Q3 2022 EuroDry Ltd Earnings Call
[music].
Thank you for standing by ladies and gentlemen, and welcome to the Euro dry conference call on the third quarter 2022 financial results, we have with US today, Mr. Aristides <unk>.
Men and Chief Executive Officer, and Mr. Toss up this Lady.
Officer for the company.
At this time all participants are in a listen only mode.
Yeah.
There will be a presentation followed by a question and answer session at which time, if you would like to ask a question. Please press star one on your telephone keypad and wait for your name to be announced.
Must advise you that this conference is being recorded today, please be reminded that the company announced its results with a press release that has been publicly distributed before passing the call to Mr. People I would like to remind everyone that in todays presentation and conference call Euro dry well be making forward looking statements.
These statements are within the meaning of the federal Securities laws.
As discussed may be forward looking statements, which are based on current management expectations that involve risks and uncertainties that may result, in such expectations not being realized I kindly draw your attention to slide two of the webcast presentation, which has the full forward looking statement and the same statement was also included in the press release.
Please take a moment to go through the whole statement and read it.
I would now like to pass the floor over to Mr. Peter. Thank you Sir Please go ahead.
Yeah.
Hello, Ladies and gentlemen, good morning, and thank you for joining us for the scheduled conference call.
So how can we meet that successfully reached our chief financial officer.
The purpose of today's call is to discuss our financial results for the third.
Quote and nine month periods.
Ended September 32022.
Please turn to slide three.
Our income statement highlights are shown here.
Third quarter of 2022, we reported total net revenues of $15 $8 million and the net income of $6 $2 million or $2.10 per diluted share.
Adjusted net income attributable to common shareholders was $5 $7 million or $1.93 per diluted share.
Sure.
Adjusted EBITDA for the period was $9 $5 million.
As of November 10, 2022, we have repurchased 108963 of our common shares in the open market for about one $5 million.
Purchase plan of up to $10 million announced in August .
Our CFO <unk> <unk> will go over financial highlights in more detail later in the presentation.
Please turn to slide four.
On Friday nights.
Most of our vessels from the lease was sold for $9 $675 million and delivered to her new role Lubes and then affiliated third party well October 17th 2022.
On the chartering front, we continued to renewing all eight of our vessels, which came open for single trips, thus practically keeping that exposure to the spot market.
You can see the specifics of the various terms in the accompanying presentation.
We have two vessels that are fixed on long, but index based on dose. So practically only one vessel, which is done on a given longer term guidance. After they didn't the end of Q1 2003.
The outlook in each of our fleet in Q3 2002 was 20.
<unk> thousand $600 per day approximately.
Regarding dry docks and repairs, we've had three pads foods multiple vessel Alexa with speed.
And pass throughs, which were in Drydock for approximately $22 50, 455 days respectively.
They released dry dock commenced in Q3, but ended in Q4, So 20 days of the before will be accounted for in Q4.
There was no I can see he is all commercial upside of the school.
Please turn to slide five.
After the sale of most of the vessels from the leaves the company has a fleet of 10 vessels, including first time alerts to alter much to come so the MX and <unk> dry bulk carriers.
You will drive 10, dry bulk carriers have a total capacity of <unk>.
728000 deadweight approximately in the neighborhood of 12 six years.
Turning over to slide six let's review, Kevin vessel employment schedule in a bit more these days.
As you can see fixed AI based algorithms for Q4, 2022 stands at around 54% and it comes down to about 10% in Q1 2023.
This figure excludes the two ships on index charters, which are open to market fluctuations, but have secured employment.
Moving to slide seven will go over the market highlights for the quarter ended September 32.
And it doesn't go into the spend.
The average spot market rates for Panamaxes was approximately $16000 per day in the third quarter of 2022.
<unk> there was enough to 17300 per day currently has dropped to around $14900 per day.
The one year time charter the need for <unk> was about $16300 per day.
They're all going to $14950 per day by September .
And currently standing at $14565 per day.
Despite the slight uptick towards the end of Q3 2022, both BPI and BPI indices. So a precipitous drop from the second quarter of 2022 of about 10%.
