. On the right-hand side, very specifically, and encouraging from our standpoint, is the supply-demand situation for our intraregional trades, the trades in which we are involved. We look at a still fairly low order book when it comes to the smaller vessel sizes. We look at low fleet growth of around 1% CAGR 2021 to 2025 in the sub 5,000 TU segment. And we see a strong trade growth of intraregional trades. We also believe that reshuffling of supply chains, et cetera, will contribute to that even further, and we therefore are positive when it comes to the overall supply-demand growth development and outlook for our specific segment.
Now, from market to company outlook and company specifics, let me move forward to Slide 14 where we have shown the charter backlog and forward visibility in a format that we have commonly used in previous quarters. From left to right, on the left-hand side, you can see the Q3 and Q4 forward. The two columns represent the open days and fixed days operating days of the vessels. So, we basically see, we are almost sold out for the rest of the year. We have five more vessels to be fixed more towards the end of this year, representing the number of open days. We have a secure TCE of around mid $31,000 per day on the fixed days. And we have a secured revenue of around $300 million to 315 million for the remainder of 2022. Most of the open positions, as I said, are in Q4 2022. If you now take a bit of a broader picture on the years ahead on the right-hand side, first of all, you can see from top to bottom, the EBITDA and revenue backlogs. So, $1.8 billion in revenues and projected EBITDA backlog of around $1.4 billion. And you can see from left to right, the respective figures in terms of fixed days, open days, contracted forward TCE, and contracted forward revenues for the second half of 2022 in aggregate, as well as 2023 and 2024, as well as 2025, and then also 2026 forward. Interestingly, we have quite a visibility for the years ahead in terms of contracted revenues and certainly contracted rates and days, yet we still have some open days, in particular from 2025 onwards. And we are very positively looking forward on the basis of our charter backlog.
Now, what does that mean in terms of where are we from a risk standpoint? We have illustrated on Slide 15, a bit of an overview where we have looked at the net interest-bearing debt as per end of Q2, added the market cap, as per, I think yesterday, arriving at an enterprise value of $1.2 billion. If you then deduct the scrap value of the vessels as the bare minimum, plus the projected EBITDA of $1.4 billion, as well as the proceeds from the vessel sales that has taken place to-date, we see an excess value above the current enterprise value of more than $0.5 Billion US. So, we believe from a pure enterprise coverage standpoint, we are very well positioned going forward. And that is obviously the protection from a downside perspective. On the other hand, we have shown, and also that is in line with figures that we’ve shown in previous quarters, a bit of a sensitivity to show the significant potential for further sustainable distributions going forward. What have we done? On the top of this slide, we have shown for 2023, 2024, and 2025, operating revenues, EBITDA, and net profit, excluding potential special effects. So, this is a pure sensitivity on the open days derived from the slide that I alluded to earlier. And that means we have, at current market rates, which, for the blended basket of our vessel, is around $40,500 per day, we arrive at these figures, and we will continue obviously to apply our clear and transparent distribution policy so everyone can derive dividend scenarios and return scenarios, which we believe is very attractive in this market environment, given our backlog and the application of our policy. On the lower end of this – lower part of the slide, we have run that number on the basis of the 10-year historical average, according to Clarksons for all vessel baskets, which is roughly $16,500 per day. And that obviously gives you lower figures, but shows you a bit of the sensitivity and the fact that we do have a lot of charters locked in, and there’s a very clear path to sustainable distributions in our view going forward.
On that note, let me conclude before we open the floor for questions on a bit of an outlook and where we stand. We see, from a pure market assessment standpoint, that the container market remains historically strong, despite geopolitical and macro uncertainty. We continue to witness severe global supply chain disruptions and congestions globally. And that is certainly here to stay, at least for the foreseeable months and quarters in our view. In addition, the industry landscape will be affected by energy transition and decarbonization of the industry, which will induce capacity contraction in our view, for example, through slow steaming. Overall, and again, we alluded to that as well, we see a favorable outlook for intraregional trades for various reasons explained, in particular, the diversification of supply chains, which we believe will likely benefit intraregional trade lanes disproportionately. And we also see a very solid demand growth in those regions. At MPCC, we believe, with our very low leverage, and our strong cash generation, we are very well positioned to not only continue our path of prioritizing distributions to shareholders, but also to make use of opportunities as and if they arise. We will continue with a very clear focus on mitigating residual value risk in any decision we take, and also selectively explore the possibly vessel sales or attractive charter opportunities with our existing fleet.
