Q3 2024 Euroseas Ltd Earnings Call
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Speaker Change: Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas conference call on the third quarter 2024 financial results.
Speaker Change: We have with us Mr. 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 in 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 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.
Speaker Change: Please be reminded that the company announced their 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, EuroC's will be making forward-looking statements.
Speaker Change: These statements are within the meaning of the Federal Securities Laws.
Speaker Change: 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.
I kindly draw your attention to slide 2.
Speaker Change: 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.
Mr. Pittas: And now I would 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. Together with me is Anastasios Aslidis, our Chief Financial Officer.
Mr. Pittas: The purpose of today's call is to discuss our financial results for the quarter and nine-month period that ended on September 30th, 2024.
Mr. Pittas: Let us turn to slide 3 of the presentation to go over our income statement highlights.
Mr. Pittas: For the third quarter of 2024, we reported total net revenues of $54.1 million and a net income of $27.6 million, or $3.95 per diluted share.
Mr. Pittas: Adjusted net income for the quarter was $27.4 million, or $3.92 per diluted share.
Adjusted EBDA for the period was $36.1 million.
Mr. Pittas: A reconciliation of adjusted EBITDA to net income is presented in the press release that was released earlier today.
Mr. Pittas: Tasos Aslidis will go over our financial highlights in more detail later on in the presentation.
Mr. Pittas: As part of the company's common stock dividend policy, our Board of Directors declared a quarterly dividend of 60 cents per common share for the third quarter of 2024, which will be payable on or about December 16th to shareholders of record on December 9th.
Mr. Pittas: The annualized dividend yield of our stock remains at around 5.7% based on our current share price.
Mr. Pittas: I love November 20th, 2024, and since the initiation of our repurchase program in May 2022, we have repurchased 414,000 shares of our common stock in the open market for a total of about $8.8 million.
Mr. Pittas: Our share repurchase plan of up to $20 million was extended for another year in May 2024 and we will continue to make measured use of it at management discretion depending on the level of our stock price, aiming to enhance long-term shareholder values.
Thank you for watching!
Mr. Pittas: Please turn to slide 4, where we discuss our recent developments, including an update on our sales and purchase, chartering and operational highlights.
Mr. Pittas: On the S&P front, we are pleased to announce the signing of a contract for the construction of two LNG-ready, eco-designed, fuel-efficient container ships with a capacity of approximately 4,300 TEU each.
Mr. Pittas: These vessels will be built at Jiangxi Shipbuilding Company Ltd. in China and are scheduled for delivery in the fourth quarter of 2027.
Mr. Pittas: The total investment for each vessel is approximately $60 million, with the financing structure as a combination of debt and equity.
We paid from our available liquidity the first 15% installments.
Further installments start coming due in 2026.
These vessels have echo engines and are LNG ready.
2025 respectively.
Mr. Pittas: Upon delivery, both vessels are set to commence charters for a minimum of 34 months and up to a maximum of 36 months, each at a highly favorable rate of $32,000 per day.
Mr. Pittas: Continuing on our chartering developments, Motovessel Synergy Busan has been fixed on an attractive time charter for a minimum of 36 months up to a maximum of 38 months at a rate of $35,500 per day, commencing in December 2024.
Mr. Pittas: Also, Motovessel Tender Soul has secured the charter for a minimum of 34 months, maximum 36, at $32,000 per day, starting in December 2024.
Mr. Pittas: In addition to these three-year charters, we have been able to fix or extend expiring charters for some of our smaller and elder vessels at very attractive rates for periods ranging between 11 and 12 months.
Please see the presentation for more details.
Mr. Pittas: Regarding dry dockings, Motovessel Joanna completed her scheduled dry dock over a period of 43 days from September 20th to November 2nd, after which she commenced her new charter which had been secured since last quarter.
Mr. Pittas: Please turn to slide 5 for an update on our current fleet profile.
Mr. Pittas: A current fleet is comprised of 23 vessels, including 16 feeder container ships and 7 intermediate container carriers, with a total carrying capacity of just under 67,000 TEU and an average age of 14 years.
Mr. Pittas: Turning to slide 6, you can see the 4 vessels that are currently under construction, 2 of which are to be delivered as I mentioned earlier, in January 2025.
Mr. Pittas: The other two intermediate container ships are to be delivered in the fourth quarter of 2027.
Mr. Pittas: After the delivery of these two feeder and two intermediate container ships, our fleet will consist of 27 vessels with a total carrying capacity of approximately 81,000 TEU.
Mr. Pittas: Let's now turn to slide 7 to see our entire employment profile.
Mr. Pittas: The recent charters helped improve the visibility of our expected cash flows, and as you can see from the slide, we have now secured strong charter coverage over the next two years, with approximately 70% of our fleet fixed for 2025 and about 35% fixed for 2026.