This was mainly caused by lower stripping demand due to the economic slowdown across the globe because of LNG supply in certain differently.
The wall and the increasing interest rates to combat rising inflation.
Please turn to slide.
The global GDP growth is forecast to slow from 6% in 2021 to three 2% and 22 and two 7% in 2020, we are going to be arguing that.
This is the weakest growth profile in the last 15 years above from the global financial crisis, and the critical phase of the COVID-19 pandemic.
And awesome Brazos invasion of Ukraine.
Zero carbon policy, showing LNG prices and global inflation, all weighed down heavily on the dry bulk.
Brian . This is growth is projected to slow to three 2% in 2022 significantly lower than the pre pandemic use marking one of the worst performance in almost half a century.
2023, the IMF expects the fly, let's say new standards strengthening to four 4%.
GDP growth for the United States with revised downwards to one 6% for 'twenty two.
Two 3% in previous projections and is now projected to inch down.
Just 1% in 2023.
On the other hand, you'll be on the growth projections have increased to three 1% from 32, 6%.
<unk> remained on the downside and 20 <unk> GDP growth is expected to be just <unk>, 5%.
You look in the emerging markets is focused to be slowing.
Two why is the only country with a better forward gas seems to be Brazil, with an anticipated growth of two 8%.
One 7% previously forecasted due to the robust cargoes in Latin America.
For 2023, all other developing countries are expected to do a little bit worse than in 2022.
<unk>, given us, which should improve relatively to 2022, but still face a negative growth.
Two 3%.
Looking into the dry bulk trade according to Clarksons the amount of the Golan is expected to be marginally negative <unk> 22, compared to plus one 2% in the previous call to projections.
For 2023 dry bulk trade is expected to grow by EMEA with one 4%.
As you can note this straight and growth projections are being continuously revised.
Some geopolitical tensions between Russia, and Ukraine on load growth in <unk>.
We'll continuously assess and the efforts to combat that.
Rising inflation are still not producing significant results.
Please turn to slide 10.
The single most positive drive sort of optimism about the dry bulk market and the low dry bulk.
The last 18 months has been kept at very low levels.
Currently stands at six 9% of the existing fleet.
Now please turn to slide 11 for the birds eye view of the supply fundamentals.
Based on Clarksons latest report the new deliveries as a percentage of total fleet is expected to be three 7% by the end of 2020, 234% in 2023 and two 2% in 2020.
Before.
Absolute fleet growth will of course be lower due to scrapping.
8% of the fleet is older than 20 years old and the candidates for scrapping if the market itself.
Yeah.
Please turn to slide 12 summarize our outlook in the dry bulk market.
The dry bulk market them predominantly the capesize sector significant yourself from year to date, primarily due to reduced demand for steel in China, which has led to less iron ore imports.
The real estate sector, which accounts for about 30% of China, GDP faces significant incentive fees going forward.
And ticketing.
The rescue monetary policies, including interest rate hikes being pursued by central banks way on global commodity demand and freight rates.
Yeah.
Strong demand for coal, which is further supported by the current energy crises has helped keep strong rates in some case capesize vessels.
<unk> has provided some support in the Capesize sector.
On the supply side, both congestion, which resulted in supply constrained casino a major improvement this quarter with the supply chain, starting to normalize and bringing a lot of comments back into the market.
The negative pressure recorded in the dry bulk freight market because that is the main contributor in increasing the number of demo candidate coming into the market and especially in the bigger size segments.
Hello living of new ships to 'twenty to 'twenty, three 'twenty four deliveries because been practically nonexistent.
Due to lack of available slots and shipyard on the lack of clarity for the cumulative future.
Something that mixed blazing a new world.
Awesome.
Despite the above said low expected fleet growth for 2010.
In 2024.
Little direction of the market remains uncertain.
It will be determined by the developments in the Chinese economy.
In particular, the real estate sector.
The outcome over the war between Russia, and Ukraine, and the essence of the global economy to find complacent with the least possible negative consequences on the world.
