Q1 2022 EuroDry Ltd Earnings Call
Speaker 1: yearin 2025, in 2020: six.
Speaker 1: Our next balloon payment is towards the end of 2023, for about 11.3 million, and the first one of our concermer acvestmentswe would expect to be able to refine out that balloon payment if we choose So, as we have done numousnumous occasions previously, like that.
Speaker 1: If weick not also move on this light about the cost of our debtthe average margin of our debt is about 3%. In assuming the librbor rate of about one point 25% on the top of it, we can estimate the cost of our B debt to be around for 0%.
Speaker 1: At the bottom of this slide we can also see projection for cost low breakeven rate for the next 12 months.
Speaker 1: And we can see our projection that a CST flow breakeven level of about $13 thousand. The redpressel per day, which it is no wanted to say, includes about $3.8 thousand per resssel per day of loan repayment.
Speaker 1: Let's now move to Slide 19, where we can see some highlights from our balance in a simplified way.
Speaker 1: This light shows a snapshot. Our artmalar beil.
Speaker 1: On our asset side, you can see the cost that we have and other assets.
Speaker 1: Of a liquid asset that accounts for about 20, 20- one million. The book value of our passence is approximately 140 to 48 million, resulting in the total book value of our for our assets of about one hundred and sixty nine million.
Speaker 1: On the liability side, our debt as of Mar serviffirst, as I mentioned earlier, equals to about 75.6 million, which approximately represents about fourty 5% of the book value of our assets. Accounting for other liil in the same at the same time comes to about four point six million, approximately 3% per of assets, leving thus circalled equity. centurally, our net book value to be approximately 89 million, which translates to $30 per serve book value.
Speaker 1: However we estimate, as of the end of March of 2022, that the market value of our vessels to be around 2015 med year, about 46% higher for their respective of their respective value aresuggesting and an 80% in nexis of $52.
Speaker 1: Our said addally traded around $35 for about 65% of our net asset volumes are ggesting that a significant roof appreciate for appreciation ourms stock if it work to approach our NAV levels.
Speaker 1: And with that, I would like to turn the Lo back to our steers to continue the call. Thank you, taso. Let me open up the F for any questions that we may have.
Speaker 2: Thank you. We will now begin the question-and-answer session and, as a reminder for those who want to ask a question, just press AR and one on your telephone key pad.
Speaker 3: And we will now take a the first question. The line is now open. Please go ahead and ask your question.
Speaker 4: Hello, take Sullivan maximum group. Good day some Ma just starting on on new builds and air cies. Can you, can you review some of your conversations with shipyards? Last week we saw a new build announcement for a delivery at first half- 24 in the dry drivebulk industry and I've heard that maybe now the conversations are focusing on 25 deliveryis that the case? And Wit So long at a long online?
Speaker 5: Yes yes, you are right. The good shipyards are mostly full for 2024, So it is difficult to play all that within 2, twentthousand and 24, So most likely you will be looking for delivery in 2020 five these days, of course was smaller drybulk vessels. I think that in China you can still have 2024 deliveries, but the best shipards really are quite full.
Speaker 4: Can you comment? And historically, and then I mean two to three years to get delivery of a new ship- is there any conversation in Ministry about expanding shipyard capacity, or is that? What are the barriers to doing so?
Speaker 5: If you remember, this was done back in in 2005 when again the markets were going through a boom and suddenly people wanted ships and we saw, especially in China, new CS being open. It takes time to build the cl- a couple of years- and most of them, by the time they were open, the market has corrected and there was no need for them. So there was a lot of suffering by people that tried to build new cards and I don't see any movement right now to increase the C capacity significantly at all.
Speaker 4: okaythank. Shifting to the future overhang, that's the right way to put a potential environmental regulations. Are you starting our clients starting to request newerships, cleanerships that they've been doing? So I mean, what's the kind of potential enforcement of future environmental regulations through you re seeing customers demand for newer ownnerships.
Speaker 5: I think that everybody would like to use newer shipts and whatever is available which is more efficient, but one has to live with what exist and everybody is having to live with what vessels existand.
Speaker 5: It will be. It will be quite some time till we see much more fuel efficient vessels being built. So I anticipate that, whilst we all want to do what we can to help the environment, the practicalities of the day such So that we will continue with the conventional ships that we have for quite some time.
Speaker 4: Great Thank you very much. As sults, I'll turn it over to call Thank STE.
Speaker 2: Thank you, and we will now take the next question. The line is now open. Please go ahead and ask your question.
Speaker 6: I think I'm up, it's PO, frances from alignance global partners, airerstes. If we could talk about the other side of the equation on new builds, you talked about delivery time being extended, potentially into 24 and twenty-five.
Speaker 6: What would drive you to order a new buildill? There's no visibility in the market. Contracts are still fairoughly short. Would you consider building something on spec without any confidence that you might see longer-term contracts develop over the next couple of years?
Speaker 5: I think you could fin il. We are seeing new building orders in container seat where people can get long term charters at high rates and therefore can justify the investment in dry bulk. We do not have charters taking seats for longer periods and that's why you see that not only us but everybody is reluctance toward the dry bulk vessels today at prices which are 25- 30% higher than what they were a couple of years ago. So I think this is the main reason that you see this discrepancy between container oring and dry bulkcoldtering.
Speaker 6: greatate that' helpful. And then can you talked about environenvironmental regulations- can be a little more specific on your fleet and what you're doing between now and 2023 to prepare for the new regulations?
