Q3 2024 EuroDry Ltd Earnings Call
[inaudible]
Anastasios Aslidis, Unknown Executive, Anastasios Aslidis, Unknown Executive, Anastasios Aslidis,
Speaker Change: Thank you for standing by, ladies and gentlemen, and welcome to the EuroDry LTD conference call on the third quarter 2024 financial results.
Speaker Change: We have with us today Aristides Pittas, Chairman and Chief Executive Officer, and Mr. Anastasios Aslidis, Chief Financial Officer of the company.
Speaker Change: At this time, all participants are on a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you'd like to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced.
Speaker Change: 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.
Speaker Change: Before passing the floor to Mr. Pittas, I would like to remind everyone that in today's presentation and conference call, Bureau Dry will be making forward-looking statements. These statements are within
Speaker Change: 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.
Speaker Change: that involved risk and uncertainties that may result in such expectations not being realized. I 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.
Speaker Change: Please take a moment to go through the whole statement and read it. And now I'd like to pass the floor to Mr. Pittas. Please go ahead, sir.
Mr. Pittas: Good morning ladies and gentlemen and thank you all for joining us today for our scheduled conference call.
Mr. Pittas: Together with me is Mr. Tantos Aslidis, our Chief Financial Officer.
Mr. Pittas: Please turn to slide 3 of the presentation. Our financial highlights are shown here.
Mr. Pittas: For the third quarter of 2024, we reported total net revenues of $14.7 million and a net loss attributable to controlling shareholders of $4.2 million, or $1.53 loss per basic undiluted share.
Mr. Pittas: This significant loss is a consequence of the poor market we have lately been witnessing.
Mr. Pittas: but more importantly, on the fact that we chose to bring forward two dry dockings, which coupled with the two scheduled dry dockings we had during this quarter, cost about four and a half million dollars and resulted to significant off-hire days.
Mr. Pittas: Adjusted net loss attributable to controlling shareholders for the quarter was $3.9 million, or $1.42 lost per basic and diluted share.
Adjusted EBITDA for the period was $0.5 million.
Mr. Pittas: Please refer to the press release for the reconciliation between Adjusted Net Loss and Adjusted EBITDA.
Speaker Change: Our CFO Anastasios Aslidis will go over our financial highlights in more detail later on in the presentation.
Speaker Change: As of November 19, 2024, we had repurchased 314,000 shares of our common stock in the open markets.
Speaker Change: for a total of about $5 million since the initiation of our repurchase plan of up to $10 million, which was announced in August 2022. We will continue to execute the repurchase program around current share price levels.
Speaker Change: During the quarter, we refinanced two of our loans, involving four of our veterans, releasing $16 million of available cash reserves, extending loan maturities till 2029 and 2030 respectively, and also lowering the loan margins.
Speaker Change: Still, our debt levels are below 45% of our best-wishes market value.
Speaker Change: Please turn to slide 4 for an overview of our sales and purchase chartering and dry docking highlights.
Speaker Change: The duration of most of our charter contracts is short term for the time being, typically spanning 10 to 100 days.
according to their minimum duration.
Speaker Change: You can see the specifics of the various charters in the accompanying presentation.
Speaker Change: Additionally, we completed scheduled dry docking for vessels Yannis Pittas and MV Irini. During the quarter, we faced an additional 10 days of technical lock hire for our motor vessel Good Heart, which incurred a turbocharge of damage.
Please turn to slide 5
Speaker Change: Eurodrive fleet consists of 13 vessels, including 5 Panamax dry bulk carriers, 5 Ultramax vessels, 2 Camsar Maxis, and a Supermax dry bulk carrier.
Speaker Change: Our 13 dry bulk carriers have a total cargo capacity of about 1 million deadweight tons and an average age of 13 and a half years.
Speaker Change: I'd like to remind you that Eurodry owns 61% of the entities that own Motobestos, Christos K. and Maria. The remaining 39% is owned by owners represented by NRP Project Finance, otherwise referred to as the NRP Investors.
Speaker Change: with a daily rate ranging between $7,750 to $18,500 per person.
Speaker Change: The wide range of charter rates reflects the importance of positioning of ships during these difficult times.
Speaker Change: Turning to slide 8, we go over the market highlights for the 3rd quarter ended September 30th, 2024 up until recently.
Speaker Change: In Q3 2024, Panamax vessels experienced a moderate decrease in both one-year time charter and spot rates.
Speaker Change: The average one-year time charter rate for a Panamax vessel stood at $14,923 per day for the quarter, dropping to $14,100 per day by the end of September.
Speaker Change: Similarly, the average spot rate was $20,563 per day, with a slight decline to $11,500 per day on the last day of Q3.