The last couple of days, we have seen two positive pieces of news.
Guarding the inflation lower in October and China, possibly a bundling the zero coffee grew.
Let's hope these will not be reversed during the next few days and weeks.
Please turn to slide 15.
The left side, there was slight solely evolution of one year time charter rates of Panamax dry bulk vessels since 2002.
As of November for the one year time charter rate for Panamax ships with the capacity of 75000 deadweight tons stood at $14745 per day when remains just above the average rate level observed during the decade before because we depend bearings.
Yes.
On the right hand side of the slide you can see the historical price range for 10 year old Panamax vessel.
As a carbon price of around $23 million.
While these prices are slightly reduced from the scope and valuation.
This is significantly higher than historical mean human medians.
Yeah.
Our balance sheet has strengthened considerably and we are sitting on significant liquidity.
If the market continues to grow to act in charter rates and prices dropped further we will consider further vessel acquisitions.
But barring sensor development, we believe the most investor friendly strategy is to continue implementing conservatively I'll share repurchase program.
Our sales price is trading at a huge discount to already Navy.
We will practically be buying vessels at least discount to current market prices.
And with that let me now pass the floor over to CFO Costa <unk> to go over the financial highlights in more detail. Thank you.
Thank you very much.
Good morning from me as well, ladies and gentlemen.
Well go next slide.
Give you an overview of our financial highlights for the third quarter and nine months.
In the September 30th.
2022, and compare the results to the same period of last year.
Well that next turn to slide 15.
For the third quarter of 2022.
<unk> reported total net revenues.
15, 8 million, representing 18, 8% decrease.
From total net revenues of $19 5 million during the third quarter of last year and that was primarily the result of the lower time charter rates our vessels earned in the third quarter of this year compared to last.
Okay.
Increased scheduled off hires.
During the third quarter.
During which our vessels are earning revenues and that's despite the large number of questions. When we okay.
The company reported net income and net income applicable to common shareholders for the period were $6 2 million as.
Compared to a net income of $12 1 million.
And the net income attributable to common shareholders of 11 8 million for the same period of 2021.
And there is another financing costs, including interest income for the third quarter of this year amounted to approximately $1 million compared to your point 6 million for the same periods of 2021 day increase.
Due to higher levels of debt.
Our LIBOR base.
Adjusted EBITDA for the third quarter 2022.
Martin and accompany him.
<unk> during the third quarter of last year.
Basic and diluted earnings per share I think the move to common shareholders.
Okay.
For the third quarter of 2022 were $2 1 billion.
Basic and two points.
Dollars diluted calculated.
About $2 9 million.
Basic and diluted.
Weighted average number of shares outstanding compared to 44 to $7 <unk> basic and $4 $41 diluted.
Earnings per share consummated when about two six.
Julien and $2 7 million basic.
Basic and diluted.
Respectively weighted average number of shares outstanding for the third quarter.
Quarter of last year.
Excluding the effect will be earnings attributable to common shareholders for the quarter for this change.
Skiing derivatives, the adjusted earnings attributable to common shareholders for the quarter ended September 32022 would have been $1 94.
Basic and $1 93 billion.
Compared to adjusted earnings of 384 3.79.
Sure.
Basic and diluted respectively for the same period third quarter of last year.
Usually secured January did not include the above items in their party test much of the earnings per share.
Because when I look at the numbers for the corresponding nine month period.
And at September 30 of 2022.
Embarrassed entertainment Hanwha Q4 last year.
For the first nine months of 2022, the company reported total net revenues of $55 1 million, representing a 37% decrease over total net revenues.
$42 1 million during the first nine months of last year and that increase is mainly due.
With the increased number of vessels, we operated and the slightly higher time charter rates are progressing.
During the nine months of this year compared to last.
Company reported a net income and net income attributable to common shareholders for the nine months period.
Seven 3 million as compared to a net income of $15 1 million and a net income attributable to common shareholders.
$14 2 million for the nine months period.
'twenty one.
