Q3 2023 Euroseas Ltd Earnings Call
[music].
Thank you for standing by ladies and gentlemen, and welcome to the Euro <unk> conference call on the third quarter 2000 twenty-three financial results.
We have with US Mr. M. S. T. These pizza, chairman and Chief Executive Officer, and Mr. Todd So, especially these chief financial officer of the company at this time all participants are in a listen only mode. There will be a presentation followed by a question and answer session at which time if you wish to ask a question. Please press Star then one.
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 their results with a press release that has been publicly distributed.
Before passing the floor to Mr. P tests, I would like to remind everyone that in todays presentation and conference call Euro six will be making forward looking statements. These statements are within the meaning 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 be.
Result in such expectations not being realized.
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.
Let's take a moment to go through the whole statement and read it and.
And now I would like to pass the floor to Mr. P Times. Please go ahead Sir.
Okay.
Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call.
Together, we believe that this is Lee <unk> Chief Financial Officer.
The purpose of today's call is to discuss our financial results for the three and nine months period ended September 30 of 2020.
Let's turn to slide three of the presentation to go over our income statement highlights.
We are very pleased with our third quarter results, having reported total net revenues of $57 million and the net income of $32 $2 million or $4.65 per diluted share.
Adjusted net income for the period was $28 $2 million or $4.07 per diluted share.
Additionally, adjusted EBITDA for the period was 34 and a half million Douglas please refer to the press release for a reconciliation of the adjusted net income and EBITDA.
That's part of the company's common stock dividend plan, our board of directors declared a quarterly dividend of <unk> 50 cents per common share for the third quarter, 2023, which will be payable on or about December 16th to shareholders of record on December nine.
The annualized dividend yield based on the current set of price is about 8%.
This is the seventh consecutive quarter of paying substantial dividends since we have instituted paying them and something that we believe we will be able to continue for the quarters and years ahead.
As part of our share repurchase program of up to $20 million, which was announced in May 2022, and extended for another year and have repurchased a total of 410000 shares of common spoken to the open market for about $8 $2 million.
This represents about 6% of our total outstanding shares.
Our CFO will go over the financial highlights in more detail later on the presentation.
Please now turn to slide four where we'll discuss our recent sale and purchase suffering in the professional developers.
As previously announced on July six 2020, <unk>, we took delivery of above second new building vessels and we set up that you.
<unk> phase III 2800, <unk> you feed the container ship building function diadem, if a dog just in South Korea.
On the chartering side motor vessel Aegean Express was fixed with a minimum of three to four months until December 2023, it's a $9000 per day.
Additionally, motor vessel <unk> was fixed for approximately 40 to 60 days at the $18250 per day and thereafter.
There was an option, which was declared by the charters for another 40 to 60 days until December 2023, with the same daily rate.
As previously announced also the mine will be in the MLP commenced the new charters in August 2023.
Daily rate of $21000 per day for a minimum of 20 to a maximum of 24 months.
Following the mutually agreed termination of the previously existing testers.
We had no R&D or commercial off hire vessels during the Scorpion.
Please turn to slide five.
The olive garden fleet profile.
You've received carbon fleet is comprised of 19 vessels in the water, which includes 12 feed the container ships and seven intermediate contain the carriers with a total carrying capacity of just under 60000 Teu and I see you adjusted those of its age of just below 16 years.
Yes.
Turning to slide six.
After taking delivery of the first two of the nine new Echo feeder container ships, we show up now seven vessels under construction with a total carrying capacity of 16600 Teu and is expected to be delivered within 2024.
For these new buildings have a carrying capacity of 2800 teu each and three type of carrying capacity of 1000 metric tons would be huge.
After the delivery of the 700 feet the containership new buildings in 2024.
Fleet will consist of 26 vessels and the total carrying capacity will be in excess of 75000 Teu.
Let's now turn to slide seven for a graphic depiction of our vessels employments.
As you May see we have very strong charter coverage throughout the next two years.
With about 97, 5% of our fleet being fixed for 2023, almost 65% for 2024 and more than 25% for 2025.
This very high charter coverage, it's quite profitable rates for the remainder of the year, but also for 2024 suggests that we should continue recording profitable quarters in this.
Regardless of charter rate environment.
Yeah.
Let's turn to slide now now nine now to review the 60 12 month time charter rates have developed over the last 10 years.
During the first quarter of 2023 containership markets were down across all segments compared to June 2020 to be.