Mr. Pittas: This robust charter coverage at these very profitable rates assures us of significant profitability through 2025 and 2026.
Mr. Pittas: Let's now move to slide 9 for a broader market review.
Mr. Pittas: Based on the development of six 12-month time charter rates over the past 10 years, as presented by Clarkson's, we see that in the third quarter of 2024, we witness the robust recovery in containership charter rates across all segments of interest.
Mr. Pittas: For example, the 6-12 month charter rate for a 2,500 TEU container ship reached approximately $30,750 per day, more than triple the $9,270 per day recorded at the close of 2023.
Mr. Pittas: Notably, this figure is also nearly double the 10-year average of approximately $16,000 per day.
Mr. Pittas: This upward trajectory is consistent across both smaller and larger vessel sizes, reflecting favorable comparisons to historical benchmarks and underscoring the resilience and strong recovery of the market.
Mr. Pittas: Moving on to slide 10, we go over some further market highlights. In the 3rd quarter of 2024, 1-year-time SATA rates experienced a strong upward trend across all segments, reflecting a 40% increase in average SATA rates compared to Q2 2024.
Mr. Pittas: This increase was driven by the tightening supply in larger vessel sizes and the reduced availability also in the feeder sectors.
Mr. Pittas: However, in October and November to date, we've seen a slight easing in rates for smaller ships up to 2500 TEU, though no such correction is evident on the larger sizes.
Mr. Pittas: The Red Sea region, of course, continues to play a critical role in shaping the container market outlook for the remaining couple of months of 2024, and rerouting is also expected to continue through 2025.
despite the notable increases we saw within the year.
Mr. Pittas: New building prices saw a 2.6% increase over the same period, reflecting sustained high levels due to cost inflation and lengthy yard commitments, with new slot availability now extended beyond 2028.
Mr. Pittas: A fresh wave of new building orders spurred by this year's profitable market conditions has further extended CPR's backlogs.
As of November 4th, the idle fleet
stands at 0.2 million TEU or 0.7% of the fleet.
Mr. Pittas: A stark contrast to the peak of 0.8 million TEU in February 2023.
Mr. Pittas: This decline in idle capacity, which is largely composed of sanctioned Iranian ships, signals near-total fleet utilization.
Mr. Pittas: Recycling activity has slightly picked up, but with still a negligible 55 vessels totalling less than 80,000 TEU having been sent to scrapyards year to date.
Mr. Pittas: Given that about 25% of the sub-8000 TEU fleet is over 20 years old, we anticipate recycling volumes to increase if and when market conditions soften.
Mr. Pittas: Scrapping prices eased slightly in Q3 to approximately $500 per lightweight ton, though they remain roughly 25% above 2019 levels.
The fleet overall has grown in 2024 by 9% year-to-date.
Please turn slide 11.
Mr. Pittas: The IMF's latest update from October 2024 projects stable yet somewhat underwhelming global economic growth, with forecasts remaining the same for 2025 as well, around 3.2%.
Mr. Pittas: The outlook remains relatively balanced, though risks of inflation not easing further significantly have resurfaced, primarily driven by potential trade or geopolitical tensions that a new Trump administration may result in.
Mr. Pittas: While the U.S. has shown resilience with upgraded growth projections, according to the IMF, other advanced economies, particularly in Europe, have seen either downgrades or stagnant growth outlooks.
Mr. Pittas: This mixed landscape underscores the need for careful management of sectoral dynamics and monetary policy to help maintain stability and ensure a soft landing.
Mr. Pittas: Emerging markets continue to drive global growth, led by India, the ASEAN five countries, and still China.
while China's growth appears to be
Mr. Pittas: slower than previously anticipated at 4.8% this year and 4.5% next year. The extra stimulus recently announced may boost productivity growth.
Mr. Pittas: India is projected to grow at 7% in 2024 and a further 6.5% in 2025, supported by significant investment, strong demand in technology and infrastructure expansions.
Mr. Pittas: Southeast Asian countries are also poised for solid growth, benefiting from the regional demand and investment momentum.
Mr. Pittas: According to Clarkson's data, containerized trade demand for 2024 is projected to increase to 17.9%.
Mr. Pittas: primarily because of the uplift effect of 10 miles from the Red Sea rerouting.
Mr. Pittas: This bump in the demand will not increase further in 2025 but neither reverse swiftly as Clarkson suggested in the previous quarter.
Mr. Pittas: Now, Clarkson forecasts trade demand continuing to grow in 2025 at 3.1%.
Mr. Pittas: Looking ahead to 2026, a more modest growth of 2.2% is anticipated.
Mr. Pittas: Please turn to slide 12 where you can see the Total Fleet Age Profile and Container Support Workbook.
Mr. Pittas: The container ship fleet is relatively young, with most vessels under 15 years old and only 11% of the fleet over 20 years old.