Speaker Change: The market has since declined even further, as evidenced by the rate shown at the end of last week across these three dry-bulk segments.
Speaker Change: Time-shutter rates for Panama Expresses have dropped a further 4.5% while spot rates are also down 12.5%
Please now turn to slide 9.
Speaker Change: The IMF's latest update from October 2024 projects stable yet somewhat underwhelming global economic growth, with unchanged forecasts hovering around similar levels across 2024 and 2025.
Speaker Change: While the U.S. has shown resilience with upgraded growth projections, other advanced economies, particularly in Europe, have seen either downgrades or stagnant growth outlooks.
Speaker Change: This mixed landscape underscores the need for careful management of sectoral dynamics and monitored policy to help maintain stability and ensure a soft landing, particularly as disinflation continues globally.
Speaker Change: However, many regions still grapple with services price inflation, highlighting ongoing pressures within specific sectors.
Speaker Change: Emerging markets continue to drive global growth, led by India, the ASEAN Five Countries and still China.
Speaker Change: India is projected to grow by 7% in 2024 and a further 6.5% in 2025, supported by significant investment, strong demand in technology and infrastructure expansions.
Speaker Change: Southeast Asian countries are also positioned for solid growth, benefiting from regional demand and investment momentum.
Speaker Change: In parallel, Clarkson's forecast for dry bulb trade demand in 2024 reflects the dramatic effect of tonne miles from the Red Sea and Panama Canal disruptions.
Speaker Change: Assuming these disruptions is, almost entirely, 2025's forecast showed trade demand growth of just 1.3% for the year, from 5.2% in 2024 and 1% projection in 2026.
Speaker Change: Recent projections indicate a cautious outlook for the driver sector, aligning with the global economic landscape.
Speaker Change: All the above mentioned IMF projections and Clarkson projections are however very uncertain as we remain mindful of key macro risks including the aftermath of the US elections and evolving global geopolitical tensions which could impact medium and longer term growth prospects.
Speaker Change: Please turn slide 10. Let's now review the current state of the order book in the dry bulb sector.
Speaker Change: As you can see, the current order book stands at 10.3% of the fleet, a slight increase from the 2021 low of 7%, indicating a modest uptick in new contracts.
Speaker Change: Despite this rise, the order book remains one of the lowest in historical terms.
Speaker Change: Factors such as low steaming, heightened scrapping rates, and stricter environmental regulations could constrain the available barter fleet in the coming years, thus supporting rates as supply tightens relative to demand.
Speaker Change: Turning to slide 11, let us now look into the supply fundamentals in a bit more detail.
Speaker Change: As of November 2024, the total dry bulk vessel operating fleet was 13,600 vessels.
Speaker Change: According to Clarkson's latest report, new deliveries as a percentage of total fleet are expected to be 3.6% in 2024, 3.5% in 2025 and 5.9% in 2026.
Speaker Change: The actual feed growth is of course expected to be lower than the aforementioned figures due to scrapping and slippage.
Speaker Change: Please turn to slide 12, where we summarize our outlook for the dry bulk market.
Speaker Change: Dry bulk rates have continued to decline, with some hitting year-to-date lows.
Speaker Change: The anticipated fourth quarter upswing has not materialized, and average trip charter rates for Ultramax and Comsomag vessels are down by 30% year-over-year.
Speaker Change: Earlier market support from Chinese stockpiling of iron ore and coal, as well as disruptions in trade routes, is now fading, as supply now starts to exceed demand.
Speaker Change: And therefore, a few weeks ago, China announced a further five-year stimulus package totaling $1.4 trillion to tackle their government debt problems.
signaling also that more economic support would come next year.
Speaker Change: This could indeed provide the necessary fuel to boost markets in 2025.
Speaker Change: The Panama Canal passage is running more effectively and efficiently following the resolution of the drought issues, leading to an increased supply of ships.
Speaker Change: The Suez Canal situation remains stable, although there is limited visibility on when a full return to normalcy can be expected.
Speaker Change: On the supply side, new ship orders remain limited, primarily due to constrained shipyard slots and the ambiguity around the fuel of the future.
Speaker Change: Many of the orders being placed are now structured as methanol or LNG ready, so that they can operate on alternative fuels if necessary, with less need for conversions.
Speaker Change: As mentioned, the order-book-to-fleet ratio is still near historical lows, providing a potential setup for rate recovery if demand improves.
Speaker Change: Additionally, upcoming emissions regulations, like the EXI, CII, EU ETS, QLEU, etc. could tighten supply through increased scrapping or reduced operating speeds for certain vessels.
