Q4 2022 EuroDry Ltd Earnings Call
[music]. Thank you for standing by ladies and gentlemen, and welcome to Euro dry conference call on the fourth quarter 2022 financial results we have with.
Jen Please press star one on your telephone keypad and wait for your name to be announced I 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 Florida, Mr. Peter I would like to remind everybody that.
In todays presentation and conference call Euro drive will be making forward looking statements. These statements are within the meanings of the federal Securities laws matters 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.
Ill kindly draw your attention to slide number 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 and now I would like to pass the floor over to Mr. Peter <unk>. Please go ahead Sir.
Yeah.
Good morning, ladies and gentlemen, thank you all for joining us for variable outskirts you've gone through school.
Got it.
Thank you, Chris Musso, Chief Financial Officer.
The brokerage is going to discuss our financial results for the fourth.
Full year ended December .
Thank you too.
So as we go over our financial highlights in more detail later.
The presentation.
Turning to slide three.
Our income statement highlights are shown here.
For the fourth quarter of 2022 we reported total net revenues of $51 million and net income of $6 $3 million or 2 billion.
<unk>.
But you can say.
Adjusted net income.
<unk> to common shareholders was $3 3 million.
One boy.
Diluted.
The difference stemming mostly from the onetime brokerage we had the spending.
And recently.
Adjusted EBITDA for the period was $743 million.
Please refer to the press release.
<unk> adjusted net income attributable to common shareholders.
Adjusted EBITDA.
As of February 2023, we repurchased 147362 shares of common shares.
Open market for about $2 1 million.
Our repurchase plan of up to $10 million announced in August 2022.
We will continue to execute the share repurchase program at management's discretion.
We go through 2022 method revenue was $72 million and net income was 33 million barrels of oil.
Boneless and fixed 62 cents per diluted share.
Adjusted net income for the period was $58 $4 million or $9 86 per cent.
Adjusted EBITDA for the period was $43 $2 million.
Please turn to slide four the chartering and operational highlights.
The chartering flow throughs have been active in securing short term employment for all of the vessels as a result of the weak in Q4 2022 market and believe that the market those who can fix these vessels for longer contracts at higher levels.
However, we can fix through about 10 vessels with a minimum of 30 to 24 months respectively.
On index linked charters at the 105, 5% that we add the bulk of it comes to the mix in VIX.
Maintaining our exposure to the spot market as well.
Because it was done during Q4 was still at decent levels, but all the other vessels book has been fixed in January could be at the lower levels below $10000 a day as can be seen in the slide.
I'm just going to note here is the one side.
Of motor vessel more neutrals lag.
As these vessels are delivered early from the complete restructuring of the mutual agreement and will be fixed for the remainder of the south of the $7750 per day.
About 50 days.
The original charter to the base of the difference between the original notes out there being 5750 <unk>.
As of date.
Eight of the New chart moving their drugs.
Essentially leaving us with enormous amounts of income.
Moving on to drive through the dry docks and repairs.
Motor virtually really was in Drydock for approximately 53 days following the scheduled special survey.
20 of these days with in Q4 of 2022 and the remainder in Q1 2020.
They were more like local mostly look value of previous during this quarter.
In addition, during the quarter, we sold the 90 days of initial contract with Q1 2020 to be the equivalent of one panamax vessel.
At 12000 barrels per day.
This contract is raising the money is the market.
Quite low to date.
Please turn to slide five.
The company has a fleet of 10 vessels divided into two subsectors.
<unk> modern eco ships younger than 10 years old.
<unk> two <unk>.
And five different niche vintage spinal mattresses, which got level continued to be Roger will work closely with the industry.
We'll go to our own fleet, because the total capital capacity of about 740000 deadweight than average age of approximately $13 six skus.
Turning to slide six we provide the good Africa last days of our fleet employment.
As you can see fixed rate coverage for 2023, including the Fe stands at about 38%.
This figure excludes ships on index charters, which are open to market fluctuations, but have secured employment.
Slide seven reviews, the market highlights for the fourth quarter of 2022 up until recently.
The average spot market rate for <unk> was approximately $14700 per day in the fourth quarter of 2022.
By December fed if the spot rates have dropped to approximately $12100 per day.
Remarkably this rate because it dropped by about 47%.
<unk> thousand $448 per day as of February 10th 2020.
But it won't be the one year time charter rates for Panamax is because it's been more moderate spending an average of around 14700 per day during the quarter.
Currently spending it's both in thousands of them.
Great.
Both of the BPI and <unk> and this is reflected the weaker demand and lack of less of shipping activity due to a slowdown in China.