Mr. Pittas: As of November 2024, the order book as a parentage of the fleet is backed up at around 25%.
Mr. Pittas: Turning however on to slide 13, we go over the Fleet Age Profile and Order Book for ships in the 1000 to 3000 PEU range.
Mr. Pittas: These sizes of vessels are the backbone of our operations and were the primary focus of our new building program was.
The order book here currently stands at only 4%.
Mr. Pittas: According to Clarkson's, new deliveries were projected to be approximately 8% for 2024, but the vast majority of these ships has already been delivered and very few more ships are to be delivered this year.
Mr. Pittas: Also, the percentage of new deliveries is expected to drop to 1.7% in 2025 and 1.2% in 2026 and beyond, suggesting that going forward we will have minimal deliveries in this size segment.
Mr. Pittas: With over 50% of the fleet of this size segment being over 15 years old, we are anticipating a significant reduction in the fleet size in the coming years.
Mr. Pittas: A similar picture of very limited new buildings of just 5% of the fleet and extremely high number of vessels over 15 years old of 60% exists in the other side's range where our company is very active, the 3,000 to 6,000 TU.
This data is evident in slide 14.
Mr. Pittas: The order book is predominantly focused on large container ships with significant capacity growth expected in those vessel sizes utilized on the main lane routes.
Mr. Pittas: This increase in main lane volumes drives greater demand for regional distribution by feeder vessels.
Mr. Pittas: highlighting the critical role feeders play in supporting the overall global shipping network.
Mr. Pittas: The aging of the feeder and intermediate size container ship fleet is also even more pronounced through the percentage of vessels exceeding 20 years, which is on average about 25% of the fleet.
in these sizes.
Mr. Pittas: All these ships are prime candidates for scrapping in case there is a slight correction of rates, also due to the new stringent environmental regulations.
Mr. Pittas: Thus, it is highly likely that the fleet capacity in these segments will decline, in contrast to the anticipated growth in the larger vessel categories and the overall fleet.
Anastasios Aslidis, Symeon Pariaros
Moving on to slide 15, we summarize our views.
Mr. Pittas: The container shipping markets have shown strong momentum throughout 2024, fuelled by the disruptions in the Red Sea and robust demand across key trade routes, particularly to developing economies.
Mr. Pittas: Both charter and freight rates have remained elevated, with expectations that this trend will persist for the remainder of the year.
Mr. Pittas: Following a summer slowdown, the market has rebounded with fresh vigor, as charters are actively forward-fixing vessels for multi-year charters into 2025, reflecting a positive outlook by the charters.
Mr. Pittas: As we look ahead to 2025 and beyond, the container shipping markets are likely to face some headwinds.
Mr. Pittas: The easing of Red Sea disruptions, when it occurs, may gradually shift dynamics.
Mr. Pittas: But the geopolitical uncertainties in the Middle East make it challenging to predict when the Suez Canal will return to pre-crisis operational levels.
Mr. Pittas: A prolonged adjustment period could allow the market to stabilize smoothly.
Mr. Pittas: While vessel supply is projected to be lower than the record delivery years of 2023 and 2024, it will likely remain above demand, which should lead to a slightly corrective market over the next couple of years.
Mr. Pittas: However, environmental regulations and sustainability initiatives may affect these dynamics, with reduced vessel speeds to lower emissions potentially easing market pressures.
Mr. Pittas: Indeed, the energy transition within the container ship sector continues to progress, though technical and economic challenges are not allowing the pace of adoption of new technologies and fuels to advance as fast as most would wish.
Mr. Pittas: Nevertheless, the growing demand for eco-friendly vessels is expected to drive a premium in charter rates for the more eco-friendly vessels.
Thank you for watching!
Now please turn to slide 16 for my concluding remarks.
Mr. Pittas: The left-hand side slide graph depicts the strengthening in the container ship market throughout the year. As of November 15, 2024,
Mr. Pittas: The one-year time shutter rate for 2,500 TEU container ships stood at $30,750.
Mr. Pittas: Meanwhile, new building prices for these size vessels, also picked up throughout 2024, reflecting consistent demand driven by limited shipyard capacity.
rising construction costs and compliance with environmental regulations.
Mr. Pittas: Over the long term, elevated costs for greener technologies and stricter emission standards are expected to keep new building prices high.
Similarly, second-hand vessel prices have shown a strong recovery.
Mr. Pittas: rebounding from a low of $15 million in late 2023 to $28 million by November 2024 supported by improving market sentiment and robust charter demand.
Mr. Pittas: We are very happy that we placed these orders for these two 4,300 T.E.U. vessels.
Mr. Pittas: As we feel that new building prices do not have much room for correction, and there will be a huge need for replacement of ships of this size in the near future.
Speaker Change: And with that, I will pass the floor to our CFO Anastasios Aslidis to go over our financial highlights in further detail.