And on that note, I would like to hand back to you, operator, and I’m looking forward to receiving questions.
Question-and-Answer Session
Operator
[Operator Instructions] And the first question comes from the line of Frode Mørkedal from Clarksons. Please go ahead. Your line is open.
Frode Mørkedal
Thank you. Hi, guys. I had a question on your capital allocation, your thoughts process there. I guess your vessel sales could have been used to buy back shares. At least if I look at the current backlog you have, and just assume scrap value at the end, the stock is trading well below that, right? So, it makes attractive to buy back shares in my view. So, maybe if you could talk about that.
Constantin Baack
Sure. Thanks, Frode, for the question. And yes, I mean, our capital allocation policy foresees, and that’s why we use the term distributions and not necessarily dividends, because we want to take the right decision at the right point in time while it’s being, let’s say, reliable partly to return capital to investors. We believe the dividend is a very meaningful and attractive measure. We, by the way, pay the dividend out of share premium, which means it’s tax-free also to other jurisdictions, than, for example, Norwegian investors. We believe that is a very important feature. Having said that, we would – and I mentioned that earlier, we would not rule out share buybacks. Obviously, share buybacks, the price has to be right. We cannot be exposed to any, let’s say, insider projects that we’re working at. We will have to consider the close periods, et cetera. So, having said that, I mean, it definitely is one of the options that we have on the table, and it’s nothing that we would rule out. We believe that being clear in the distribution and reliable to the investor community in terms of walking the talk on our quarterly distributions, that is clearly the way to go about it. Of course, if there were a few vessel sales lined up, that could in any event, constitute an opportunity to buy back shares. Having said that, we haven’t done it yet. again, share price has to be in the right vicinity. We have to be able to act as far as I said, close periods or inside our related matters are concerned. And then we are definitely considerate of share buyback as another option. It is being discussed with the board on a regular basis, and I would not rule out that we see something happening in the not-too-distant future. However, we believe to be a reliable partner on the dividends is also extremely valuable to shareholders.
Frode Mørkedal
Yes, I agree. Makes sense. Second question is more about the macro environment. Clearly, you have a very strong backlog, but I guess if the outlook of the potential market is at least for a slowdown, and maybe we could have a recession, et cetera, right? So, maybe if you could talk about where MPC is positioned in this type of environment, and how you would navigate if there were softer periods ahead, right, in terms of your balance sheet and decision process thinking there.
Constantin Baack
Sure. I mean, in terms of balance sheet, we have been clear, and I think that’s the – I would almost say that the unique feature, when you look at our cash generation, we are not kind of – we cannot – we do not only allocate everything to dividends or to distributions, but a very significant part of our cash generations. We continue to deleverage the balance sheet, which is probably a bit unusual in a market like this. We believe it’s the right thing to do. We believe having flexibility should the future get a bit rougher in terms of the waters, we believe that will also constitute opportunities, and to have a very solid balance sheet structure with a significant part of the fleet unencumbered, low leverage, and ability to act, is something where we believe we will have a very attractive proposition and market position going forward. So, we believe that the emphasis is put on the right things, right, deleverage, while it’s not compromising on the dividends, and yet being able to act as opportunities arise. So, that’s more the company position. Now, to your question on general macro environment. Of course, I mean, the geopolitical situation is tense. it’s very difficult to read. So, I think to have a high degree of flexibility in your balance sheet is a very solid preparation for whatever comes ahead. At the same time, vessel availability, as I mentioned before, is very limited. We believe that the new regulation will lead to a significant lease lower speeds, certainly in specific traits. And we see that actually as an opportunity on – from a pure capacity standpoint. So, whilst the overall macro environment is very difficult to read, I certainly believe that we are well positioned and our counterparties, to be frank, I mean, the top 10 liners, they have – all of them have net debt of zero. So, we believe the counterparties on all our contracts are very well positioned. So, we are actually just continuing to roll out our strategy, taking rational decisions when it comes to potential – selectively potential investments. And I would like to highlight the word selectively, and stick to our capital allocation policy, including deleveraging of the balance sheet.
