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Earnings call: Euroseas reports strong Q3 financials, expands fleet

Published 21/11/2024, 14:54
ESEA
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Euroseas Ltd . (NASDAQ: NASDAQ:ESEA), a provider of container shipping services, has announced a positive financial performance for the third quarter of 2024. The company's total net revenues reached $54.1 million, marking a 6.9% increase from the same period in the previous year. Net income also rose to $27.6 million, translating to $3.95 per diluted share. Adjusted EBITDA saw an uptick to $36.1 million from $34.5 million in Q3 2023. These results come alongside strategic fleet expansions, with Euroseas signing contracts for two new LNG-ready, eco-designed container ships and securing attractive multi-year time charters.

Key Takeaways

  • Euroseas' Q3 2024 net revenues increased by 6.9% year-over-year to $54.1 million.
  • Net income for the quarter was $27.6 million or $3.95 per diluted share.
  • Adjusted EBITDA grew to $36.1 million, up from last year's $34.5 million.
  • The company contracted two new LNG-ready, eco-designed container ships, each with a 4,300 TEU capacity.
  • Attractive multi-year time charters were secured at rates up to $35,500 per day.
  • The fleet has expanded to 23 vessels with a nearly 67,000 TEU total capacity.

Company Outlook

  • Euroseas anticipates continued strong market conditions but remains cautious about potential geopolitical challenges.
  • There is a growing demand for eco-friendly vessels, with the company positioning itself to meet this trend.
  • A potential market correction might occur in the coming years due to vessel supply dynamics.

Bearish Highlights

  • The company notes the possibility of challenges arising from geopolitical uncertainties.
  • Market correction potential is acknowledged due to changes in vessel supply dynamics.

Bullish Highlights

  • The container shipping market is experiencing a robust recovery, with a significant increase in charter rates.
  • Projected containerized trade demand is set to grow by 17.9% in 2024, with expectations for continued growth in subsequent years.

Misses

  • There were no specific financial or operational misses reported for Q3 2024.

Q&A Highlights

  • CEO Aristides Pitas expressed confidence in the demand for new eco-friendly vessels.
  • Pitas emphasized the company's commitment to providing a strong dividend yield to shareholders.
  • The CEO highlighted the container shipping market's momentum, driven by trade disruptions and demand.

Euroseas' strategic developments include the expansion of its fleet with two new vessels, reflecting a total investment of approximately $120 million. The company's financial strategy remains solid, maintaining a quarterly dividend of $0.60 per share and continuing its share repurchase program. With total debt at approximately $220 million, representing about 38% of asset book value, and an estimated charter-adjusted fleet value of $509 million, Euroseas is positioned well above its book value.

The market outlook for the container shipping industry appears favorable, with charter rates for 2,500 TEU containerships more than tripling since the end of 2023. Despite the positive trends, Euroseas remains prudent in its forward-looking statements, acknowledging the potential for market fluctuations and geopolitical uncertainties. The company's focus on eco-friendly vessels aligns with the increasing demand for sustainable shipping solutions, indicating a strategic direction that could benefit Euroseas in the long term.

Full transcript - Euroseas Ltd (ESEA) Q3 2024:

Conference Operator/Moderator: Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas Conference Call on the Q3 2024 Financial Results. We have with us Mr. Aristides Pitas, Chairman and Chief Executive Officer and Mr. Tasos Aslidis, Chief Financial Officer of the company. At this time, all participants are in listen only mode.

There will be a presentation followed by a question and answer session. 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. Pittas, I would like to remind everyone that in today's presentation and conference call, the overseas 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 result in such expectations not being realized. I kindly draw your attention to Slide 2 of the webcast presentation, which has the full forward looking statement, and the same statement was also included in the press release. Please take a moment to go through the whole statement and read it. And now,

: I would like to pass

Conference Operator/Moderator: the floor to Mr. Pittas. Please go ahead, sir.

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the quarter 9 month period that ended on September 30, 2024. Let us turn to Slide 3 of the presentation to go over our income statement highlights. For the Q3 of 2024, we reported total net revenues of $54,100,000 and the net income of $27,600,000 or $3.95 per diluted share.

Adjusted net income for the quarter was $27,400,000

: or $3.92

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: per diluted share. Adjusted EBITDA for the period was $36,100,000 A reconciliation of adjusted EBITDA to net income is presented in the press release that was released earlier today. Tasos Aslidis will go over our financial highlights in more detail later on in the presentation. As part of the company's common stock dividend policy, our Board of Directors declared a quarterly dividend of $0.60 per share per common share for the Q3 of 2024, which will be payable on or about December 16 to shareholders of record on December 9. The annualized dividend yield of our stock remains at around 5.7 percent based on our current share price.