Thank you very much.
Thank you very much, Agustin.
Good morning from New Square, ladies and gentlemen.
Speaker Change: Over the next four slides, I will give you an overview of our financial highlights for the third quarter and nine month period ended September 30th, 2024, and compare them as usual to the same periods of last year.
Speaker Change: I will not go through every lambda in the slides that follow, but rather focus on the most important points.
Let's indeed start and turn for that to slide 18.
For the third quarter of 2024, we reported total...
NetReb news
Speaker Change: of 54.1 million, representing a 6.9% increase over total net revenues of 50.7 million.
during the third quarter of 2023.
Speaker Change: A result that was mainly due to the higher number of vessels we operated in the third quarter of this year.
partly offset by lower average charter earnings or vessels earned.
Speaker Change: Interest and other financing costs for the third quarter of 2024 amounted to 3.2 million after detecting capitalized interest of 0.9 million.
Speaker Change: charged on the cost of our new building program, for total interest and other financing costs of $4.1 million.
Speaker Change: compared to 1.0 million for the same period of 2023 after again deducting the imputed, the capitalized interest of 0.9 million charged for the cost of our new building program and this happens because we are self-financing the pre-delivery installments.
Speaker Change: The increase of interest expenses in 2024 is due to the increased amount of debt that we had on our books during the period as compared to last year.
Speaker Change: Interest income for the third quarter of 2024 was 0.7 million compared to 0.4 for the same period of last year.
Thank you for watching!
the third quarter of 2023.
Speaker Change: primarily due to the higher revenues we get for the period as I mentioned above.
Speaker Change: Basic and diluted earnings per share for the 3rd quarter of 2024 were $3.97 and $3.95 respectively.
Speaker Change: calculated on about 7 million basing a diluted weighted average number of social standing
Speaker Change: compared to basic diluted earnings per share of $4.67 and $4.65 for the third quarter of 2023, calculated on about $6.9 million of basic diluted weighted average number of shares outstanding.
Speaker Change: Excluding certain non-recurring, non-cash items from our results, the adjusted earnings attributable to common shareholders
Speaker Change: basically diluted for the same period of last year, a period for which we also excluded the gain on the sale of a vessel.
Speaker Change: A more detailed reconciliation of these adjustments is provided in our press release.
Anastasios Aslidis, Symeon Pariaros
Speaker Change: Let's now look at the numbers for the corresponding nine-month period, ended September 30, 2024, and compare it to last year.
Speaker Change: For the first nine months of this year, the company reported total net revenues of $159.6 million, representing a 13.7% increase.
over Total Net Revenues.
Speaker Change: of 140.3 million during the first nine months of 2023. Again, as a result of the higher number of vessels we own and operated.
Speaker Change: to a lesser degree, in this case, offset by the lower average strata rates of vessel churns.
Speaker Change: Internet and other financing costs for the nine months amounted to $1.5 billion.
to 7.1 million.
Speaker Change: Again, after deducting the imputed capitalized interest of $3.6 million, charged on the financing of the cost of the aerial payments for our new buildings, for a total interest payment on our debt of $10.7 million, compared to $7.1 million for last year again.
after adjusting for the imputed interest.
Thank you.
Speaker Change: This increase, in this case 2, is due to the higher levels of debt we carried in our balance sheet.
Speaker Change: Interest income for the period, for the nine months of 2024, was 1.6 million compared to 0.9 million for the same period of last year.
Speaker Change: Adjusted EBITDA for the first 9 months of 2024 was $102.9 million compared to $91.1 million for the first 9 months of 2023, the increase due to the higher revenues we get for the period.
Speaker Change: Basic and diluted earnings per share for the first nine months of 2024 were $12.75 and $12.66 respectively, calculated on 6.9 and 7 million basic and diluted weighted average number of shares outstanding.
Speaker Change: compared to basic dilute tannins per share of $12.95 and $12.90 for the first nine months of 2023.
Speaker Change: Again, excluding the effect on the income for the first nine months of 2024 of certain non-CAS, non-recurring items.
The Adjusted Earnings Per Share for the 9-Month Periods
Speaker Change: and September 30th would have been $11.57 basic and $11.49 diluted compared to $11.37 and $11.33 basically diluted respectively for 2023.
Speaker Change: a period in which we have excluded also on the sale of a vessel.
Let's now turn slide 19 to show our flit performance.
Speaker Change: We'll start our review by looking at our fleet utilization rates for the third quarter of 2024-2023 and for the equivalent nine-month period.
Speaker Change: As usual, we break down our privatization rate into commercial and operational.
Speaker Change: I will not go through every number here, one by one, but I will only point out
Speaker Change: that our total inflation rate was between 99.2% and 99.8% in 2024 and for the most part of 2023 except the beginning of last year when a vessel of ours had some
So, more technical stuff like that.