For the sector, we primarily operate in.
So as soon as rates are about 28% lower year to date.
However, they are still significantly higher than the three pandemic levels.
As of November 3rd the six to 12 months charter rates for the 2500 Teu containership stood at $12 $5000 per day, which is higher than the historical median over $9500 per day.
But lower than the 10 year average rate of $15500 per day.
The comparisons to media and advertising rates are similar across the smaller and larger container sizes.
The low charter rates are driven by a progressively larger number of deliveries a reduction of inefficiencies caused during the pandemic and the considerable considerable drop in demand growth.
Moving on to Slide 10, we can go over some further market highlights.
During the third quarter of 2023, one year time charter rates showed declines across all segments and have further decline seems by approximately 20% in November 2023 alone.
Average rates during the third quarter was down by about 18% compared to the previous quarter as shown in the table.
So the average second hand container shipping VIX has decreased in line with the market decline.
Second hand container prices have been gradually dropping throughout the first 11 months of 2023.
But still high Nevertheless.
The new building price index remained roughly unchanged in the third quarter of 2023 over the previous quarter, while new building prices generally stayed elevated levels due to cost inflation and extended jobs for cargo.
While the new building contracting because east from the aggressive levels seen during COVID-19, it still remains fairly strong historically with the large liner operators continuing to place orders for larger vessels, mainly equipped with dual fuel capability and shoes.
The containership fleet, excluding vessels under repair stood at about one 6% of the fleet as of October 23rd.
0.4 5 million Teu.
The idle fleet peaked in February 2023 at 48 million Teu and was trending downwards until July but has increased again in September.
The recycling activity edged higher during the third quarter with 68 vessels, having been scrapped year to date accounting for about 130000 Teu.
The militia remains at low levels compared to historical standards due to the stronger markets earlier in the year and the good charter coverage across the sectors.
The figure is anticipated to increase for the remainder of this year in 2024 as it is driven by weaker markets and increasing environmental regulations.
Scrapping prices have softened during the third quarter to about $550, but likely down which is still about 33% above the 2019 neighborhoods.
Overall, the containership fleet has grown by <unk>.
Proximately six of the hospital <unk> year to date without accounting for the items vessels, we activations, which is quite a high number.
Please turn to slide 11.
With its latest update in October 2023, the IMF forecasts show that the global economy is still slow and uneven the remaining well below the historic average of three 8% growth between 202019.
Global GDP growth is estimated to slow from three 5% in 2022% to 3% this year and 249% in 2024.
Global inflation is forecast to decline steadily starting from 2024 due to tighter monetary policy aided by lower international commodity prices.
Slow economic recovery has been dominated by post pandemic geopolitical shocks, including the Wuxi, New Crane the latest Israeli commercial conflicts U S, China relations and the Chinese property sector.
As well as the effects of monetary policy tightening to reduce inflation.
However, important divergent divergence is geography.
The slowdown is more pronounced in advanced economies and emerging markets and developing economies.
Among advanced economies of the U S has been revised up due to resilient consumption and investment while the euro area has been revised down as tight monetary policy and the energy crisis have taken at all.
There.
Is also evident among emerging markets and developing economies.
With China facing growing headwinds are now expected to grow only by four 2% in 2024.
While Brazil, India, and Russia have been revised up recently by the IMF.
According to Clarksons estimates container trade will continue to experience subdued demand for the remainder of the year due to slow global economic growth combined with geopolitical events that are creating new challenges to a low level. These fragile economic recovery.
As such container trade growth is expected to grow by a low one 2%, which has been revised upwards from the 9% growth predicted only a month ago.
Well trained before demand is expected by Clarksons to return to a decent trade growth level of about three 8%.
Now please turn to slide 12, where you can see the total fleet age profile and containership.
The containership fleet is relatively young with most vessels under 15 years old and only 10% of the fleet over 20 years old.
Largest percentage of which though lies within feed the vessels.
Suggesting high potential of recycling for this type of seats.
The order book as a percentage of total fleet stands at a high of 26, 6% as of November 2020.
Clarksons expect food deliveries of about 3% to be delivered for the remainder of 2023 10, 4% in 2024 and 12% is benefits.
Turning on to Slide 15, we also go over the fleet age profile of loans that are booked for seats in the 1000 to 3000 Teu range, which is where our new building program is focused.
The order book stands at 10, 8%.
As of November 2012.