The global slowdown of economic growth that will continue.
The vessel energy security focus and the rising interest rates.
Please now turn to slide nine.
In its latest report the IMF revised its local growth projections for 2023 and 2020 for signaling some positivity in the most economic growth and greater than expected the resilience in a number of economies.
The IMF now projects ready to go to reach two 9% in 2023.
This includes three 1% in 2024.
The rise in physical blanket H to price inflation and with US is rolling into today continued to weigh on economic activity.
The rapid spread of COVID-19 in China dampened the growth in 'twenty two.
22, but the recent reopening has paved the way for the faster than expected recovery.
The projected GDP growth of five 2% in 2023 and four 5% in 2024.
<unk> for the GDP growth for the United States was revised upwards to one 4% finished projected to inch down to 1% than it's been before all into persistent inflammation and the federal reserves bookings outlook.
European growth projections are up by 2% from the previous growth of two 7% for the full year 2000.
Once the growth rebound to one 6% as expected in 2024.
We'll know the risks of high energy costs renewed confidence in the rising interest rates are likely to persist into the deal.
Growth in the emerging and developing countries is expected to be quite slow in 2020 with higher than previously expected.
Especially the recent documents GDP focus with seismic has improved to five 2% from four 5% previously mainly on the basis of the significant loosening over the COVID-19 restrictions.
Russia, the Russian economy has recently been upgraded from a negative 3%.
Okay.
To a positive two 1% for.
For 2024.
India is expected to grow at the fastest pace of six 1% right. Brazil economy is now projected to grow one 2% in 2023.
One 5%.
Before.
According to Clarksons estimate dry bulk trade demand is expected to return to growth in 2020 to be quarterly from traction last year.
For 2023 dry bulk today's rate is expected to grow by.
By one 6%.
2% in 2000.
Sure.
Leesburg slight then Randy will review the current dry bulk market cycle.
The order book continues to fuel positive market sentiment as it remains at historically low levels.
The order book as a percentage of total fleet stands at seven 2% as of February 2020.
This suggests minimal fleet growth over the next two three years likely leading to higher rates with raising diseases.
Additionally, new environmental regulations that kicked off this year could further influenced by forcing some vessels to value or to reduce the operational speed.
Continuing on to slide 11.
Clarksons latest report new deliveries as a percentage of total fleet is expected to be three 8% by the end of 'twenty three 'twenty two.
Two 4% in 2024.
48% in 2025.
The actual fleet growth is expected of course to be lower due to recycling.
And in February 2023, the total dry bulk vessel operating fleet was 15192 vessels.
80% of this fleet is older than 20 years old and the candidates for scrapping.
Please turn to slide 12, we summarize at outlook for the dry bulk market.
The diabetic market continues to soften with freight rates, losing 50% year on year, having it at two levels.
Levels.
The market continues to face significant headwinds in the back of geopolitical uncertainties.
Scientists zero Covid containment policy and the weak global economic outlook with the recession that it is sparking slowed down fees in key markets.
At the same time certain logistical bottlenecks that grew due to the pandemic you used available significantly.
There are however, certain demand catalysts that could lead us to return to normal or even above normal growth rates.
Diners return to normality after the real estate crisis in the reversal of zero global containment policy.
Alone we've announced stimulus packages is one of the major potential drivers of the market for the company.
By extension and then through the world between New Canadian International would lead to higher dividend next boots and shoes construction projects.
So.
<unk> Central Bank interest rate hiking has reached the level necessary to control inflation.
More predictable investment environment higher economic growth.
Thus more drybulk trade should start to materialize.
On the supply side, the ordering of new ships because of been practically nonexistent due to lack of available slots in shipyards and the lack of clarity for the fuel of the future.
The order book to fleet today, Sean discussed is near the lowest historical levels given anything to back the hoped for itself.
Charter rates with Calgary, if demand returns to normal levels.
Furthermore, the introduction of emissions regulation related measures.
And the CIA which further.
<unk> supply as already explained.
Enthusiastic quite unclear how shoes. The above described developments will enter into force sort of the timing over the market recoveries in certain but.
But it's bound to happen.
Finally, let's turn to slide 15.
The net chart shows the evolution of one year time charter rates of Panamax dry bulk vessels to strength since 2002.
As of February of expense. This year, the one year time charter rate for Panamax ships with a capacity of 75000 deadweight tons stood at $13700 per day.
This is close to the historical median level.
And the right side, you can see the historical price of <unk> for the 10 year old Panamax vessel, which has a current prices of about $32 5 million downloads.
This is normal for the highest price levels seen in the last trend from 20 plus years.
But.