For now, that is.
Speaker Change: We own and operated 23 vessels during the third quarter of 2024, earning an average time charter equivalent rate of $26,480 per day, compared to 19 vessels that we operated in the same period of 2023, earning on average $30,074 per day.
Our total operating expenses
Speaker Change: including management fees, G&A expenses, but excluding dry dotting costs, were $7,249 per vessel per day during the third quarter of 2024 compared to $7,692 per vessel per day for the same period of last year.
Speaker Change: If we look further down in the table, we can see the cash flow breakeven rate for the third quarter of 2024, which amounted to $13,629 per vessel per day, compared to the first quarter of 2024.
Speaker Change: to $13,594 per vessel per day for the same period of 2023.
Speaker Change: And finally, if we look at the very last line of the table.
Speaker Change: We can see the common dividend that we paid expressed in dollars per day per vessel. So for the third quarter of this year that amounted to 2013 dollars.
Speaker Change: while for the same period of last year it amounted to $2,012 per vessel per day.
Speaker Change: Quickly reviewing the nine-month figures. For the nine-month period, we owned and operated on average 21.3 vessels.
Speaker Change: earning a time-charter equivalent rate of $28,614 per day compared to 18 vessels for the same period of last year earning on average $29,843 per day.
Speaker Change: Our total operating expenses, again including management fees and G&A expenses, but no dry docking costs, were $7,452.
Speaker Change: dollars per vessel per day in the nine-month period of this year, compared to $7,858 per vessel per day for the nine months of 2023.
Speaker Change: First low breakeven levels for the first nine months of this year 14,743
Speaker Change: compared to $13,853 during the first nine months of 2023. Figures are per vessel per day. And our dividend for the nine months expressed again on a per vessel per day basis, it was $2,163.
for 2024 and $2,134 per vessel per day for 2023.
Euroseas, Euroseas
Speaker Change: After that overview of the fleet highlights, let's move to slide 20 to review our debt profile and our forward cash flow breakeven levels.
Speaker Change: As of September 30th of this year, our total debt stood at approximately 220 million.
Speaker Change: As you can see from the graph on the top left of the slide, in the remaining of 2024, we expect to make loan repayments of approximately $11 million and have a balloon payment of about $1.8 million.
Speaker Change: Furthermore, in 2026 we will have no scheduled balloon payments and we expect to make loan repayments
Speaker Change: We expect to make loan repayments of $16 million and have a balloon payment of about $20 million.
These figures
Speaker Change: do not include two additional financings we have entered into to partly finance the two new buildings we are taking delivery of in early January 2025.
Speaker Change: For those two vessels, we expect to draw 26 million of debt each for a total of 52 million of additional debt, which will add about 4 million per year of incremental repayments.
Thank you for watching!
Speaker Change: 0.13 percent, which if we combine it with the base offer rate of about four and a half percent would result in a total cost of our debt of about 6.63 percent.
We have, however,
Speaker Change: swapped a small portion of our software exposure, about 9%, for fixed rates.
Speaker Change: to a lower base rate, so our overall cost of debt is actually a little lower, it's about $60,000.
6.53 percent and will drop slightly farther when
Speaker Change: The two loans I mentioned earlier that we're going to draw for our new building specials are included in the calculation.
Speaker Change: I would like to draw your attention to the bottom of this slide, where we present the
Speaker Change: of our projected cash flow breakeven for the next 12 months.
Speaker Change: As you can see, we expect that to be around $12,544 per BPL, lower by about $1,000 per day than our 2024 numbers so far, and that is mainly due to lower loan repayments.
Speaker Change: Please note that this figure does include the two vessels and the financing of which we expect to take delivery of in January 2025.
Speaker Change: To sum up my part of the presentation, let's move to slide 21 to review our balance sheet in a simplified format.
Speaker Change: Our assets in our balance sheet include cash and other current assets, advances for vessels under construction, and of course the book value of our assets in the water.
Speaker Change: As of September 30th, 2024, we had cash and other assets amounting to about $94.3 million.
Speaker Change: We had made advances for our new building program of about $36.6 million and we had book value for our assets...
standing around.
450 million resulting in total assets
Speaker Change: in our balance sheet of a book value of about 581 million.
Speaker Change: On the liability side, as I mentioned, as of September 30th, we had debt that stood at $220 million, representing about 38% of the book value of our assets.
Speaker Change: We also had other liabilities, like the fair value of below market shares acquired, and yet other liabilities amounting in total to about 2.8% of the book value for our assets, leaving the rest
around $343 million to be our net book value.
That figure alone indicates that the book value per se
of our fleet to be around $49.
However,
Speaker Change: It is important to highlight that the market value of our fleet
is significantly higher than its book value.