Speaker 7: Well obviously we are going to fully comply with the new regulations. Even existing six will be able to comply new regulations with veryarious initiatives to paint the house So that less resistence. But at the end the most important thing that will help comply with the regulations will be to reduce the speed of the vessel and indeed this is what everybody will be doing in this market. They will reduce the maximum speed of the seeds, which of course is a good thing for the market as a whole, but because effectively reduce supply of vessels.
Speaker 5: So small things are being done in optimizing the rots, in trying to make the engines a little bit more efficient. But these are small numbers, they are not very significant improvements. The biggest improvement comes when you dri no your shipp and you paint it nicely and you reduce significantly the resistance and, of course, when you cut your speed.
Speaker 6: Okay and then, if I calculate correctly in the C us, on the first quarter your PEX was roughly in the $6.6 thousand range day and you're, for the next 12 months, guiding to about 69, 38 or six thousand nine hundred $38 a day. Can you walk us throughcrew you a little bit more clearly the drivers on that? Is it higher bunker fuels prices and also, should we see it so, the gradual increase? Or will there be a step change in the first, in the second quarter? De defion, change the F house for the Mon fion, get jer become more the new life.
Speaker 1: So I think we expect the not over the next quarter. See a little, you are to be su book getting through POS, the nment, the information, in factation, the markets, that that we see now. Ok And if we could broadly talk about capital allocation in the context here, you continue to find some opportunities for second hand assets, but arguably you're paying close to n a, B for those assets and your stock is trading, you know, at a fairly reasonable discount or wide discount to what?
Speaker 4: You said your ABS might be. Can you walk us through whether at some point in time you'd consider implementing the share buy back program or potentialally, like other companies, returning from cash to shareholders in the form of a dividend? Or can you just talk about broadly what we might expect over the next 12 months and from a capital allocation standpoint?
Speaker 5: So that's a very good question and this is what we are discussing continuously our Board at the Board level. There is this.
Speaker 5: As you say, we are raising a big discount to our renav, So one would say that you could buy back your stock and thus that would be a good investment.
Speaker 5: Our problem is that we are very small company, especially for the capital markets, because as an operating company, I think the size that we have is suffficient to have the same operating costs as companyies that are much bigger and also be more efficient. And then So I think that, but from a capital markets perspective, becoming smaller- which is what essentially we would do if we were to buy back our stock- would reduce the size of the company and the liquidity on the stock, and we are discussing and hoping that we will be able to increase the shaprice of our surprice to work than NAV with a better marketing of who we are and what we are doing and what the press prospects of the company. So this is the reason we have yet.
Speaker 5: To follow such a such a Poly of paying dievvidends, of doing set buybacks. But this is always under the review. Yeah, understood it, it just is. Fact is so volved leave a small share buyback might set a higher floor than what we've seen, you know, over the last couple quarters. It just seemslike every once and while there's an air pocket and if a stock buyback we're in place, maybe that would help minimize or maybe dampen that, you know, that sharp drawdown. Just some thoughts receied.
Speaker 3: Thank you, and we have a follow-up question from Page elevven. We'll now take the question. Lines is now open. Please go ahead and ask your question.
Speaker 8: Right said. Thank you for taking my follow-up possible fund on the dry docking costs that you're forecasting we made and then what you reported this quarter- in the first quarter rather, I mean they do do see higher. Is that related to painting the halls that aristste mentioned earlier? Are there other things you can do when the ships are in the dry DOC to make them more fuel fession? And should we expect dry docking costs to increase in the next couple of years as go? Probably it's fair to say that the operated, D course basically visation these over the next for the month or the years, but issues like that in part of the de the F isips.
Speaker 1: Are aging that if they have to go through a driver at the later is they stially more. But also, but also, the the unit cost in all the shipyards have increased significantly. So you know, all replacement of the tne of steel has increased 50%. So every unit cost in shipyards has been increasing over why we come on the.
Speaker 8: Okay great. And then, following up the capital allocation question, with the ship purchases in the last quarter we need you purchase a ship, mostly with almost all of cash and can reduce debts. Like, are you expecting to finance or add financing, secuure financing, to the ship in the ship you're BU this quarter we're considering the thing. We're looking, we can the isure to the market and look what the the best ter, but we're considering to to finance both of our last acquisition, which were both with all So have embededf capacity that we can. Usually we need to find finance other basmentok. And then, just addressing some potential point, I mean BU shipps, second hand ships in this market, air cities, can you just talk about?
Speaker 9: How you stress, has the current rates and get comfortable with pain, higher prices. Then you have your recent acquisitions for ships. I in this period, sure we always, and that's why we have not been buying very, very modern ships. I mean, the last ship we bought was a very old vessel But with the one year times are that could be agreree, that the time we brought the value down to reasonable level by the end of of the one year are. So these kind of thoughts and assumptions going to our process of selecting ships to buy, we need to have some heights are, even if it's just the year, to make sure that we are able to reduce the price.
Speaker 5: To a price which is close to the historical median price at the end of the chartter and also later. I think a fundamental reasonion to be optimistic about the market is when you look at Slide 10, the order to ple ratio, that I would say it are almost on time low. It's not at all time low and that definitely provides.
Speaker 1: Fair amount of concers for there. For the next couple of years, the MAR will remain a good lad challing, but thank you to take my call.
Speaker 7: Thank youthank you, and no further question as of the moment. I will now pass the COP floor over to our cityiz peas. pleaseco headwer. Thank you all for taking the time to listen to our callla will be with you again in three months time. Bye, thankent.
Speaker 2: Thank you. That concludes our conference for today. Thank you all for participating. You may now disconnectpleted. Please disconnect now. Thank youthis. Conference is being completed. Please disconnect now. Thank you.