Still considerably higher than the historically average and median prices.
Clearly prices are higher than what the current charter rates, which suggest an additional reflects expectations of most market participants that would be a strong recovery in that age soon.
We share the view that the recovery should come sooner rather than later and Dwight believe Q1, we believe that Q1 'twenty three will be the first loss, making quarter four Utica dry after the eighth consecutive profitable quarters in which the company booked a combined.
But.
With more than $21 per share.
We would hope that it will be just the parentheses and in Q2 the company will have.
The ability.
If for any reason charter rates do not recover as expected.
It will give us the opportunity to use our strong balance sheet to grow the fleet with new of assets, whose values will also have corrected due to the protracted fluids the markets.
And cyclical markets like shipping a piece of those companies that time that acquisitions at the lower end of the cycle that eventually will be rewarded.
In the meantime, we will continue to execute conservatively on our stock repurchase broken them as indeed, we perceive our stock market valuation to beat by a couple of orders of magnitude.
Lower than that of intrinsic fair value.
Let me now possible floor over to our CFO <unk> <unk> to go over our financial highlights in more detail.
So the floaters goes thank you very much.
Good morning for me as well, ladies and gentlemen.
For the next four slides.
Give you another view of our financial highlights for the fourth quarter and full year of 2022 and comparison with our auction results and the equivalent of.
Slide 21.
For that lets turn to slide 15.
For the fourth quarter of 2022.
We reported total net revenues of $15 1 million.
Presenting effect at two 3% decrease over total net revenues of $22 3 million during the fourth quarter of last year, which was the result of the decreased Opex time charter equivalent rate our vessels.
Fourth quarter of this year.
Going back to last year.
The company reported net income and the net income applicable to common shareholders for the period.
$27 million as compared to a net income of $16 million in there.
Net income attributable to common shareholders of $15 2 million.
At the same in the.
Fourth quarter 2021.
In.
Another financing costs for the fourth quarter of 2020 to engage to about $1 5 million as compared to <unk> seven media for the same period of 2021.
Interest expense was higher mainly due to the increased amount of debt and of course, the increased LIBOR rates are launch get to pay.
During the period.
Compared to the same period of last year.
Adjusted EBITDA for the fourth quarter of 2020.
Two.
$7 3 million compared to 16 million achieved during the fourth quarter for 'twenty one.
Basic and diluted earnings per share.
Thank you all to common shareholders for the fourth quarter.
2012.
<unk> basic calculated on $2 8 million and $2 29.
<unk> looked at <unk>.
Negative again on about.
$2 9 million.
Weighted average number of sexual spending compared to $5 38, basi and 532 diluted.
During the same period of last year.
Excluding the effect on the income attributable to common shareholders for the quarter.
Change in fair value of derivatives and gain on sale of a vessel.
Adjusted earnings I think.
They want to common shareholders for the fourth quarter of this year with $51 19.
<unk> per share basic at one point, you are making sure our share diluted compared to adjusted.
Avalanche of $434 per share basic and two for $4 $99 per share diluted.
The same period of last year.
It's becoming security analysts do not include therefore items in their published estimates for earnings per share.
Let's now move to the top of the slide to review the same figures for the full year of 2022.
For the full year. The company reported total net revenues of $70 2 million, representing an eight 9% increase over total net revenues of $64 4 million during 2021 excellent result.
Increased number of vessels.
Operator.
During the plant its magnitude.
The company reported net income and net income attributable to cost performance for the period.
The $3 5 million as compared to a net income of 51 2 million.
Net income available to common shareholders of $29 4 million.
During 2021.
Interest and other financing cost for that.
During 2022 amounted to $3 9 million compared to $2 3 million for the same period of last year.
Adaptive EBITDA.
For the 12 months of <unk> 92 was $43 2 million compared to $42 3 million achieved here 2021.
Basic earnings per share I think of the one to common shareholders for the 12 months of 2022.
$11 66.
Native tongue.
9 million weighted average number of excess in our spending.
Diluted earnings per share were $11 $61 update us again on about $2 9 million weighted average number, especially our standing compare.
Basic and diluted earnings per share attributable to common shareholders of <unk>.
763.
Bottlenecks and $11 54.
Dollars.
Very good with respectively for last year.
Excluding the effect on the earnings attributable to common shareholders for the year.
And to the FERC.
Richards.
And loss on debt extinguishment in July and the gain on sale of transaction is great too.
Separately on expenses I think the performance of our holders.
<unk> net revenue of 22, Wolfcamp, b, $9, and 9% basic and $9 85 diluted.
<unk> 11 60.
63, basic and $11 54.