Let's now turn to slide 13.
As of November 15th, 2024
Speaker Change: The one-year time charter rate for Panama exceeds, with a capacity of 75,000 deadweight tons, stands at $13,475 per day, slightly below the historical median of $13,700 per day, by about 2%.
Speaker Change: This level is significantly above the 10-year historical median of $15 million and the 10-year average of about $17.5 million.
Speaker Change: These trends highlight a still resilient second-hand market despite the 10 to 15 percent correction we have witnessed already.
Speaker Change: We believe the second-hand prices may soften a bit more to align with current charter rates if rates remain at current levels in the following months.
Speaker Change: Without, however, we will see significant further drops as this will be constrained by new building prices.
Speaker Change: There we feel there is not much space to give as the yards are full into 2028 and in no need to accept projects at low prices.
Speaker Change: Additionally, building costs have also risen, thus placing a floor to how much the yards could afford to reduce prices, even if they wanted to.
Speaker Change: In this context, we are evaluating our opportunities to further grow the company with investments that will enhance our shareholder future returns.
Speaker Change: And with that, let me pass the floor over to our CFO, Anastasios Aslidis.
Anastasios Aslidis: Thank you very much Aristidis. Good morning from me as well, ladies and gentlemen.
Anastasios Aslidis: Over the next four slides, I will give you an overview of our financial highlights in the third quarter and nine months of 2024 and compare them to the same periods of last year.
Anastasios Aslidis: I will not try to go through every lambda in the slides that will follow, but rather concentrate on the main points.
Let's start and turn to slide 15.
Anastasios Aslidis: during the third quarter of last year, and that increase was primarily the result of the increased average number of vessels operated during the third quarter of this year compared to last.
Anastasios Aslidis: Interest and other financing costs for the third quarter of 2024 amounted to about $2 million, compared to $1.6 million for the same period of last year.
Anastasios Aslidis: Interest expense during the third quarter of this year was higher mainly due to the increased amount of debt we carried during the period as compared to last year.
Anastasios Aslidis: The difference again being contributed to lower cost balance sheet that we had during the two periods.
Anastasios Aslidis: Basic and diluted loss per share attributable to controlling shareholders for the third quarter of 2024 was $1.53.
It should be noted.
Anastasios Aslidis: If we adjust our result for the unrealized loss or earnings from interest rate swaps, we get adjusted loss per share of $1.42 for the third quarter of 2024 compared to a loss of $0.24 per share for the same period of last year.
Anastasios Aslidis: Let's now look at the numbers for the corresponding 9-month periods ended September 30, 2024 and compare them to the same period of last year.
during the period of this year compared to last.
Anastasios Aslidis: Interest and other financing costs for the first 9 months of 2024 amounted to about $6 million, compared to $4.4 million for the same period of 2023.
Anastasios Aslidis: The same reason, we had more, higher levels of outstanding debt, outstanding during that year. And interest income for the first nine months of 2024 was $78,000 versus $734,000 during the first nine months of 2023.
Anastasios Aslidis: Adjusted TBIDA for the first nine months of this year was $7.6 million compared to about $8 million achieved during the first nine months of 2023.
Anastasios Aslidis: Again, calculated on about 2.7 million of basic diluted weighted average number of shares outstanding compared to a loss per share of $1.17 for 2023.
Unknown Executive, Anastasios Aslidis
Speaker Change: I will repeat here my reference to dry docking expenses for the 9-month period.
Speaker Change: which accounts for the majority of the difference in the results.
Speaker Change: Let's now turn to slide 16 to review our fleet's performance.
Speaker Change: We will start our review by looking at our fleet utilization rates for the third quarter and nine-month period of 2024 and compare them to 2023.
Speaker Change: As always, we provide the breakdown of our utilization rate into commercial and operational.
Speaker Change: I will not go through the numbers in detail, but just highlight.
Speaker Change: range between 98.5% and 99%, except for a period in 2023, specifically the second quarter, during which a vessel incident resulted in higher or higher tide.
Speaker Change: Regarding the rest of the figures in this slide, I would like to highlight that on average,
Speaker Change: earning on average a time-charter equivalent rate of $13,339 per day for the 9-month period and about $13,105 for the third quarter of this year.
Comparatively.
Speaker Change: The final point I would like to make on this slide is to point you to the last line of the table, the one that shows our cash flow breakeven levels.
Speaker Change: During the 9 months of 2024, our cash flow breakeven level was around $13,788 per vessel per day, while it was about $15,145 for the third quarter of the year.
Speaker Change: Please remember this number when we'll discuss the expected cash flow break-even level for the next 12 months.
to review first our debt profile.
