Constantine, great to see you again. Thank you so much for taking the time.
Yeah, great to be back. Christopher, you're in Oslo. It's been a couple of busy days. What is the sentiment on the ground? What are you doing here? There's conferences all over the place. Tell us how are you?
Yeah, no, I'm very well. It was Marine Money yesterday and now today the Pareto conference started. So, a few busy days here in Oslo, but I think it's also exciting days. It's a big conference at Pareto. It was a good Marine Money. So I think a lot of, let's say, good vibes in the city and that's obviously good after summer.
Definitely. So we have several topics to tackle today, but just start very broadly. Shipping is on fire. Obviously there's a lot of different reasons for that. I guess at the Pareto you see a big audience there for you know many different reasons. Just in your mind how special are these times in shipping and energy?
I wouldn't say they're unique because every time you use the word unique in context of shipping, you know, something else comes up and it's probably not as unique, but it is, I mean you have shipping markets across the board in excellent shape and actually no real end in sight. Equity markets very strong. We raised some money before summer and credit markets spreads are very tight. So I think you know having all three in fairly good shape is probably nothing that will last for eternity and it's I would say that is unique that you have all three in a very good state. But I think overall I'm not negative about the future. I think it's still a bit of uncertainty ahead for sure and complexity hasn't come down but I think so far everything is keeping up quite well.
Yeah, there's a lot of moving pieces obviously that changed it so drastically, but internally as well in Hamburg. You have done some things as well, a new brand, a new setup. Can you just tell people what we're looking at today? Because people in Norway probably know you through the MPC Container Ships, but there's a holding company behind it who's also done a lot of different things. Can you just give an intro to the audience what are we looking at today?
Sure. And I mean we have, the way I see it, you know, we have rebranded and redefined the formerly known as MPC Capital which is a company with 30 years of history and more than 25 years being listed in Frankfurt. That company we have renamed. I think it's basically catching up with reality rather than really a big event that is a big change process. It's basically just, you know, continuing with who we are and who we have been all along and the name is now MPC Oceanic Group and that is basically a reflection of the heritage of MPC that has been, you know, our fundament for the last 30 years in Germany. Oceanic basically showing, you know, our face of being very active in the maritime space but also in the, let's say, related, the ocean is also a source for energy so we see our main activities being maritime and energy in that name and group because we have quite a variety of activities under our umbrella. Obviously here in Oslo MPC Container Ships being the most prominent one but we're also quite large over the years in services. So the last 10 years we have really become a maritime service company as well with, you know, commercial management, technical management, compliance management, IT management, so everything around ships and there we service more than 450 ships globally. So it's also a very important part of our activities next to the investment activity and to put all of that into the new frame of MPC Oceanic Group actually is, as I said, same team, same strategy, new name but we will just continue on the path that we have been on.
Got it. So you know starting with the containership business and maybe you know let's start with MPC Container Ships. The company looks in very good shape there. Of course it has been an incredible journey for, you know, we have talked about this before people can tune in and look at the stock price etc. It was quite an unbelievable, unbelievable, you know, case study and timing the market but still, you know, talking to people in the space they would fear that okay the markets look rather bleak in the future but the markets have just kept going strong. Obviously you have done a lot of business in that period but what is the story sort of today and what you're sharing with investors and the broader base?
I think for containers the last few years, you know, there was obviously a lot of disruptions there still is. Actually congestion has never been bigger than today even post-COVID. So it's really the whole system is quite disrupted when you look at container shipping. What people tend to focus on is kind of the headline news and that is okay big order book where do we go with demand etc. But I think if you look at the details the outlook is not that bad. Of course the Red Sea deviations add a lot of kind of ton-mile demand but at the same time we see, as I said, congestions we see actually quite solid fundamental demand growth and when you look at the demand growth if you look at the headline it's probably 3 to 4% but the distribution of demand is different. You have a strong leg which is the front haul and then you have a weaker leg on the way back. So the front haul basically grows by 6%, if you look at the main global trades and the back haul is a bit, you know, maybe 2%. But the distribution the asymmetry of demand growth means the growth is actually and the use of vessels is more constrained one than the headline would suggest. And I think this is a very important aspect. And lastly, you know, looking at the hinterland and landside logistics and infrastructure terminals 10 years ago most of the liners some had terminal exposure most were just focusing on the sea leg. That has changed. So they now realize that post-COVID the liners have realized that terminals are the bottleneck and to get access to terminals are bottleneck. So it's really also about there's a lack of investment in the terminal space which will in my head take another three to five years at least and hence the congestions will take longer and is not solidly linked to geopolitics and the demand side I'm not that negative. Maybe lastly on the order book. Yes, the order book has been, you know, 60% order book to fleet in 2008. Then it has come down to 15% and now we are back at 35 to 40%. But at the same time people need the ships. We have slower speeds. We have more slack in the systems. The liner have a more complex system and network to service. So it's logistics has become more challenging and it's more important to be reliable than to be a just in time delivery kind of industry and I think this is now playing out and I'm not that negative for the future and the numbers actually suggest the same when you look at charter rates forward coverage etc.