Diluted for 2021.
As I mentioned on typically <unk> not going to provide proper.
Yes.
Let's now turn to slide 16 to review our fleet performance.
We'll start our review by looking at our fleet utilization rates for the fourth quarter.
And the full year of 'twenty to 'twenty, two 2021 and that's part of the fourth quarter first.
As usual our fleet utilization rate is broken down.
Maxine and replenishment.
In the fourth quarter of this year, our commercial utilization rate there was a 100% operational utilization rate was 99, 7% compared to 99, eight comercio enact 95% of rationale for the fourth quarter of last year.
I will now go ahead Sir.
Any form one vessels were owned and operated during the fourth quarter of 2022.
<unk> and <unk> time charter equivalent rate.
2016.
And $88.
<unk>.
Compared to nine vessels that we own and operated during the fourth quarter of 2021.
<unk>.
290000 to.
$157 per day.
Our total daily operating expenses, including management fees general and administrative expenses.
Opex setup Basel III.
$1035 per vessel per day during the fourth quarter.
22 compared to 6000.
Performance.
Production per day over fourth quarter of last year.
No further borrowings table, we can see the customer breakeven rate.
We paid during the fourth quarter of this year.
<unk> takes into account also.
<unk> expenses interest cost non entertainments.
Preferred dividends, if any of that work best in class.
Thus for the fourth quarter of 2020 to our daily cash flow breakeven rate we're expecting.
In technical <unk> pharma spare investment per day.
<unk> thousand six <unk> factor on those pre investment per day during the fourth quarter of 321.
Let's now look on the right part of the slide to review the same figures for the full year.
During the impact of <unk> 22 are commercially utilization rate was 99, 8%.
While our operational utilization was 99, 3%.
Compared to $99 nine from axiom and <unk> 96.
Non footprint with transplant.
On average we owned and operated 10 four vessels.
And now it's time charter equivalent rate of <unk> $304.
Compared to $7 nine infections, using transitory Antoine and ankle numbers trending profiles on $422 per vessel per day.
Our total daily operating expenses, including management fees.
Yes.
<unk> expenses, excluding diagnose from cost averaged six.
<unk> $6699 per vessel per day compared to $6456 per vessel per day in 2021.
Again, we can at the bottom of this table you can see our daily cash flow breakeven rate for the year, which amounted in 2022 to 29.
$9890 per vessel per day.
That compares with <unk> <unk>.
<unk> to $9 2021.
Let's now move to slide 17.
Variable, Canada review our debt profile.
As of December 31, 2022.
And outstanding Bank debt of about $81 9 million.
Looking at the chart on the top of the slide we can see that our debt repayment, our debt payments and bundling payments over the next four years.
Excellent share preferred to first half again, our scheduled debt repayments.
Floating vessel repayments over the next 12 months 23.
I wanted to about $23 million, an amount of which includes an $11 3 million balloon payment related to the enrollment of our U S production capacity.
Our balance sheet allows us to comfortably make the bundle payment.
We intend to refinance it like we have done in similar cases in the past.
Total debt repayments in 2020 before amounted to about $14 million infusion.
$3 million balloon and it dropped to about $5 7 million in each of <unk> 'twenty five 'twenty six.
And quick last year above the corporate market.
The average margin for our debt is about two 7%.
Assuming a LIBOR rate of about four 8% on the top of it we can estimate.
Our total cost of our senior debt to be our answer on the comp question.
However, if we included in our cost of debt calculation the interest rate locks.
Via our interest rate swap contracts.
Cost of our debt will drop to about six and 625%.
At the bottom of this table, we can see it for executive customer breakeven rate for the next 12 months.
Okay.
<unk> components.
As you can see we expect another cash flow breakeven level.
Level of around <unk> hundred 20.
$5 per vessel per day.
Also in the middle of this.
Chart on the bottom of the slides, we can see our EBITDA breakeven rate, which amounts to about 7006 out of them at that $7 per vessel per day over the next 12 months.
Let's now move to the last slide slide 18.
We can see some highlights from our balance sheet in a simplified way.
This slide shows all fresh a snapshot of our assets or liabilities.
As of December 31, 2022.
Cash and other current assets.
Stood at about $55 million and our balance.
The book value of our vessels was approximately $149 million, resulting in a total book value of our assets of about two kind of the medium.
On the liability side.
Actual at.
At the end of last year as I mentioned was about $8 9 million representing about 41%.
The book value of our assets and we also had other current liabilities amounting to about $4 3 million or about two 2% of the book value of the assets that leaves us with.
We will provide you with shareholders' equity of about.
Yeah.