Frode Mørkedal
Great. Thanks. Thank you very much.
Operator
There are no more questions on the phones at this time. Please continue.
Constantin Baack
Yes. Thanks, operator. There are a number of questions through the web, which I’m happy to take, unless you chip in with more questions through the line. There is one question by (unintelligible). He’s asking about five vessels will come off charter before year-end. One of these is already off charter, Alexandria. Will all or some of these vessels be marketed for sale, or why has none of them secured a new charter yet? We are, as we have done in the past, considering both options, chartering out vessels, or potentially even selling vessels, as we have done on previous occasions. So, that’s the thought process there from our side. If you look at the Alexandria, yes, she is off charter, but she’s now in dry dock. So, that is the reason, and we will obviously continue to market her. We are positive that we will find a very good employment. I mean, the question is, as I mentioned earlier, the duration. As durations have come down a bit, as alluded to in the market section, and obviously the potential sales is also something to seriously consider. So, we would stick to our game plan of being very rational in the decision to sell or charter of the vessel. We believe the market has obviously been less active by virtue of fewer vessels being available, yet rates are still very solid, and we are not overly concerned about charter opportunities out there, and we’ll take them as we move forward. As I said earlier, forward fixing activity, that has come down, but that has been a very unique and almost unheard-of development that we have seen during the first quarter of this year. And we are now more back to the normal days where you extend the charter or renew a charter 30 to 40 days ahead of charter expiry when the vessel comes out of dry dock, and that is also the case for AS Alexandria.
There is another question by (indiscernible). Due to the lack of understanding from the journalists, analytic resources, could MPCC clarify the new build will not impact dividend. There has been a lot of comments from different brokerhouse analytics that clearly show lack of understanding. Yes, we can just repeat and explain in more detail that the new builds that we have carried out, have zero impact on our dividend capacity, our dividends, and that is one reason why we have this dividend policy in place relate to 70% of net profit, 75% of net profit. So, any investments into the new buildings, will have no impact during the construction or now on net earnings, as that is a balance sheet and cash flow development, and we’re yet to generate enough cash to do so. So, it has zero impact on the dividend capacity. To the contrary, it actually has a positive impact on the earnings and dividend capacity going forward, because we have secured a significant revenue and EBITDA backlog for those four new builds. So, we have also communicated that to the analyst community, and I’m hopeful that some of them are here on the call. We just had Frode asking a question. So, I think everyone is hopefully on the right page there, what the new buildings will do and will not do in terms of rather enhancing our dividend capacity down the road, with zero impact today.
There’s another question from (Martin Hughes). Is there any plans to start share buyback program? Okay. I think I answered that when I replied to Frode. I will not repeat that. Martin, if you have any further questions, please clarify that question in a bit more detail. There’s a question of (indiscernible). If I understand the CII rating correct, the rating will be calculated the following year. What incentives will the charterers have to maintain a good CII rating when the charter agreement expires? We generally have, and that is a very important feature, so-called CII clauses in our charter parties that mean that charters will have to basically utilize our vessel in the calls with a certain rating scheme, meaning they cannot just – we will not be penalized by them running the ships to the contrary. They have to stick to a certain CII rating scheme, and that is in general, a C rating as part of our charter agreements.