According to Clarksons, new deliveries, including what has already been delivered for 2023 of estimated at nine 4% six 2% in 2024, and just one 8% in 2025.
Additionally over 50% of the fleet is over 15 years old, indicating good fundamentals for this sector as we can expect a decline of the size of the fleet in the next few years.
Let's move to slide 14, where we will discuss some.
Some of it for the containership market based on the full discussed demand and supply matters.
As we said charter rates continued to face a renewed pressure due to weak demand leading to the 12% decrease in <unk> since the third quarter.
The substantial accumulation of available tonnage and smaller feature sizes is notably contributing to the downward trend in the charter rates for the smaller vessels.
While the container freight index has seen some improvement since July it remains significantly lower at $8, 80% below its peak in January 2022, and is there actually a return to about the prequel with 10 year average.
Container trade volumes grew by six 6% year on year in September.
We're still above pre pandemic levels.
For the remainder of 2023, there are still considerable challenges ahead.
Downward pressure has reemerged in the fourth quarter as supply growth.
<unk> and then increasing number of chart the vessels that we deliver.
Slower speeds are expected to play a key role going forward in absorbing some of the excess dollars.
Economic developments amongst the two wells remained variance.
Therefore 2024.
We'll probably be quite a difficult year as well.
Market conditions will remain challenging as the rates may decline, even further towards the lowest point of the cycle.
Second due to the second consecutive year of substantial fleet expansion.
Market performance will remain sensitive to capacity management vessel speeds.
And the range of other inefficiencies like congestion that could alleviate the pressure of some extent.
But the energy transition also has continued to gain traction in the containership sector.
Why is it is evidence that the shift is taking place the long term outcome is still very uncertain.
One thing is always though that the spread between charter rates achieved by eco vessels compared to conventional ones is expected to further increase adjusted has become even more sensitive to given the scope.
For 2025 supply and demand fundamentals seem to suggest that we could see a leveling off in the market and some stabilization.
If enough scrapping materializes within the next two years demand remains relatively resilient, a new discipline, we could possibly see a dozen points sometimes.
Moving on to slide 15.
The left chart shows the evolution of one year time charter rate two containers with a capacity of 205000 Teu since 2010.
One year time charter rates are far below the peak in early 2022.
As previously mentioned the current one year time charter rate stands at $12000 per day.
Which is still at the high enough and profitable level higher than the historical median.
At the same time, the right hand chart shows the historical range for new building and 10 year old containers ships with a capacity of 205000 Teu.
Prices are still significantly higher than the 10 year median despite.
We absorbed.
Despite our expectations for the pool market next year as discussed above we believe that we are largely insulated from developments in the charter market. During 2024 due to our contracted revenue backlog of more than $400 million, which we should.
Have developed during 2021 'twenty two.
Our liquidity build up will allow us to take delivery of the seven remaining containership new buildings, while keeping leverage low at around 60%.
It will also allow us to continue paying a substantial dividend and executing on our stock repurchase program.
Price continued to hover at levels below 50% of MTV.
At the same time, we will be left with ample free cash to acquire further vessels when we deem the timing appropriate.
And with that I will pass the floor to <unk> to go over the financial highlights in further detail.
Thank you very much good morning from me as well, ladies and gentlemen.
Over the next four slides I will give you an overview of our financial highlights for the third quarter and nine months.
Turning to 2003 and compare them to the same period of last year.
For that lets turn to slide 17.
For the third quarter of 2023, the company reported total net revenues were $50 7 million, representing 10, 3% increase over total net revenues of 46 million during the third quarter of last year.
Which was mainly the result of that.
Higher average.
It's a reduction shown in the first quarter of 2023 compared to last year.
The company reported a net income for the period.
Two 2 million as compared to net income of $25 2 million for the third quarter of 2022 seven.
Seven 7% increase.
This quarter there are two points that I would like to make regarding entries that affect our finances.
The first relates to the termination of the charters from Honeywell and ran at EBIT, We reported during the last earnings call and I receive as mentioned earlier.
Those charters came with investors when we bought them and because of the time they were below market. We recorded the vessels with book value corresponding to the below market value of the charges and at the same spot and at the same time, we started recognizing the below market value.
Over the life of the charters.
U S U S GAAP guidelines.
These charges were terminated when we get to recognize the remaining are recognized portion of them.
The $16 million gain on charter termination did you see in our income statement.
Incidentally. These charters were culminated with mutual agreement with the charcoal and replaced by charters with Fireeye.