As of November 20, 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 $8,800,000 Our share repurchase plan of up to $20,000,000 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 value. Please turn to Slide 4, where we discuss our recent developments, including an update on our sales and purchase, chartering and operational highlights. On the S and P front, we are pleased to announce the signing of a contract for the construction of 2 LNG ready, eco designed, fuel efficient container ships with a capacity of approximately 4,300 TEU each. These vessels will be built at Jiangxi New Yanxi Shipbuilding Company Limited in China and are scheduled for delivery in the Q4 of 2027. The total investment for each vessel is approximately $60,000,000 with a financing structure that is 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 eco engines and are LNG ready. We also have 2 upcoming newbuilding deliveries, motor vessel Deere (NYSE:DE) Panel and motor vessel Simeon P, which are expected to join our fleet on January 7 January 8, 2025, respectively. 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 $22,000 per day.

Continuing on our chartering developments, motor vessel 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. Also, motor vessel tender Sole has secured the charter for a minimum of 34 months, maximum 36 dollars at $32,000 per day starting in December 2024. In addition to these 3 year charters, we have been able to fix or extend expiring charters for some of our smaller Anelbo vessels at very attractive rates for periods ranging between 11 12 months. Please see the presentation for more details. Regarding dry dockings, motor vessel Joanna completed her scheduled dry dock over a period of 43 days from September 20 to November 2, after which she commenced her new charter, which had been secured since last quarter.

Please turn to Slide 5 for an update on our current fleet profile. Our 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. 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. The other 2 intermediate container ships are to be delivered in the Q4 of 2027. After the delivery of these 2 feeder and 2 intermediate container ships, our fleet will consist of 20 7 vessels with a total carrying capacity of approximately 81,000 TEU.

Let's now turn to Slide 7 to see our entire deployment profile. 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 2 years, with approximately 70% of our fleet fixed for 2025 and about 35% fixed for 2026. This robust charter coverage at these very profitable rates assures us of significant profitability through 20252026. Let's now move to Slide 9 for a broader market review.

Based on the development of 6 to 12 month time charter rates over the past 10 years, as presented by Clarksons, we see that in the Q3 of 2024, we witnessed a robust recovery in containership charter rates across all segments of interest. For example, the 6 to 12 month charter rate for 2,500 TEU containership reached approximately $30,750 per day, more than triple the $9,270 per day recorded at the close of 2023. Notably, this figure is also nearly double the 10 year average of approximately $16,000 per day. 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. Moving on to Slide 10, we go over some further market highlights.

In the Q3 of 2024, 1 year time charter rates experienced a strong upward trend across all segments, reflecting a 40% increase in average charter rates compared to Q2 2024. This increase was driven by the tightening supply in larger vessel sizes and the reduced availability also in the feeder sectors. However, in October November to date, we've seen a slight easing in rates for smaller ships up to 2,500 TEU, though no such correction is evident on the larger sizes. 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. In the Q3, the average secondhand price index rose by approximately 2% over Q2, although prices remain around 50% below the pandemic peaks, despite the notable increases we saw within the year.

Newbuilding 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. A fresh wave of new building orders spurred by this year's profitable market conditions has further extended shipyard's backlogs. As of November 4, the idle fleet stands at 0.2000000 TEU or 0.7 percent of the fleet, a stark contrast to the peak of 0.8000000 TEU in February 2023. This decline in idle capacity, which is largely composed of sanctioned Iranian ships, signals near total fleet utilization. Recycling activity has slightly picked up, but with still a negligible 55 vessels totaling less than 80,000 TEU having been sent to scrapyards year to date.

Given that about 25% of the sub-eight thousand TEU fleet is over 20 years old, we anticipate recycling volumes to increase if and when market conditions soften. 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 to Slide 11. The IMF's latest start date from October 2024 projects stable yet somewhat underwhelming global economic growth, with forecasts remaining the same for 2025 as well, around 3.2%.

The outlook remains relatively balanced, though risks of inflation not easing further significantly have resurfaced, primarily driven by potential trade or geopolitical tensions that the new Trump administration may result in. Whilst 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. This mixed landscape underscores the need for careful management of sector dynamics and monetary policy to help maintain stability and ensure the soft landing.

Emerging markets continue to drive global growth, led by India, the Asian five countries and still China. While China's growth appears to be slower than previously anticipated at 4.8% this year and 4.5% next year, The extra stimulus recently announced may boost productivity growth. 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. Southeast Asian countries are also poised for solid growth, benefiting from the regional demand and investment momentum. According to Clarkson's data, containerized trade demand for 2024 is projected to increase to 17.9%, primarily because of the uplift effect of ton miles from the Red Sea rerouting.