There’s another question by (indiscernible), saying, because of the current charter market with low durations and ship values remaining high, is it more accretive to sell ships, or do you expect the market to be strong even after the one to tier duration is over? Yes. Vessel sale – and I think that is part of my earlier answer to the question, we would always consider a vessel sale. And certainly, if you can arbitrage between the realizable sale price for a ship and the implied charter price or value by ship, we would always consider that at the point in time where a charter renewal is possible and also for vessels that are operatable. So, that is part of our decision-making process. And I think the sale of AS Serafina proves this, that we do not shy away if that’s an attractive deal. And by the way, the AS Serafina, in terms of an implied NAV per share of that sale, that is probably slightly above 40 NOK per share. So, a significant premium to the implied value by the current trading. So, we would always want to make use of these kind of opportunities that are accretive to our company and shareholders on a per share basis.
Then there’s another question by (indiscernible). How much speed reduction is required to keep your fleet INCI compliant? Will this affect any of the existing charter agreements? As I said, I mean, there are INCI clauses in the charter agreements that we have well considered. And in addition, speed reduction really depends on the trading profile. And what we do know is that liners are already adjusting their services and their trading profiles to some extent where our vessels are employed. So, it’s a question that cannot be easily answered, at least not black and white. Certain trades in particular, for example, we did an analysis on the tariffs where we believe there will be a significant impact on speeds. We have spoken to various operators in that region who are considering to reshuffle their services. So, we do believe that there will be a quite significant speed reduction because of the trading pattern of the vessels. So, that’s my answer to that question.
And there’s a question by (indiscernible). My compliments on a good quarter and prudent corporate governance. You still have 20,22 open fixtures. That is surprising. Are these being held open for sale, or are you doing a wait-and-see game with charterers? In general, as I said, the market is a bit more quiet, and simply the dynamics in the market have changed. I mean, we believe that we have a very solid kind of remaining charter book of five vessels, and we will find employment. And obviously, to keep optionality on a potential sale is one of the options. As an example, the AS Serafina got sold to an operator. And if you want just the option to sell a vessel to an operator, you rather want to have no charter attached to it, because that provides for a different set of potential bias on assets. And therefore, we actually feel very comfortable with the mix of our continue – our upcoming charters for the remainder of this year.
There’s a question by (indiscernible). The forward fixing window is closing. Are you seeing the same on durations, or still likely to see three year or longer than historically normal charters for the open positions you have for the remainder of 2022 and for 2023? It’s certainly – periods have come down, but there are certainly still also longer periods available. So, it really depends on the vessel position and individual situation. As I said, the market has been a bit less active just by virtue of fewer vessels being available. And we will consider sales, short-term charter, long-term charter, when the time is right. And the forward fixing dynamics have simply changed in this market environment.
A question by (indiscernible). What kind of purchase do you look at, single buy or company, et cetera? I’m not sure what that exactly means, but if that relates to potential acquisitions, as I said, we will be selective on acquisitions. We believe the market is cyclically more on the higher side of things. So, to carry our purchases, we would always follow our principle of mitigating residual value risk. So, if there was a purchase, for example, the new builds that we have done, we would only consider that if there’s a full derisking over the charter period. And in general, we would be more selective. And as you’ve seen with AS Serafina, we would probably also consider to be on the selling side in the current market environment.
There is another question by (Martin Engstrom). Do you feel a turning point where it is more attractive to sell ships rather than forward fix on long-term contracts? Or do you still believe it is more attractive to forward fix most available ships? Again, I think if you look back the last 18 months, we have taken different decisions to buy, to sell, to charter out, and we believe we will do that according to our principles, and have done that, at least from our standpoint, in a way that we have generated value to the company and shareholders, and we will continue to do that. And maybe at this point in time, one is more on the selling side of assets than the buying side. However, both will have to be carefully and cautiously considered and not taken easily.