Tell us a bit about some of the strategic decisions you have made inside the company because obviously the coverage looks very strong and just keeps adding like you were saying that's maybe because there is a real demand there so it's not like ships are waiting to get, you know, orders on them.
No and I think, you know, and you alluded initially to, you know, the story and the growth etc. I mean when we started it was very much buy low in the firm belief that, you know, there is a disbalance in the market that will be recouped. Now over the last couple of years we have spent a lot of time on fleet renewal. So we have basically 18 months ago we have also adjusted our dividend policy to allocate a tad more of that capital that we generate to renewing the fleet and we have basically started with that fleet renewal four years ago. So now focus was build the backlog, be resilient in terms of the balance sheet on the one hand, I'll get to that in a minute, but certainly the fleet profile on the other hand. So, we have really rejuvenated the fleet. We have attracted more coverage through new builds, through extensions of charters. So we're not kind of taking spot market risk all the time. We have a staggered book of ships that come open but whenever they open we're rather taking a sell or go long decision which now has translated into a backlog of 2.2 billion in terms of revenue. This year basically 100% next year 90% then we're at 60 to 70% 40% and 29 even. So we have a visibility that we have never had before and that gives us a lot of comfort in, you know, that many decisions that we have taken also to renew the fleet at times investors said well why don't you keep the high dividend you can dividend a company to death I'm 100% sure that's possible but you I see my mandate as creating long-term value and not short-term value that is probably slimmer than the long-term value so I think what we have done has really created this backlog stability and actually sustainable dividend right rather have a sustainable dividend at 50% net earnings than 75 so I think and that has actually also created some discussions with investors as you will appreciate but I think where we stand now I would every time of the week every day of the week I would do the same again and I think this reallocation of focus has been very well without compromising on making opportunistic deals as well of course but I think this is a very solid fundament for the times ahead.
Got it. You know last time we spoke in Haugesund, we sort of discussed the port fees and Trump is meeting President Xi again. You said you're not that worried because Red Sea is more important. But port fees again, do you think it's just going to be an extension on that again or never predict those conversations?
I think it's super difficult. You know what I always say, we do what we can control and, you know, be it IMO regulation, be it, you know, geopolitical things, we need to make sure that we can maneuver in any environment. Having said that, I think, you know, at least the liners, our customers, they plan with USDR 301 being implemented. They put the, you know, non-Chinese built vessels on the services. They try to adjust for us because most of our ships are below the threshold. We're not exposed. So I actually think I'm looking at it with a bit from a distance more as an observer I would say. I think what is more interesting if it's implemented what will retaliation actions be from China and I think then things get in motion in any case it will lead to more disruptions so if it's being reintroduced but I would also not rule out that it's just extended and let's take it from there.
But the big story has been in sort of the Red Sea I guess and any news on that do you think that's also
I mean some liners like Maersk they have started transiting it again since 1 of July with a limited number of ships and not always on both legs, sometimes only on the front haul through and then, you know, going around on the way back.
What decides that when you go and how many ships you send? Is that just a decision made by
Yeah, it's I mean obviously you need to understand that in container shipping it's a way more complex system and network than a point-to-point dry bulk or tanker operation where you can just decide okay I go through or back. So they have to adjust the whole network according to it. So if they say we go through it as part of a, you know, scheduled network going forward that has many knock-on effects. So at the moment I think it's more still testing the waters and being a bit more opportunistic rather than really adjusting the whole network according to it. Let's see how that goes. I mean, you know, things turn around very frequently and I'm not sure that this is a sustainable open Red Sea situation in which we are approaching now.
You know, talking a bit about Hamburg, the Elbe River has been, you know, having some troubles? Do you fear that Hamburg will have a trouble getting those big ships into the port because it's better to go to Rotterdam and Antwerp because of water?
It has been an issue for a long time, right? And if I see that in Shanghai they build 5 kilometers of additional berth capacity for containers, cruise ships, all kinds of activities and they decide this and in two years it's done. In Hamburg if you want to deepen the river by 20 or 30 centimeters, you have, you know, many people talking about it for months if not years to actually get a decision and getting it done. So that shows you what the how the competition is actually right in terms of other countries. But we still have the larger ships that can come into Hamburg, not fully loaded because of draft restrictions. And of course, Rotterdam is logistically a tad better positioned, but I do think Hamburg has one big benefit and they have a very good hinterland connection. But volume still is constrained at some point, right?