The second point that I would like to make relates to recording an impairment charge for our vessel <unk> Jonathan.
Based on our impairment test results.
The tournament.
Current amount was not recoverable. Consequently, we booked an impairment charge of $13 8 million to reduce the vessel's book value to each market value.
I would like to stress that the vessel. So it's been a great contributor to our bottom line soon as reported in October 2021 vessels have been chartered from the highly profitable charter of 26600.
$67 per day net of commissions for three years until September 2024.
And so there's already contributed up to the end of last quarter $14 4 million of EBITDA in there.
Mainly a year historically is expected to contribute about another $7 million of EBITDA.
Thus the impairment charge is EMEA accounting requirement rather than the commercial.
No.
In any event both of the above items are not included in the adjusted earnings per share sorry, we'll refer to a little later in my presentation.
There is another financing costs for the third quarter of 2023 amounted to $1 8 million. After deducting capitalized imputed interest of four 9 million, which relate to the self financing of the pre delivery cost of our new building program for it.
Interest and other financing cost of $2 7 million.
Compared to $1 6 million for the same period of 2022.
During which the imputed interest was only <unk> 2 million.
This increase is due to the increased amount of debt that we carry.
During the third quarter this year and increased benchmark rates LIBOR and sulfur if our loans get paid compared to the same period of 2022.
Adjusted EBITDA for the third quarter of 2023 increased $34 5 million compared to $26 2 million achieved during the third quarter of last year and in case of about 32%.
Basic and diluted earnings per share for the third quarter of 2023 were $4 67, and $4 65, respectively.
Circulated on about $6 9 million basic and diluted.
Weighted average number of session on spending.
<unk>, two basic or diluted earnings per share for free and the profit dollars for the third quarter of 2022 calculated in about seven 2 million basic and diluted.
Weighted average number of shares outstanding.
Excluding the effect.
On the income for the quarter.
Unrealized gain on derivatives.
Alteration of the fair value of below market charters acquire.
The vessel depreciation on the portion of the consideration for the vessels were acquired with <unk>.
Time charters.
Cater to the below market charges the gain from the termination of the below market factors and the impairment charge.
Adjusted earnings attributable to common shareholders for the quarter ended September 32023.
Would you have been $4 <unk> basic and $4 seven diluted.
Compared to $2, 9% basic and diluted for the same quarter of last year.
Thank you John I'll just typical don't include the above items in their published estimates of earnings per share. That's why we're making the adjustments of our shops.
Let us now look to the right part of the slide.
In view of the numbers for the corresponding nine month period.
Ending September 32023, and compare it with the same period of last year.
So for the first months for the first nine months of this year. The company reported total net revenues of $140 3 million, representing a 4% increase over total net revenues were 139 $139 8 million during the first nine months of 2022.
We reported net income for the period.
$89 8 million as compared to a net income of 85.9.
$9 million for the first nine months of last year, an increase of four 6%.
I will not repeat here the same points I made earlier regarding the NDA.
And there is.
Great.
Yes.
In our income statement, but they apply for the nine months period as well.
Interest and other financing costs for the first nine months of 2023 amounted $3 9 million after deducting capitalized interest of $3 2 million related to the self financing.
The pre delivery cost of our new building program.
The resulting in a total interest and other financing costs net of the imputed interest of $7 1 million compared to $8 8 million for the same period of 2022.
During reagent kit and capitalized interest of only <unk> 2 million.
Again this increase is mainly due to the higher interest paid based benchmark interest rates, we pay and the fire at a level that we can.
Adjusted EBITDA for the first nine months of 2020 fee was $91 1 million compared to $91 5 million for the first nine months of 2022.
Basic and diluted.
Earnings per share for the first nine months of 2023 were 12 of $12 95.
Basic and $12 90 diluted.
Alkylate at 697 million.
Respectively, basic and diluted shares basic and diluted weighted average number of traditional.
Compared to $11 91 basic.
$11 86.
Diluted for the first nine months of 2022.
Again, excluding the effect on the income statement of the items that I mentioned before.
The adjusted.
Income.
For the nine months ended September 32023 would have been $11 77, basic and $11 compared to three cents diluted compared to adjusted earnings of $10.
<unk> basic and $10.07 diluted for the same nine months period.
Last year.
Let's now turn to slide 18 to review our fleet performance.