I have a question by (Ian Lewis). What’s your view on IMO’s carbon reduction legislation on the fleet of container ships, such as the MPCC fleet ready for the introduction of EEXI and CII, where you have to scrap all the ships with low ratings T or E? The answer to that is, I don’t see any scrapping imminently in front of our doorstep. As I said, we have certain EEXI CII clauses in our charter parties. So, vessels will not be operated, at least not in the next couple of quarters and months, and certainly not 2023 that would suggest any of such measures. Of course, the carbon reduction legislation will have steeper impact on certain size segments by virtue of the formula, and also certain regions by virtue of the trading pattern. And we believe that is something that is currently being reshuffled also by the line operators. And as I said, we believe that there will be certainly slow steaming on the cost that will play a significant role for the years ahead.
Another question by (indiscernible). Is there any accretive acquisition in the market at this point? Well, we believe that the new building deals we’ve done, they have required quite some preparatory work, and they are certainly, I would argue, unique in the way we have conducted them, and they are not necessarily replicable. Therefore, we want to be very selective, and we would rather be cautious when it comes to certain growth investments at this point in time, also given the macro uncertainty.
There’s a question (indiscernible). Are there option contracts for the MPCC share like for (indiscernible) shares at the Euronext in Germany? Well, it is up to the respective stock exchanges to offer option series on the stocks. Listed stock exchanges will consider listing of options series if there is a demand for market participants. So, I can only then encourage you to take that up with the respective stock exchange, but at this stage, that is not present.
There’s a question by (Klaus Hanson). Can you give some color on the prospect for cascading as bigger new builds hit the market? How much of port infrastructure in MPCC’s core trade areas can accommodate larger vessels? That is obviously a relevant question, yet a question that cannot be answered black and white. Obviously, cascading has taken place since there’s container shipping. So, there will continue to be cascading going forward. I have no doubt about it. There are not just port infrastructure restrictions that dictate the way this might be conducted or not. There’s also port rotation schemes, schedule integrity, considerations, et cetera. So, it is much more complex. We have seen some cascading in intra-Asian trades where Baby Panamaxes have moved in. However, they have basically moved into that market segment, the intra-Asian trade that has grown most significantly over the last decade. So, they have rather taken up the incremental demand than have actually pushed out any smaller vessels. So, if you look on the absolute terms, for example, they are still basically the same number of smaller vessels employed in these kind of trade lanes.
If you now look at the larger vessels in the order book, well, they would probably shift the trading pattern, but they will not at all cascade into all the smaller trades. It’s impossible by virtue of port turnaround times, schedule integrity, as well as the physical restrictions you alluded to in your question here. So, we are – certainly based on the existing order book for the smaller vessels, and the age profile of the smaller vessels, we are still very positive that cascading, yes, will happen, but it will not kind of mean a complete game changer to the smaller vessel segment as far as our view is concerned. To the contrary, we still believe that looking at the demand development and port rotations, et cetera, and the intraregional trade as such, still create a very attractive, let’s say, field for growth for our vessels and sizes.
There’s a question by (indiscernible). Revenues in H1 2022 was $295 million US. The presentation on Slide 14 assumes that $350 million is contracted for H2. when I add both, I come with $600 million us, and that relates to the revenue guidance of $570 million to $585 million. Yes, indeed, there is a bit of slack, but there is also dockings coming up. This is the contracted revenues. We also have to consider prolonged docking times, for example, leading to off hire, and on the same side, it’s not – it cannot be completely ruled out that revenues come in higher than what we have anticipated. But there are risks on the cost side, as well as on the revenue side when it comes to off hire that have led to our current guidance. And that is the guidance we believe is the best guidance we can give at this point in time.
Are there any further questions through the line, operator? I don’t see any additional questions through the web here, but I would wait another minute and at least give you the chance to bring in questions through the phone line, if there are any.
Operator
There is no questions at the moment. [Operator instructions]. There are no questions on the phones. Please continue.
Constantin Baack
There are no questions through the web. And since there were quite a few, I’m assuming that there are no further questions. Obviously, feel free to reach out through our IR box. And operator, I would like to thank you for hosting the event. I would like to thank everyone for their participation, active participation, and for their time, and we look forward to the rest of the year as MPC Container Ships, and I wish everyone a pleasant day. Thank you. Bye-bye.
Operator
That does conclude our conference for today. Thank you for participating.
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