Speaker Change: As of September 30th, 2024, Eurodry's outstanding debt stood at 94.6 million, and on a pro forma basis, including recent refinancing, we concluded, at 110.6 million.
Speaker Change: The repayment schedule outlined in this chart is thus adjusted for the refinancing we completed.
Speaker Change: Repayments for 2025 and 2026 are between 12 and 13 million dollars each year, and only in 2027 we have to repay a significant balloon payment of about 10 million dollars, which as we have done several times in the past, we would have the option to refinance.
Speaker Change: A quick comment on this slide about the cost of our debts.
Unknown Speaker 1-1-1
Speaker Change: Assuming a 3 month off rate of about 4.5%, the estimated cost of our senior debt is approximately 6.69%.
Speaker Change: However, if we factor in our interest rate swaps, the portion of the debt that has been covered under interest rate swaps, the effective cost of our senior debt decreases a bit to around 6.54 percent.
Speaker Change: positioning to manage our interest expenses more effectively amid market rate fluctuations. And this average cost of debt will further come down as the refinancings I mentioned were concluded with margins below our average margins.
Speaker Change: At the bottom of this slide, we can see our projected cash flow breakeven level for the next 12 months that I referred to in the previous slide, broken down into its various components.
Speaker Change: What is important to note is that we expect our cash flow breakeven level to be around $11,766 per vessel per day.
Speaker Change: And that is really due to much lower scheduled dry docking expenses of $468 per vessel per day that we anticipate for the next 12 months. We have only one dry docking schedule and one in-water survey.
Speaker Change: and the difference of about $3,300 is fully reflected in the cash flow breakeven levels that we expect.
Speaker Change: Let's now conclude our presentations by moving to slide 18, where we can see some highlights from our balances in a simplified way.
This slide offers a snapshot of our assets and liabilities.
Speaker Change: As of September 30, 2024, cash and other current assets stood at about $20.3 million in our balance sheet.
Speaker Change: The book value of our vessels was approximately $194.4 million, resulting in total book value of assets of $214.7 million.
Speaker Change: Minority interest of $8.7 million, which in turn results in book shareholder's equity of about $103 million, translating to about $37 per share.
Speaker Change: But also, it should be noted that the market value for our vessels is higher than their respective book value.
Speaker Change: which compared to our share price of $15 per share illustrates the appreciation potential our shareholders have if market or other factors trigger a reduction of this discount.
Speaker Change: And with this, I would like to turn the floor back to Aristidis to continue the call.
Thank you, Tasos.
Aristidis: Let me open up the floor for any questions that you may have.
One moment, please, while we poll for questions.
Aristidis: Our first question comes from Mark Reitman with Noble Capital Markets. Please proceed with your question.
Yes, hi.
Speaker Change: on trip time charters, short charters, which are, you know, anything between 15 to 90 days at the current levels. Of course,
And then just secondly...
Speaker Change: We will not be securing longer charters at these rates because we think and hope that in 2025, after the new year, we will at some point see higher charter rates.
I mean, our scientists...
Unknown Executive, Anastasios Aslidis, Unknown Executive, Anastasios Aslidis, Unknown Executive,
Speaker Change: then during that period we pay the mortgage expenses ourselves. So they fluctuate in a less standard way.
Okay.
Unknown Speaker Okay.
Speaker Change: I mean, I would use it for modeling purposes, I would use a percentage of the previous results.
Modeling Forward
Speaker Change: Actually, I think, you know, for modeling purposes, you would just use the time-sharper equivalent that you suppose that the vessels will get.
and neglect that.
Okay, okay.
Speaker Change: I think that's what we had done. But so just lastly, so fourth quarter, looks like that'll be a very strong quarter. You won't have the dry docking expenses. Could you just, I know you touched on it, I didn't catch it all, but could you just talk a little bit about dry docking for 2025? Do you think you'll, if rates are low in the first quarter, would you pull any forward? Or just, if you could just kind of reiterate the dry docking expectations in 2025?
In 2025, we have only one scheduled dry dock.
for Santa Cruz
Speaker Change: and we have a dry dock for one of our new buildings, it's not actually a dry dock, we have a survey, a special survey for one of our new buildings which will pass in water.
Speaker Change: So, that's why we have a very minimal dry docking expense in the 4 or 12 month break even expectation.
Okay. Thank you very much. I really appreciate it.
Thank you very much. Bye.
Speaker Change: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad.
One moment, please, while we poll for questions.
Speaker Change: Our next question comes from Tate Sullivan with Maxim Group. Please proceed with your question.