Yeah. You know, I heard a talk yesterday talking about sort of how the stock market has changed and the investment landscape. And I think the data points that were talked about was that in the 1950s, you know, the average investor held their position in 8 years and in 2015 that was 3 years and today they hold their positions five six months. So, you know, much more short-term minded investors. And the reason why I'm explaining that is just because you have had an incredible loyal investor base. It's kind of a case in itself, you know. Any reflections on that? I that can just share how you have built it, how you managed to keep it as stable as you had it seems like and some ideas around that because it is quite a different market that you're so shortsighted and you want to change your positions frequently etc.
Yeah and I think one reason why that is probably the case is because the world is changing dramatically within a short period of time. So people want to adjust and react and I think people think they want to take the decision in their own hands. Whether that's the better investment, you know, scheme I don't know, time will tell but to your point I mean we have also kind of exchanged our investor base from the very beginning it was more in let's say short-term asset play no dividends really just value value and then, you know, we have developed the company into a more sustainable dividend machine so to say and of course as a result of that we have replaced some of the more opportunistic investors with more dividend and value-driven investors. Now the way what we try to do is be straight, you know, walk the talk, you know, always do what we say. Maybe sometimes even as we did with a, you know, dividend policy, adjust it slightly, explain why, hope that, you know, people understand the why and then move on. And I think so far we have always been straight on what we do when we do it and we're reliable in doing it. And I think we have not been too wrong in some of the decisions. So, I think this is in my view the most important thing that people know, I mean, these guys are talking about their business and they talk about how they want to act and they're actually living up to it. And I think this is how you can ensure that investors at least entrust you with investing in the company. Of course, you know, trends change. You know, tankers are hot as hot, you know, and containers are certainly not in the same form and shape. It's different, right? But I still think that we can generate maybe on a less risky base, we can generate value and I think it should be part of the portfolio, of course. So, I, you know, we walk the talk and we are always very, you know, we try to be as transparent as we can in capital market communication as well, so people know what they sign up for and what to expect.
Perfect. So MPCC can be sort of a cornerstone in your portfolio and then you can play with the tankers on top if you have more risk appetite.
Of course, but I think we have been quite solid stock and we have also had a good run this year. So I mean I wouldn't say it's only stability. I mean admittedly containers is also not only stability but I think we have advanced and we now have a way bigger visibility on cash flows.
Very good. So Constantine you have been very busy at the group. You have launched a new fund MPC Storm Maritime Opportunity. How did this come about? What can you share so far? It's quite an exciting time.
Yes, I agree and I think the basis for this was on the MPC Oceanic Group level. We have carried out multiple investments also in other sectors than containers which is obviously MPCC is the dedicated platform there but to also from a group standpoint diversify a bit and make use of our network and our expertise. We have teamed up with, you know, partners with whom we have done business with in the past and have felt that, you know, this is a good group of people. So it's Utal with Harald Mario Hansen. It's Storm with Morten Astrup. It's Claven Marine. And is a company called Port Line from Hong Kong. And this is kind of the anchor investors who have committed capital into our new venture. And we're running that as a I would say as a nice corporation with the other investors. The goal is to invest in ships in a diversified portfolio of ships, secondhand ships with a let's say where we think risk return is attractive. Target IRR is 12 to 15%. We have this year already acquired three ships. So we bought a Kamsarmax, a modern Kamsarmax we bought an MR tanker. We bought an anchor handler. So, you know, there is quite some activity and we are now approaching or we are in the midst of, you know, marketing the platform for third parties and to grow the capital base further and allow additional partners in and to take it from there. I think it's exciting because the pool of investors is really everyone is contributing and it's not just money it's knowhow it's intelligence it's market view it's deals at times. So the idea is really for others to take part in the deal sourcing of this group of people under the MPC and also Storm umbrella and then move forward on that basis and I think this is very important that we look at risk adjusted return in a diversified portfolio and so far I think we're very happy with the investments that we've carried out and there's more to come.
Who put this band together? Who was the lead on that?
I mean we did it together with Storm but I mean, you know, we have had the idea of putting a fund together and then we spoke with the Storm guys and basically said well that's a, you know, they had more a credit focus on the product side obviously, you know, the principles behind it have also been equity investors and we said well it's actually nice to also branch out a bit for them from a pure credit focus and for us it was a natural way and then the others are all parties we have done successful business with and it was I think an easy mix of mixing people together that all have the same conviction and have done business with each other. That's important.