We estimate
Speaker Change: that the Charter adjusted value of our fleet to be around $590 million, that is $140 million more than its book value, adding about $20 per share to the value of our shares, for a total NAV, net asset value per share, in the range of $69 to $70.
11?
Speaker Change: that indicates that our stock, trading recently around $42 per share, represents a significant discount to our net asset value.
Speaker Change: and thus we believe it offers considerable appreciation potential to our shareholders and investors.
Thank you very much.
Speaker Change: Thank you Tasso. Let's now open up the floor for any questions we may have.
Thank you.
We will now be conducting a question and answer session.
Speaker Change: If you'd like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star 2 if you would like to remove yourself from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.
One moment please while we poll for questions. Thank you.
Speaker Change: Thank you. Our first question comes from the line of Mark Reichman with Noble Capital Markets. Pleased to see you with your questions.
Thank you. Good morning.
Speaker Change: I have a question about the two fuel-efficient container vessels that will be delivered in the fourth quarter of 2027. What rates would be required for those vessels to achieve break-even and also if you could provide maybe a little more detail on the financing plans and what are the implications for the remainder of your fleet?
I think that's it.
Yes, Mark.
Speaker Change: If we had something below $20,000 per day for the whole duration, that would be profitable.
Speaker Change: But obviously we are hoping to achieve a better race than that.
and...
Speaker Change: We did pay the down payment 15% on each of the two vessels just last week. The next instalments come with steel cutting which starts in 2026 and the ships will be delivered in 2027. We anticipate that at the end of the day we will end up paying for the ships with a debt of 60-65% and equity of the remaining.
Thank you for watching!
Anastasios Aslidis, Symeon Pariaros
Speaker Change: Okay, thank you. And Euroseas has done a great job, you know, keeping its fleet employed at profitable rates. And I was just wondering, what are your expectations for Diamantis and the Asian Express, whose time charters expire at the end of November and December, respectively?
Speaker Change: Both of these ships obviously will be fixed within the next couple of weeks.
Speaker Change: $13,000 and $20,000 for a year or a year and a half, things like that. We are still not ready to announce something because we are negotiating, but they will be fixed.
Speaker Change: The market is positive and it's helping us, right? So, we've achieved great rates, thank you very much. It's the market, as they say. That's great. Thank you very much.
Thanks Mark.
Speaker Change: Our next question is from the line of Tate Sullivan with Maxim Group. Please proceed with your questions.
Speaker Change: Thank you. Can you expand on the decision to expand the new build effort to larger class ships with TUs of about 4,000? Did you mention it was based on your analysis of that size ship having an older age in the global fleet?
Absolutely. I mean, we have seen that...
Speaker Change: and between 50-60% of the existing fleet is over 15 years old.
So, these newer ships are much more economical.
much more environmentally friendly.
Speaker Change: They have a lot of much nicer attributes than the older ships. We are very confident that there will be the need for this type of vessels.
Speaker Change: And we thought that, you know, we have six 4,500 EU vessels in our fleet, which are, you know, all between 10 and 15 years old.
Speaker Change: And did you say this order is with a new shipyard in China and how did you evaluate its capability and did it have available slots versus South Korea or how did you look at it?
Speaker Change: The shipyard is called the New Yangtze Yangtze Yang, but it is right now the best, I would say, private shipyard in China. It's been established for quite a few years.
Speaker Change: We actually built, well Eurodry built some cancer maxes there 10 years ago. This is one of the best Chinese shipyards. It's not new, despite the fact that the name says New Yangtze Shipyard.
Speaker Change: Thank you, and to confirm, you said the delivery of the two new builds in the first quarter, did you say January 7th and January 8th, and you've been on time for all the other ships it seems like, or can you talk, can you confirm those dates?
Speaker Change: Yes, I can confirm early January. In fact, the ships could have been delivered in November and December, but it was our choice to ask the shipyard to go a bit slower so that, you know, when they are delivered, they are delivered with a 2025 notation rather than a 2024 notation.
Thank you.
Thank you both.
Speaker Change: Our next questions are from the line of POFRAT with Alliance Global Partners. Please receive your questions.
Speaker Change: Good afternoon, Anastasios. Good afternoon. You've covered a lot, but I just wanted to sort of get, if you wouldn't mind giving your rate expectations for the Monica, which is, you know, a 2024 new build that's up for, you know, up for, it's open and starting in either March or May of next year.
you know, makes us to fix it already.
It's really difficult to say at this point.
Speaker Change: Okay, and I assume it's the same thing with the three intermediates that are coming up in the first quarter of next year?
Speaker Change: Which ones? The three intermittent, the Antwerp, the Rhena P, and the Emanuel P.
Speaker Change: Yes, we are in discussions trying to see if we can achieve good rates for big enough periods.
Speaker Change: And there is interest on the ships and we might be able to announce something this side of the year. We will see.