As usual, we will start our review by looking at our fleet utilization rates for the third quarter of 2023 in comparison to the same period, the third quarter of 2022.
Our fleet utilization rate is broken down to commercial and operational.
During the third quarter of 2023, our commercial utilization rate was 100%, while our operational utilization was 99, 2% compared to a 100% commercial and 99, 5% operational for the third quarter of 2022.
On average we operate we owned and operated 19 vessels during the third quarter, earning an average time charter equivalent rate of $30074 per vessel.
They compared to owning and operating 18 vessels from the same period of last year, earning an average time charter equivalent rate of 30000, and that's kind of the $93 per vessel per day.
Our vessel daily operating expenses, including management fees were $7292 per vessel per day for the third quarter.
For this year compared to $6 six Camden and one dollar.
Hey, Dave during the same period of 2022.
General and administrative expenses amounted to $500.
During the third quarter of this year compared to $579.
For the same period of 2022.
If we move further down on this table, we can see the cash flow breakeven rate for the third quarter of this year, which also takes into account drybulk expenses interest costs and loan payments.
For the third quarter of 2023, our cash flow breakeven rate was $13594 per vessel per day compared to $14466 per vessel per day.
During the third quarter.
Of 2022.
In the in the in.
The last line of this table, we can see the common dividend paid expressed in per vessel per day.
Units in the third quarter of 2023 are the dividend, we paid amounted to $2012 per vessel per day compared to $2177 per vessel per day.
Same period.
Last year.
Let's now look at the right part of this table and review the figures for the first nine months.
Of 2023.
During the first nine months of 2023, our commercial commercial utilization rate was 99, 4%.
Our operational utilization rate was 98, 9%.
Compared to 99, 9% commercial and 99, 6% operational for the same period. The first nine months of last year.
Well now go rich, we owned and operated 18 vessels during the first nine months of 'twenty three earning an average time charter equivalent rate of 29008.
$843 per day compared to $16 eight vessels from the same period of 2022.
He can average of 32.
<unk> thousand $814 per day.
Our vessel operating expenses again, including management fees were $7210 per vessel per day in the first nine months of this year compared to $6771 per vessel per day for the same period of last year.
General and administrative expenses for the two periods amounted to $648 and $635 respectively.
This is again move further down on this table, where we can see the cash flow breakeven rate for the first nine months of this year, taking into account drydocking interest and loan repayments.
Thus for 2000 for the first nine months of <unk> 'twenty free cash flow breakeven rate was $13852 as compared to $12.
$14052 per vessel per day during the same nine months period of 2022.
At the bottom of the table again, we can see.
Hi.
<unk> contribution to the cash flow breakeven from the our dividend payments and for the nine months of 2020 to say that amounted to $2134 per vessel per day and seeing the corresponding nine month period, which includes one dividend payment less.
That amount contributed added $1500 to our cash flow breakeven rate for.
For the period.
Let's now move to slide 19 to review, our debt profile and our forward cash flow breakeven level.
As of September 30th 2023, our total debt stood at about.
1038 for me.
On the top of the slide you can see a snapshot of our debt repayment profile over the next several years.
We have already made $61 6 million of loan repayments in 2023, and the remaining of the year, we have to make another $7 4 million loan repayments.
For 2024, and <unk> 25, our loan repayments drops to about 31, and 35 million, respectively, including balloon payments.
The latter should be able to refinance if we choose to do so as we did.
Hi.
Okay.
Okay.
At this level.
That I mentioned.
The fish.
The debt.
He's on the fleet and our fleet in the water <unk>.
Yes.
I guess as you stated we intend to partly finance.
The remaining of our new building program with debt.
We expect to assume an additional approximately $65 million of debt over 'twenty 'twenty four and early 2025.
A quick point on the cost of our debt.
The average margin of our current debt stands at about three points to 32% and assuming a sulfur grade of about 541%.
Cost of our senior debt is approximately 773%.
This figure if we can do.
Putting that figure the cost of our interest rate swaps.
It is brought down to about 744%, it's about 15% of our product that you said, it's a soft rate of around 24%.
I would like to draw your attention now at the bottom of the slide where we present the level in components of our expected cash flow breakeven for the next 12 months.
And we saw a couple of levels of cash flow breakeven first for our EBITDA breakeven level is.
Around $9260 per vessel per day as you can see that in the middle of the bars and in total including interest and loan repayments.
Our cash flow breakeven level over the next 12 months is expected to be around 15000 and $100.