Interest and other financing costs for the first nine months of planning for 2015 amounted to $2 4 million compared to $3 3 million for the same period of 2021, <unk>, which also includes loss from debt extinguishment.
<unk> 1 million to $165 million.
Studies further for the period was.
Higher.
Due to the increased amount of debt that we can extend the life of.
Today's LIBOR rates to be.
For our loans.
This year.
Adjusted EBITDA for the nine months of 2022.
$5 9 million compared to $26 3 million during the first nine months of last year.
Basic and diluted earnings per share.
As opposed to common shareholders for the first nine months.
With two wars.
It was $9 <unk> basic and 970 <unk>.
Diluted calculated when about $2 9 million weighted average number of shares outstanding compared to $5.94.
Basic and $5 with 74 cents diluted calculated about two four and $2 5 million respectively for the same period last year.
Excluding the effects from the earnings attributable to common shareholders.
Nine months of this year of the change in the fair value of derivatives.
The adjusted earnings attributable to common shareholders for the nine month period, the nine months period, the nine months period.
Ending September 30 of 2022 would have been.
$8.90 basic.
Basic and they grow less than 6% diluted.
Compared to adjusted earnings per share was $7 42 ship, some basic and $7 79 diluted for the same period, the nine months of 2021.
Let's now turn to slide 16 to review our fleet performance.
As usual, we will start our review by looking first at our fleet utilization rate for the third quarter of 'twenty, two and conversion.
For the third quarter of 2021.
And so here and that's always our fleet utilization rate is broken down to commercial and operation.
So during the third quarter strength to our connection with utilization rate was at 100%, while our operational utilization rate was 98, 9% compared to a 70% commercial.
Nine 4% operational for the third quarter of last year.
Alright, 11.0 vessels were owned and operated during the third quarter of this year.
And my very first time charter equivalent rate was 25 $6700 per day compared to eight one vessels we operated in the same period.
Last year, having on average $28103 per day.
Our total operating expenses.
<unk> management fees general and administrative expenses, but.
We're concluding the proper Unfortunately, <unk> was $6593 per vessel per day in the third quarter of this year compared to $6495 per vessel per day for the third quarter of 2021.
It will move up as part of this table, we can see the cash flow breakeven rate for the third quarter of 2022, which actually takes into account diagnosing expenses interest expenses.
Their loan repayment.
Do you think there were any to be paid in cash.
Smoodge antibody in payments.
Thus during the third quarter of 'twenty to 'twenty two.
Daily cash flow breakeven rate was 13000 $9084 per vessel per day.
<unk> $9992 per vessel per day for the same period of last.
Yes.
Mainly as you can see attributed to acquire Drydocking costs.
When we get to pay this year and to higher loan repayments.
Let's now.
Yeah go over.
Let's now look for the nine months period.
Let's start again, regardless of mutation.
During the nine months.
Nine months period of 2022.
Maybe I can rate was 90 899, 8% operational utilization rate 99, 1% compared to 100% connection and 99, 6% operational during the same period the first nine months.
Yeah.
We operate we own an average standpoint.
Vessels are earning an average time charter equivalent rate of 22 $5876 per day.
Third to seven five vessels that we owned and operated during the first nine months was 23, one which Aaron.
Now 2000 2002 coming in at $32 per day.
Our total operating expenses again, including management fees G&A expenses, excluding drydocking cost were 6587 kilometers vessels per day for the first nine months of this year compared to $6510 investment per day for the same period.
Of 2021 again looking at the bottom of the table, we can see the customer breakeven rate for.
For the period and for the nine months period of 2020 to about 12961 boomers as compared to 10000, a program with $56 for the same period of last year. The increase again due to higher dairy both in expansion space and higher long things.
Let's now turn to slide 17, and that's and that should give you our debt profile.
As of September 30th 2022 we kept an outstanding bank debt is about 88 million.
Looking at the chart on the top part of the slide we can see that our debt repayments, excluding balloon payments over the next few years.
And around $11 million per year and then.
The $5 7 million.
In 2025, and $4 9 million.