Speaker Change: Okay, so there's more... They don't come through in 2.1, I think because there are optional periods attached, very likely the charters will keep them until...
Speaker Change: the the outer part of the of the optional delivery period
Speaker Change: Okay, Tasos. And then, you know, you're seeing more interest, just to sort of paraphrase, you're seeing more interest in the intermediates that are coming up than the speeders, it sounds like. And then, Tasos, following up on your comment that, you know, they'll keep the option period, that would imply that, you know, the current rates in the low to mid-20s, you know, are attractive for charters and they would hold on to them as long as possible because the renewal rates would probably be higher.
That's right.
Okay.
Speaker Change: And then if we could flip over to the, you know, the deliveries of the first quarter.
Speaker Change: You're financing $52 million, it sounds like, and it sounds like you've lined up the financing. What's the tenor of that debt? Is it five years? Should we assume five years?
Speaker Change: I think it's in one case it's 10 years because in one case we are doing or we're in the process of arranging a Say Lisbeck style financing.
In another case, it's about six years, I think.
Speaker Change: It sounded like it would add about $4 million to amortization, looking at $25 million beyond it. And that includes the lease pay-down too?
Yeah, okay, great
Speaker Change: And then relative to what you're spending, you know, the new bill delivery payments upon delivery, that $52 million, will that finance all that or will that create a little bit of extra cash? Can you give me, I guess, a short way of saying what's the new bill delivery payments that are due in the first quarter of 2025?
Speaker Change: I don't think we have, I think we, that would pretty much finance the remaining amount for the new builds.
Okay, and then...
Speaker Change: Could we just go over the the decision to, you know, build versus buying if you could just sort of talk about what you, whether you assessed what was out there as far as second-hand tonnage. You know, you have a chart in the presentation with, you know, ten-year, ten-year-old assets that are, you know, I think
Speaker Change: pretty attractive relative to new book prices or you know it depends on your your outlook for rates but can you just talk about whether you whether you assess buying something in the second-hand market versus you know committing to a new built
We are always looking at second-hand opportunities.
but recently prices for second-hand vessels have risen substantially.
Speaker Change: But of course other rates have also risen, so we are trying to see if we can find something that we can charter straight along when we buy it for a significant period of time. We haven't been able to find something that makes sense financially in the second-hand market at this stage.
Speaker Change: And of course, the new vessels, they come with many more eco-characteristics than the elder vessels. So, they are significantly better vessels.
and more fit for the future.
Also, we don't think that new building prices...
Speaker Change: can drop significantly from where they are because the cost of building ships has increased.
Speaker Change: Indeed, the yards are making profits, but not substantial profits, not huge profits. There's not much room for them to lower prices. And, of course, they won't for the next couple of years, because all the yards have a huge order book. They are sitting on orders.
Speaker Change: so they will not be inclined to take business at a discount. Therefore, we feel that new building prices will not get much better and the future for these ships seems extremely attractive.
Speaker Change: Great, thank you Aristides. Can you, just to clarify, do you buy these out of, you know, are these resales or are these new orders?
No, no, these are orders that we are placing ourselves.
Speaker Change: Okay, great. So it doesn't, you know, the quarterbook goes up just slightly. And then I think I heard, you know, that you paid a 15% deposit in the fourth quarter, this quarter, you know, $18 million.
Speaker Change: And I thought I heard that you didn't have any progress payments in 2025, but you'll have progress payments in 2026. Can you...
Speaker Change: Do you have handy the amount of progress payments that are due in 2026 and then also if you wouldn't mind what will be due in 2027?
Speaker Change: I'll be happy to provide you with that schedule, I think usually we start making the second payment in the final week.
Speaker Change: when the steel cutting starts, when they actually start building the ship, that would be something that happens late in 2026.
late in 26 or late in 25, Custos?
Speaker Change: late in 26 because it takes about less than a year to actually build the ship the ships are to be delivered in Q4 27 or sometime late in 26
We should have the next payment due.
Speaker Change: Okay, but nothing, you won't have any progress payments in 2025, right? No, that's correct.
Speaker Change: Okay, and so is it 50, you know, roughly, I was estimating, you know, five projects payments of 10% and 50%
Speaker Change: you know, payment upon delivery. Clearly, I was wrong on the deposit level. It's 15 percent, but can you give me the rest of the sort of timeline for how the payments are spread out, you know, what's due upon delivery?
Speaker Change: It's 15% advance payment, then it's three installments of 10% and the remaining is paid upon delivery.
Speaker Change: So, starting from Q4-26, you can say the next payment and then put in another...
Speaker Change: Three 10% and another two 10% in the first half of next year and the repayment at the beginning of the fourth quarter of 2027.