The vessel per day.
This level reflects the number of vessels planned to be dry docked next year and the work that is expected to be done on that.
To sum up our presentation, let's move to slide 20 to review our balance sheet.
In this slide we provide a simplified snapshot of our assets and liabilities.
Yes sure September 30th our assets include costs and other current assets amounting to about $6 9 million.
Also includes advances that we paid for our new building program program amounting to about 678 million.
The book value of our vessels, which is around $276 6 million, resulting in total book value of our assets.
About four hunton.
$8 9 million.
On the liability side, our debt as of September 30th.
Yes.
Usually mentioned stood at about $138 4 million.
Representing our.
Amounting about 33, 8% of the book value of our assets.
The fair value of our remaining.
Below market sorry for software is about $8 4 million or about two 1% if our assets and other liabilities of about nine point.
3 million.
Amounting to about two 3% of the book value for us.
However, it should be noted.
The market value of our fleet is much higher than its book value.
Based on our own internal valuations and comparable market transactions.
Charter adjusted values for our fleet and new building contracts are about $396 million, which translates to a net asset value for our company.
$385 3 million or a bit more than $55 per share.
Recently.
Shares have been trading around $25 per share.
Thus.
And that represents a significant discount to our net asset value and suggest that there's a good appreciation potential for our shareholders and investors.
With that I would like to turn the floor back to our activities to continue the call.
Thank you Tassos, let's now open up the floor for any questions you may have.
Thank you.
At this time, we will be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
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Our first question is from Tate Sullivan with Maxim Group.
Oh Hello. Good day. Thank you households can you start by just a little more detail on the impairment of the Jonathan Pete was that impairment triggered based on the timing of the acquisition of Jonathan.
And what might imply for the rest of your vessels.
Yes.
Testing for impairment.
We continue to do a test to see whether the book value of the vessels is recoverable based on certain assumptions about the future rates.
We did when we bought Jonathan.
Yeah, we shared the vessel.
The market the market was a pretty healthy but also we've got a healthy charter rate attached street, we recognized significant profits over the last three years from the charter rate, but the book value has been depreciated down over the remaining of the life of the vessel. So it was depreciated matched.
Less than the earnings contribution that.
Jonathan provided to us and if you do the test using historical average age for the period after the charter to get an.
Any indication that the vessel needs to be impaired as you know these are really accounting requirements and the.
Mental business evaluation of the investment remains as it was when we decided to pursue it.
And did you say every quarter.
Test all your vessels for impairments or periodically you do so okay.
Every quarter, we test all our vessels, whether they need to be impaired or not.
Thank you and then on the new builds can you comment on the new builds coming to market come into your fleet for next year. It appears the or an on schedule with your previous timelines.
Can you give an update on are you looking at are there other new companies getting intermediate sized newbuild delivered here in the near term that you are really looking at or what what's the contract outlook 2024 deliveries.
Yes.
Although new building program.
Going according to schedule. So we do expect to get the ships in.
2024.
Two.
The last few months, we haven't seen new orders being placed but that exist. The other orders that are being that are being built.
Now.
I think.
That's the order book for the ships between 1000 to 3000 Teu that will be delivered next year is around 6%.
Of course the.
The average age of the fleet is extremely high with a 50, 253% of the fleet.
<unk>.
Older than 15 years old so we.
We expect that.
If in 2020 for the market this pool, which is highly likely we will see ships.
That size that.
Being delivered by the charter foods at the end of the charter.
We'll be screwed up so that's why we say that the overall, we think that are in this size bracket, we will probably see a declining market.
Lining number of vessels available within the next two to three years in fact, if I cannot see the order book as a percent of the fleet for the feeder sector has come down for about 18% a year earlier down to less than 11% now. So there is less new orders being placed for about.
Segment special posed to the overall fleet wherever you're ordering sort of continues.
Not to get too top but with the larger ships away from the larger container ships and masks announcement in the last couple of weeks of cutting 10%.
Our workforce is there any I mean is this more reflective of weakness in China that youre feeder sector could benefit from working at smaller courts outside of China or is there any can you comment on the Maersk announcement too.
Well.
I'd leave Merck ducommun.
On their own.
But I think that the market generally.
<unk> believes that.
The next couple of years are going to be softer.
Of course, let does not forget the huge profits that all of these lines of risk has been making during the last years. So they are all extremely well see companies.
They are not worrying us at all about you know the start dose is it does that.
Sure.