Turning to 2006, our next balloon payments of about 11 point thing you in 2023.
We expect to be able to refine that as these payment. If we can show as we've done in all the cases that we get launched in the past.
A quick note here.
Above the cost of our debt.
The average margin for our debt is about two points, we went to 5% and assuming a LIBOR rate of about four 155% on the top of it. We can estimate is the total cost of our senior debt and so we entered the quarter to be around seven 3%.
Akshay can go the cost of our debt is about 110 basis points lower.
That is about six 2% easily account for the amount of debt the LIBOR cost per week.
The interest rate swaps.
The motto mortgage.
She.
<unk> cash flow breakeven rate for the next 12 months broken down huge components.
We can see that we expect to hear.
Cash flow breakeven rate of around $13550 per vessel per day.
On the same chart at the bottom of the slide we can see our EBITDA breakeven, which includes our operating expenses G&A expense in dry docking cost.
It is estimated at around 7564 bullish they're desperate for a day.
This figure.
Analysts and investors are says our EBITDA over the next 12 months by making an assumption about the Aaron's.
Our vessels.
On the basis of our investments we kept about 75 pounds investment base available for high over the next 12 months.
Almost all of our virtual data rooms from 15 area.
Our exposure to the spot market.
You can say straightforward to make an assessment of our EBITDA for the next 12 months for example.
Our vessels, we are seeing with our vessels are my mother.
For the sake of simplicity $17564 per vessel per day net of commission, the resulting stem cells. They are.
Exceptional for the EBITDA breakeven rate.
Translates to about $5 million EBITDA for the upcoming 12 months period.
Let's now move to slide 18.
We can see some highlights from our balance sheet and they seem to be sideways.
This slide shows a snapshot of our assets and liabilities.
Our assets when Houston, our cash and other short term market.
Value for vessels.
As of September 30 of 2020 to cash and other assets.
Now $43 70.
The book value of our vessels was approximately $158 2 million.
In total we can find new prospects for about 2000.
One 8 million.
The liability side, our debt as you mentioned earlier.
The third piece was about 88 million.
<unk> 43, 6% of the book value for Us.
Other liabilities amounted to $6 6 million or three 3% of our total book.
Book value for our assets, resulting in book shareholders' equity of about a thousand.
$142 million, which translates to a book value of $77 $7 per share.
However, based on our own estimation based on market transactions Ashland at the end of September we estimate the market value of our vessels was above their book value and stood around it.
It comes in a $92 5 million.
Suggesting it.
Are any of these are set to be.
The next phase of $49 per share.
We've got a shutdown traditionally trading around $15, they're obviously.
Obviously appears to be decided upon got Huawei Navy, suggesting significant appreciation potential.
Congress and the investors.
And without commenting let me turn back to the floodwaters Skus to continue the call.
Thank you Tushar.
Let me open up the floor to any questions that you may have.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
For participants using speaker equipment, and they'd be necessary to pick up your handset before pressing the star one.
One moment, please while we poll for questions.
Thank you. Our first question is from Tate Sullivan with Maxim. Please proceed with your question.
Hello, Thank you good day.
Let's start you mentioned I think I heard correctly the third.
$35 million EBITDA for the upcoming 12 months period.
13558 breakeven, but what was the assumed time charter equivalent rate you used for that.
One year contracts today of around 14500 <unk>.
Please.
Yeah, Dave.
Doctor an indicative calculation.
Two because our EBITDA breakeven the warrants as a $7564 I assume and net to just demonstrate the calculation I assumed and net.
Time charter revenues of 17564, so the difference would be in your own time.
That was only an assumption you should make your own assumptions about the rate for the next 12 months.
But he said was that they did that would have been 75 million.
Okay.
Thank you and then strict.
Strategically I mean the increase in.
From two Q3 Q can you can you talk about the decision to add debt by roughly $16 million.
Sure.
We've had the two one in combo with the best solution.
And we felt that it was a good idea to put a.
Concerns about the 50%.
The debt on them. So it was to have the liquidity to.
To be able to use its first meaningful at all.
