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TBS International has
an established presence in core markets carrying non-containerized, liner, parcel and bulk
cargoes
Services
Shipping
(TBSI-NASDAQ)
TBS International Ltd.
Commerce Building
Chancery Lane
Hamilton, HM 12 Bermuda
Phone: 441-295-9230
Joseph E. Royce
Founder, Chairman,
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
July 6, 2007
BIO:
Joseph E. Royce
Founder, Chairman, President and CEO
Mr. Royce has been president,
chairman and director since our inception, and chief executive officer since March 2005.
Since 1993, Mr. Royce has served as president of TBS Shipping Services and is responsible
for supervising the vessels in our breakbulk, bulk and liner operations. Since 1978, Mr.
Royce has organized and managed ventures engaged in ownership and operation of vessels.
Between 1984 and early 1993, Mr. Royce was president of COTCO, a dry cargo pool of over 45
vessels. From 1973 to 1983, he was active as a shipbroker and independent ship operations
manager involved in the shipment of various products worldwide.
Company Profile:
TBS is an ocean transportation services company that offers worldwide shipping solutions
through liner, parcel and bulk services, and vessel chartering. TBS has developed its
business around key trade routes between Latin America and China, Japan and South Korea,
as well as select ports in North and South America, Africa, the Mediterranean and the
Caribbean. TBS provides frequent regularly scheduled voyages in its network, as well as
cargo scheduling, loading and discharge for its customers.
CEOCFO: Mr. Royce, what was your vision when you
founded TBS and where are you today?
Mr. Royce: “We started TBS in 1993 and the vision
of the company was a business based on service and long-term customer relationships. We
viewed our business as working with a variety of customers in the dry cargo sector of the
shipping industry. Based on these relationships and the trades that we have developed, we
have been able to move the company away from the spot market in shipping, which is
extremely volatile. We felt that we are a service company that utilizes ships to empower
our customers.”
CEOCFO: Please give us an example of what you might do
that another shipper might not do?
Mr. Royce: “In our business, the ship owners
carry cargo from one port to another. It is a very neutral business based on commodity
pricing, purely supply and demand. Literally, in the spot market it is called a
“tramp” service where the ships will go from one cargo to another cargo based on
availability and pricing. We, on the other hand have established our own sales forces in
the various countries where we trade. We give our customers established scheduled
sailings, so they can rely on us. We also offer inland logistics where we work with our
customers from the actual source of the commodity to the port; transport it as well as
discharge it and take it to the delivery point inland. We have full-time port captains
that work with our customers in loading and stowing the cargo in the various ports. We
work very closely with our customers on scheduling inventory management, cargo control,
etc. We really are a company that is different than a traditional dry bulk owner or
operator.”
CEOCFO: Do most of the companies you deal with take
advantage of a full range of your services?
Mr. Royce: “Some do. We have over 300 customers
so everybody has a different view. You have people who want service from A-Z, and people
than might only want our shipping. The one thing that they know, is that if they do need
us and they do need assistance, we are there to support them.”
CEOCFO: You operate on several different trade routes;
is there a common thread and why have you chosen those particular geographic areas?
Mr. Royce: “The trade routes are historic; they
are there pretty much established, for example, trading between Asia into South America.
We know what the ships have done in the past 15 years and we will know what the ships will
do in the next fifteen years. The only thing that might change is volumes, because at any
different year volumes might go up or down. In either case, we can make an adjustment
putting more sailings as needed or taking ships out, if that certain sector of the market
has a decrease in overall volume. This is much different from companies that place ships
out on time charter to others where there is a duration. It could be at the end of twelve
months or two years or whatever. When at the end of that time, they are not sure if the
ship will be renewed. We have a consistency in our business that is very important not
only in the short-term but the long-term and that is why we have concentrated on these
trade lanes.”
CEOCFO: Will you tell us about your vessels?
Mr. Royce: “We have two types of ships. One is
what we call a multipurpose tweendecker. This is a ship with a second deck in the ship and
what this does is gives us the opportunity to load and discharge many different types of
cargoes at the same time. We utilize these ships in our liner or parcel trades, for
example in Asia where we load all different types of non-containerized package cargoes in
China, South Korea, or Japan; such as pipes, steel parcels, machinery and project cargo.