When the need was huge they grew now they need to downsize a little bit.
Okay. Thanks.
Thank you thank you for commenting.
Thank you.
Thank you.
As a reminder to ask a question. Please press star one.
Our next question is from Christopher <unk> with Arctic Securities.
Hello, gentlemen, congrats on another great quarter.
Okay.
Thank you.
I was.
Just wondering can you comment a bit on par with them.
Negotiations are going Florida.
Since June for delivery in 'twenty four.
Whoa Whoa whoa level.
Are in.
Are being discussed.
And you can kind of give some flavor on the duration here.
Are you seeing any interest.
From the liners.
Yeah.
Thanks.
Yes.
Yes.
We are talking with the major liners.
Well I'll say, we like the ships that are interesting, but let's discuss are closer to the time of delivery about any opportunities to charter.
Because of the market.
Right now is generally at other week, we'd rather wait to discuss later, if we had the ships today.
Would probably be able to fix the 2008 hundreds at the level of around say 17, $18000 a day for the year.
And the 18 hundreds at around something between 11 and $13000 for the year, but since the vessels scheduled for delivery.
For at least three months the first one and five months the second one.
People are waiting to see how the market develops before we have discussions.
We also don't want to press to press the liners for something today, because today, if they see some with it being you know trying to cover now for three or five months down the road.
We'll try to impose a much lower rate. So we are not the best.
But asking them to come up with a proposal until they feel comfortable about it.
Okay.
I appreciate it.
In terms of capital allocation.
Sure.
They'll accumulating shares.
Which is a significant discount to underlying value.
Sure.
Be able to contract.
Yes.
And I suppose that you describe them.
How would you sort of consider capital allocation.
Are you are you are you willing to increase.
Steve.
Compared to.
Buybacks I mean liquidity.
Uh huh.
For a while will also be an issue.
With liquidity.
Currently not a new issue, obviously and we don't expect it.
To become mainly issue within the next.
Say five six quarters at least based on our contracted revenues, we estimate that we will have a big enough liquidity.
The bucket to allow us to come.
Complete the seven.
Several acquisitions.
We are in discussions.
Yes.
Let me finish.
Alan.
Yes.
Sorry.
I didn't mean liquid it seems there are some cash balance.
Uh huh.
Eric.
The liquidity in the stock.
Sorry. Please go ahead.
Okay the liquidity in the stock.
Yes, the liquidity in the stocks has been decreasing you are right I think on that as it has been decreasing for most shipping companies.
See that generally the interest in shipping has it been reduced during the last.
Six months or so.
This is something of course, we follow and the <unk>.
May affect the buyback program on how aggressive we are with that.
Cause we do want to continue having a higher liquidity.
The insiders and the family controlled more than 50% of the company's installed right now so that reduces liquidity, obviously seen slow but these are cell loop.
But it's something that we monitor continuously.
Uh huh.
All I can say is that we won't be very aggressive on the buyback, but it will continue to an extent.
David This will of course continue.
And.
And they will continue to be at the significant of.
Of significance.
We want to be good.
Giving a dividend yield which is in the area of seven to eight 9%.
So.
These are the policy things that are right now.
We are following.
Okay.
You are much and again.
Congrats on the quarter.
Thank you.
As a reminder, its star one to ask a question we have a follow up from Tate Sullivan with Maxim Group.
Thank you for taking my follow up can you touch on the below market charters.
And I think you gave some figures of $8 $4 million of assets remaining.
And other liabilities of $9 $3 million is it with the same event trigger a gain on those time charter agreement termination, if you entered new agreements and what sort of money.
For a different vessel here's a third vessel Mark Cosby that was bought with a below market charter but.
Hello, Margaret charter values being amortized is being credited to our earnings during the duration of the charter and the $8 four I believe that I mentioned in slide 20 refers to the remaining.
And amortize.
Below market sorry for value related to Mark was when the vessel is earning $34000 in time charter, but of course because of our recognized.
Amount, which we subtract out when we do our jobs preparedness.
Okay Alright.
Thank you that's it.
Once again, ladies and gentlemen, if you do have a question. Please press star one at this time.
We're not really receive any further questions at this time I will turn the floor back to Mr. <unk> for closing remarks.
Thank you everybody for listening throughout today's call, we'll be back in three months' time, thanks, everybody. Thanks.
This concludes today's conference. Thank you for your participation you may disconnect your lines at this time.
Okay.
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