Speaker Change: Hi, thank you. I was reviewing it. It was a little about a year ago that you formed the partnership with NRP project finance
Speaker Change: Can you give us an update on that joint venture and are you still looking to do more?
Speaker Change: and I just noticed that are you still flowing out some income to the joint venture? Just any update is appreciated.
Speaker Change: We have regular meetings and everything is running smoothly. We have said that we are there to look at other projects together and it is something that may happen.
Anastasios Aslidis: and indeed, for the financials, Tasso, you can say a few things, perhaps.
Anastasios Aslidis: We are fully consolidating their figures in our fleet and we report their portion as minority interest both on the income and on the balance sheet. The project in isolation so far has recorded some losses but that's why we brought forward the dry dogs we expect and we hope that the project will turn quite profitable over the next year.
Speaker Change: Thank you. And then just globally, is the current weakness in dry bulk in most trade routes or is there better strength in Europe versus Asia, or can you just comment on what that balance is going forward, please?
Speaker Change: And the fact that it has been slow has affected our expectations and I think the biggest part of the market. But you know, ships are ships, they float around, they go wherever, they can find the best rates.
Speaker Change: Even if there were imbalances, they balance out relatively quickly. I wouldn't say that there is a particular area of the world currently that is much stronger than any other.
Okay.
Speaker Change: Thank you for your comments. Have a good rest of the day.
Thank you. Thank you.
Speaker Change: Our next question comes from POFRAD with Alliance Global Partners. Please proceed with your question.
Hi, good afternoon Aristides and good afternoon Tassos.
Speaker Change: Can, Tontos, when you review the refinancings that you did, it looks like you repaid $10 million and you have new loans for $26 million, hence the increase in cash of about $16 million. Can you just broadly describe the...
Speaker Change: Yes, I think we have, I mean I can give you a little more detail after the call if you want, but we have, we increased, we relevered four of our ships into loan facilities.
Speaker Change: Extending the maturity 5 and 6 years respectively, going to 2029 and 2030 at a little lower margin. I don't have on the top of my head the balloons, but I'll be happy to provide you that information.
Speaker Change: Okay, I'll follow up with you. And then if you look at, I think you, you talked about the joint venture with NRP and potentially some other opportunities you're looking at. How does, how did those potential opportunities factor into your
Unknown Executive, Anastasios Aslidis
Anastasios Aslidis: in this quarter, maybe 1000 shares or so. Can you just talk about your stock buyback program relative to your other capital allocation priorities?
Cerefone
Speaker Change: Yes, Paul, this is, you are right, there has been very little buybacks up to now in this, in the last quarter.
Speaker Change: It should be. So, on the one hand, we would like to proceed with further buybacks.
Speaker Change: to decide, you know, how really we will go along with all that. Unfortunately, the resources are not unlimited, so we can do both very heavily. But we will see. We will let you know how we proceed.
Speaker Change: I wanted to add that the stock buyback is limited by certain regulatory factors and we cannot execute more than what we have been already executing. There is up to 25% of the average volume that we can buy and certain other things that really
I think also...
Speaker Change: Also the main reason is that indeed the liquidity in the stock is not that high, so that makes it a bit less. We could have done more, obviously, but you know, having a not very liquid stock and thinking about investing some of our funds.
Speaker Change: Yeah, just to confirm though, Aristides and Tasos, the buyback program was active in the fourth quarter as the stock went down.
Speaker Change: He was active but I mean in the fourth quarter because weeks into the fourth quarter we stopped doing it because it comes within our trade window, our closed window, but it was a very limited amount of shares that we bought back.
Speaker Change: Yes, I always view it as more of a compliment, not a number one priority, but I just wanted to make sure I understood that it is, you know, you do feel that at roughly in the 15s or the mid-15s, the stock is undervalued and that you're...
Speaker Change: you're more active than you have been, obviously subject to the constraints of the average volume and everything, but you're more active now than you have been over the course of the last three quarters.
That, I think, is the first statement.
Okay. And then, um,
Speaker Change: I think I'll follow up, Chancellor, on the, you know, the details on the, the
Unknown Executive, Anastasios Aslidis
It's 16 million incremental.
Speaker Change: Okay, on top of the $10 million that was, you know, due in the quarter, so, right? Oh, we refinanced even loans that weren't due in this quarter.
Okay.
Sounds good. Thanks so much.
You're welcome, Paul.
Thank you, Paul.
Speaker Change: We have reached the end of the question and answer session. I'd now like to turn the call back over to Aristides Pittas for closing comments.
Speaker Change: Thank you all for listening to us today. We will be back to you in three months' time. Thank you.
Speaker Change: Thanks, everybody. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your...
Participation.
Thank you.