We have scheduled sailings to the west coast of South America. After the packaged cargo is
discharged, the ship’s retractable tweendecks go up against the side of the ship and
she becomes a bulk carrier. Then we are able to take the parcel of bulk raw materials back
into the markets of China, South Korea and Japan. These multipurpose vessels with
retractable tweendecks, are ideal ships in north-south or east-west trade, where you have
packaged goods and finished goods in one direction and bulk raw materials in the other
direction. We currently have 34 ships, and out of that there are 19 multipurpose
tweendeckers. We have 15 handysized bulk carriers and these are basically standard bulk
carriers. All of our ships have 25-ton cranes with grabs that give us the ability to load
and discharge in ports or facilities that do not have shore equipment. These ships are
ideally suited for our trades and our customers’ needs.”
CEOCFO: Is maintenance of the fleet a big part of what
you do?
Mr. Royce: “Absolutely, and we do this ourselves.
The maintenance of our own ships is a very important part of our overall service. We have
our own technical department, and when you are in a business where scheduling and delivery
is imperative, and the fact that the cargo has to be delivered in the same way that it was
loaded, it is very important. We have put a strong emphasis on maintaining ships because
our ships are second-hand ships and whenever we take a ship over, we plan the ship to
trade until she is 30 years of age. In our first TBS drydock of each ship, we put
extensive steel work into the ship to maintain her strength and integrity based on thirty
years life. We also have just entered into a newbuilding program where we are going to
build 6 new multipurpose vessels with retractable tweendecks in China. Two are scheduled
to be delivered in 2009 and four in 2010.”
CEOCFO: Is security an increased concern for you?
Mr. Royce: “It is everyone’s job. On-board
our ships, our crews are trained in security as well as safety as they are top priorities.
If they are in hostile waters, they have to be aware of what is happening around them.
Everybody is aware of what is happening in the world today. We focus on the security, but
when you are talking about security in the ports and cargo, this is handled by the local
jurisdictions.”
CEOCFO: What is the financial picture of the company?
Mr. Royce: “We are public company and we have
solid support from Wall Street. We also have solid support from the banking community. We
have recently established a $160 million financing with the Bank of America. We have a
$150 million financing program with The Royal Bank of Scotland for the six new ships we
are building in China. Our financial results, operating income and balance sheet are
available on our TBS website-www.tbsship.com. We are excited about this and where we have
taken the company over the last couple of years.”
CEOCFO: Why should potential investors be interested
and what might people miss when they first look at the company?
Mr. Royce: “What people miss is that we are a
different story than the majority of the other public shipping companies in the dry
sector. The reason is that these companies are more of traditional ship-owning companies
where they buy the ship and then they look for employment either at the 1, 2 or 3-year
time charters. This is an easy model for the financial community to understand, because
you have a fixed time charter rate over a period of time, less fixed expenses, so it is
pretty easy to model the income on the cash flow basis. TBS, because we are the end-user,
have a much different model. An investor has to put more homework in understanding the
type of shipping company that we are. We are customer and relationship oriented; we give a
service. We describe ourselves and try to make the comparison that we are much like
Federal Express or UPS, where we work with our customers, they rely on us, and we become
their shipping arm. Therefore, when people look at us, they have to look at us in a
different way. The majority of the other public companies pay dividends, while we are a
growth company; we take our earnings and reinvest it into the business either in new
trades or ships.
TBS has very strong and established presence in our core markets, in Asia and Latin
America. We have the type of fleet that supports our business. We are expanding and
growing our business. We have just expanded our trades in West Africa and the Middle East.
Our present core cargo volumes are expanding based on our loyal and longstanding customer
base. We focus on the trade lanes that constantly keep our vessels employed not only on
the short-term but on the long-term. We benefit from the very positive freight environment
that everybody is experiencing. The managers of this business are owners and our interests
are directly aligned with our stock holders.”
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