Saturday sensors program, but also to be able to move quickly.
Some volume if we want to make a new acquisition. It feels good to have the cash in the bank.
Okay. Thank you.
Question, you gave detail on that rising break going forward and we can make our own calculations on that too and then also on the sources.
Support for the market I mean is the primary source of support if rates, perhaps the more pressure the lack of or relatively low historical balance of the new builds coming into the market or any other sources up the math, we should ship.
Potential sources that Rob that we should keep an eye out for.
I think what we need to do it.
Can you just I know you opened to the geopolitical and economical development.
Yeah.
Demand.
Depends a lot on on global GDP growth and this is really what we should be.
To understand what it will be in but of course this is a very difficult.
Task.
Okay.
Thank you Bob.
Okay. Thanks.
Thank you. Our next question is from Poe <unk> with Alliance Global Partners. Please proceed with your question.
Good morning, Steve Good morning, Tassos I had a question more on the financing side.
$11 3 million of debt.
Debt. That's due next year that is potentially going to refi can.
Can you give me an idea of what you're expecting as far as the refi rate and Conversely. Thank you did you know encumbered.
Refinance or income per sub as a personal thing.
In the third quarter.
Would we expect to you if the rates are too high too.
Pay that debt down with cash and and wait for a better financing environment.
I think we figured that we would like to get some liquidity on our balance sheet for the reasons, which I repeat as explained earlier. So that's why we took it over.
Particularly cheap I think the margin on the objective without was near 2%.
It doesn't have to be actually less than 2%. So it is a it was relatively cheap debt LIBOR four star or higher in cone.
Something on the margin yes.
Reversed by the increase in LIBOR, but maintain scabbing the extra liquidity in our balance sheet gives us flexibility to better shoe.
The repurchase program and also be ready to pull the trigger people change.
Asia for communities come around.
Also also okay. The cost of the debt because life book is increasing is high but on the other hand you.
How do get a suddenly instead of stonegate deposit so the overall cost of having these three liquidity is actually very small basically the margin, which is not in that particular cancer, what's wrong with the knowledge we have achieved recently.
So it really doesn't if I remember you mentioned that is due sometime in the second quarter of next year.
Besides close or consolidate whether we will just repay or refinance it as we can we consider ourselves lucky enough to give them the flexibility to make that decision before the crash.
Yeah, that's what I was sort of alluding to and then.
No.
If you pull the trigger on some new assets that means that you know asset values have come down.
You know just to reiterate on the stock buyback program can you walk us through some of the math that you're looking at on you know the.
The current stock price. It 15 that would imply that asset values are below the median average you know that you show in your presentation, you know probably to the tune of about 20%. So.
E M I should I be looking at you know even if the asset values go down maybe in the label that you are still buying your stock currently at a discount to the long term asset values.
Yeah Yeah.
Right now the best investment for US is to buy back our smoking patio is trading significantly below where navy and that's why we're doing it and of course compared to buying your husband recognize he's not these 75% of that Scott.
Or whatever is being picked up.
If the market becomes.
We can then opportunities onshore who just flown.
Our eldest vessel.
Hum.
So all of which in our mind using our mind to renew our fleet so swapping.
You own a question for Ron.
These powerful karnes targets.
And with.
With rates lower are you seeing any customers you know think about locking in trying to lock in our approach was more longer term commitments.
You know not not to say that you would agree to longer term commitments at these levels, but are customers starting to.
Think about that.
No.
Not really no.
We don't see any.
A significant pressure from the market to get long term charter days at eight.
Inc.
You know the the fact that it's so difficult to predict what will happen makes evident body more conservative and not willing to take longer and exposure.
Okay, great. Thanks for your time.
Well thank you Paul.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Okay.
Okay.
I presume there's no more questions.
There are no more questions at this time I'd like to turn it back to management for any closing comments.
Thank you all for being with US a swap out of coal this quarter and we will be back with you.
Early next year to discuss how the whole year.
Thank you.
Hello, everybody.
After Thanksgiving Tomorrow, our American friends.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
Okay.