Speaker Change: Okay, that's really, so 45% upon delivery. That's really helpful. And then Tom says, can you just go, you dry docked the Joanna in the third quarter, more in the fourth quarter. Can you just give us an upcoming schedule on dry docks that you plan for 25?
Speaker Change: I think there is very little that is due in 2025. Let me just see if I can pull it up quickly.
So we have...
A couple of verses.
We have definitely one vessel in the third quarter.
Speaker Change: And we have a bunch of in-water surveys. So there isn't really...
Speaker Change: We have, as I see here, on the draft schedule I have in front of me, we have one...
Speaker Change: Dry Dock and a bunch of in waters. I can give you a more detailed schedule offline if you want.
Speaker Change: Okay, is that in the year, Katsos, or you know for 25? The dry dock that I see we have it in the third quarter of 2025. The in waters are various quarters.
Speaker Change: Okay, great. And then I know I had one other question.
That has just split my mind, I apologize.
Speaker Change: Okay, so, you know, if you look at the Aegean Express, you know, it's a 97 built. It sounds like you have interest, but is that a potential sale candidate along with the Diamantis P?
Speaker Change: We can always sell for the right price an old ship or a newer ship. But generally, as you've seen, we feel very comfortable in operating also the elder ships. We think this is one of the advantages of Eurobank our manager, that they can handle elder ships.
Speaker Change: I know they are not extremely popular to the investment community, but we can do a good job with them and in times like this where the markets are strong, it makes sense to generally keep these vessels. Usually you can make more than what you would if you sold them.
Speaker Change: Okay, but at some point in time, probably over the next two years, those are...
Speaker Change: sale candidates or retirement candidates? Of course, of course, if the market corrects, if the market corrects and the dry dock becomes due, it might not make sense to pass another dry dock. So that's really when you, when we sell a ship.
OK.
Speaker Change: You talked about the forward-looking OPEX and break-even levels. Are you seeing any major changes in any of the cost categories? Is there any inflation, whether it's insurance or any other areas, looking into 2025?
Speaker Change: Nothing noteworthy that I can report, I mean there is some cost inflation obviously in every aspect of our lives, including in maintaining the ships, but to the best of my understanding nothing sticks out as we prepare our analysis.
Speaker Change: Certain insurance costs, although not vessel related, like V&O insurance fluctuates and lately has been trading down, for example, but.
I mean, these things could change.
Speaker Change: Thank you. Our next questions are from the line of Clement Mullins with Value Investors Edge. Please proceed with your questions.
Speaker Change: Hi, good afternoon. Most has already been covered, but I wanted to follow up on the recent new build additions. Could you talk a bit about how you expect to market the vessels? Do you expect to secure a contract in the near term? Or are you comfortable waiting until closer to delivery?
Speaker Change: We are very comfortable waiting until closer to delivery. If, however, we are offered, you know, a good rate for a big period, we would proceed with such a charter. But we are very, very comfortable waiting closer to delivery. It's still quite far away, the delivery.
Speaker Change: Makes sense. Yeah, that's helpful. And after recent contract additions, you have solid earnings visibility throughout 2025 and even into 2026.
Speaker Change: Could you talk a bit about how you think about your dividend? Is there any appetite to potentially raise it going forward?
Yes, we discuss dividends regularly in our board meetings.
Speaker Change: And we will have a discussion on that again during our next board meeting when we look at the final results of the year.
Speaker Change: and we will decide at the time. Generally, we always want to give a good dividend, a good dividend yield to our shareholders. We think it's important. So, as long as our financials allow that, we do that.
Speaker Change: Of course, you have to always balance the growth of the company, the new acquisitions, the share repurchase program which we have in place because we feel that we are trading at a discount. So, there are quite a few things that one can do with the liquidity and we will discuss again next quarter.
Speaker Change: Makes sense, yeah. Thanks for the over. That's all from me. Thank you for taking my questions. Thank you.
Speaker Change: Thank you. Our next question is a follow-up from Mark Reichman with Noble Capital Markets.
Speaker Change: Well, I think you may have just answered it, but, you know, with the rate environment remaining positive, so should Euro C's cash flow outlook, so I was just going to ask Tasos if he could maybe discuss the...
Speaker Change: Capital Allocation Priorities for 2025, you know, that, like you mentioned, that balancing between investing in the business, paying out dividends, funding buybacks, you know, etc.
Speaker Change: positive in deciding to look more positively at growing the dividend, but you know it's decisions to be taken at the next board meeting.
and I revert to what I described earlier.
Thank you very much.
Thank you guys.
Speaker Change: Thank you. At this time, I'll pass the floor back to Mr. Aristides Pittas for closing remarks.
Speaker Change: Thank you everybody for listening in and we'll be together with you in three months time to discuss how this very good year for Euroseas ended up finally.
Speaker Change: Thanks everybody. Thank you to everyone who joined us today. This does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines at this time.
Thank you for watching!