That's a good point, right? Because you have the trust already in the system that you've done successful deals together.
You know, Martin has been on the show several times and I heard he was quoted in one interview that, you know, that the good thing with partnering up with the MPC umbrella is that at least you get the structure right. You know that that German machine is something that is very nice to have if you're like if you're a Norwegian, you know, opportunistic investor it's very nice to tap into the MPC system because you know the structure is going to be there.
Is that exaggerated or is it part of the jewel in MPC the structure?
I think we are quite structured in our approach and quite analytic but we also like to be, you know, we also like deal making right. I think we have a track record of being good in executing on opportunities and I think it's a very good mix with certainly with Storm and with Morten and the team there but also with the other partners and we're excited to grow this further now.
Yeah, I agree. It's great people involved. So talk a bit about, you know, the way you do deals now because obviously it seems like you should have focus on the downside risk the markets are on fire. Is that sort of counterpart to risk dealing with all majors, you know, being, you know, a bit conservative in what you're paying for ships? How do you sort of frame it? Because it's so easy for people. I think some people say that there's a lot of tourists in this industry right now because they look at the rates, they look at the ETFs, it's just on fire. So, obviously, you attract a lot of people, but the people who have been there know that the rainy days are coming at some point. Hard to calculate but can you just take us inside that, you know, we you don't want to start this on the top and then go all in and then two three years down the road everything looks, you know
No and I fully agree and I mean across the board asset prices are high right whether they are too high or how high they are in context of the next few years I don't know but they are not low at least so that in turn means, you know, it's not an MPCC where you buy at scrap and have less of a downside risk so what we now need to do and that's how we approach it. Have kind of a risk adjusted perspective and at least have a bit of a de-risking through a charter, through a pool employment, through something that has legs, right? Not just buy and hope that you have it right. So we would always and I think this is very important. We would always look at the asset the employment opportunities and have also range for financing already so that we have all the ingredients at hand and feel comfortable with the decision. And even, you know, should the market correct, you know, that we are still in a good place but I think so far, you know, the market is still quite dynamic for example the Kamsarmax we bought all the deals that we did are in the money today that, you know, again in a high market that doesn't mean a lot but I mean they are also well de-risked through cash flows that we have attached and it's more about structuring it in an analytic way especially if you buy in a market which is not cheap but also not being afraid right? If you're too concerned, you never get a deal done. If you're too greedy, you never get a deal done. So it's I think you need to find the right balance and in my view the market today, yes, it's not easy to identify good deals, but it's possible. And I think the diversification of our portfolio is an important factor there, right? Not all in on one sector on those kind of projects. But as I said, you know, we have different parties contribute and we very thoroughly analyze the assets and the employment and I think that's the way to go about it. But have a bit of a de-risking in mind. I mean I would agree be not on the fully aggressive kind of step, but, you know, take your time and be a bit selective on what you do.
And the investment horizon is going to be around two years, three no is it basically two years of investment period and then five years in total plus extension option so that's the way we have structured it.
And that's also how we select the projects, you know, we would not go into a 10-year time chart new building project I mean it needs to be, you know, liquid we want to go in liquid segments also where the assets can be, you know, acquired and sold and where there is some sort of an active market happening. So that's very important.
And the idea is to scale this up if it's successful. And maybe then you know work with second vintage or third vintage. So it's really about for us, it's creating a strategy that has more vintages and build on track record and show people that you know we are able to actually deliver on that with that group of people. I think I'm very positive that we'll get there.
Very interesting. So, you know, let's go up to the Osanic Group again and talk about shipping in general, but you also do other investments in the energy space, but you know, just some what's on your mind when you're seeing, you know, oil tankers breaking new records. You see a lot of headlines, first time in history or $1 million per day. What are you thinking having been in this industry for so long inflation adjusted or [laughter]
I mean it's crazy and it's really unique and maybe it will continue for a longer period of time right we don't know. I think it's a bit concerning because these are unhealthy levels and these can only be achieved in a completely disrupted market where pricing is wrong where supply demand of the product itself is so out of range that you actually can generate these. I mean I just heard that I think it was Frontline within 40 days they derisk 25% of the investment of a ship right. I mean this is crazy. It's obviously great for investors but it's an unhealthy state of the industry because where should this end where should that lead. But again I mean I would not rule out that we see at least the ups and downs maybe not that as a straight line, but that we see this, you know, being volatile on a high level. And that would obviously mean there's a lot of money to be earned by someone or by a few people that know the industry and that can act smartly in that field.