This bump in the demand will not increase further in 2025, but neither reverse swiftly as Clarkson suggested in the previous quarter. Now Clarkson forecasts trade demand continuing to grow in 2025 at 3.1%. Looking ahead to 2026, a more modest growth of 2.2% is anticipated. Please turn to Slide 12, where you can see the total fleet age profile and containership order book. The container ship fleet is relatively young with most vessels under 15 years old and only 11% of the fleet over 20 years old.

As of November 2024, the order book as a parentage of the fleet is back up at around 25%. Turning, however, on to Slide 13, we go over the fleet age profile and order book for 6 in the 1,000 TEU to 3,000 TEU range. These sizes of vessels are the backbone of our operations and where the primary focus of our new building program was. The order book here currently stands at only 4%. According to Klachsons, 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.

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. 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. 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 size range where our company is very active, the 3000 to 6000 TEU. This data is evident in Slide 14. 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.

This increase in main lane volumes drives greater demand for regional distribution by feeder vessels, highlighting the critical role feeders play in supporting the overall global shipping network. The aging of the feeder and intermediate sized 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. 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. 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. Moving on to Slide 15, we summarize our views.

The container shipping markets have shown strong momentum throughout 2024, fueled by the disruptions in the Red Sea and robust demand across key trade routes, particularly to developing economies. Both charter and freight rates have remained elevated with expectations that this trend will persist for the remainder of the year. 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 charterers. As we look ahead to 2025 and beyond, the container shipping markets are likely to face some headwinds. The easing of Red Sea disruptions when it occurs may gradually shift dynamics.

But geopolitical uncertainties in the Middle East make it challenging to predict when the Suez Canal will return to precrisis operational levels. A prolonged adjustment period could allow the market to stabilize smoothly. While vessel supply is projected to be lower than the record delivery years of 2023 2024, it will likely remain above demand, which should lead to a slightly corrective market over the next couple of years. However, environmental regulations on sustainability initiatives may affect these dynamics, with reduced vessel speeds to lower emissions potentially easing market pressures. 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.

Nevertheless, the growing demand for eco friendly vessels is expected to drive a premium in charter rates for the more eco vessels. Now please turn to Slide 16 for my concluding remarks. The left hand side slide graph depicts the strengthening in the containership market throughout the year. As of November 15, 2024, the 1 year time charter rate for 2,500 TEU container ships stood at $30,750 Meanwhile, newbuilding prices for these size vessels also picked up towards 2024, reflecting consistent demand driven by limited shipyard capacity, rising construction costs and compliance with environmental regulations. Over the long term, elevated costs for greener technologies and stricter emission standards are expected to keep newbuilding prices high.

Similarly, secondhand vessel prices have shown a strong recovery, rebounding from a lower $15,000,000 in late 2023 to $28,000,000 by November 2024, supported by improving market sentiment and robust charter demand. We are very happy that we placed these orders for the 2 these 2 4,300 TEU vessels, as we feel that newbuilding 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. And with that, I will pass the floor to our CFO, Tasos Aslidis, to go over our financial highlights in further detail.

Tasos Aslidis, Chief Financial Officer, Euroseas: Thank you very much. Thank you very much, Aristides. Good morning, ladies and gentlemen. Over the next four slides, I will give you an overview for our financial highlights for the Q3 9 month period ended September 30, 2024 and compare them as usual to the same periods of last year. I will not go through everything under 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 Q3 of 2024, we reported total net revenues of $54,100,000 representing a 6.9% increase over total net revenues of $50,700,000 during the Q3 of 2023, a result that was mainly due to the higher number of vessels we operated in the Q3 of this year, partly offset by lower average charter earnings our vessels earned. Interest and other financing costs for the Q3 of 2024 amounted to $3,200,000 after deducting capitalized interest of $900,000 charged on the cost of our new building program for total interest and other financing cost of $4,100,000 compared to $1,100,000 for the same period of 2023 after again deducting the imputed, the capitalized interest of $900,000 charged for the cost of our newbuilding program. And this happens because we're self financing the pre delivery installments. 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.

Interest income for the Q3 of 2024 was $700,000 compared to $400,000 for the same period of last year. Adjusted EBITDA for the Q3 of 2024 increased to $36,100,000 compared to $34,500,000 during the Q3 of 2023, primarily due to the higher revenues we had for the period, as I mentioned above. Basic and diluted earnings per share for the Q3 of 2024 were $3.97 $2.95 respectively, calculated on about $7,000,000 basic and diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $4.67 $4.65 for the Q3 of 2023, calculated on about $6,900,000 of basic and diluted weighted average number of shares outstanding. Excluding certain non recurring, non cash items from our results, the adjusted earnings attributable to common shareholders for the quarter ended September 30, 2024, which have been $3.94 basic and $3.92 diluted compared to adjusted earnings of $4.08 4.07 basic and diluted for the same period of last year, a period for which we also excluded the gain on the sale of a vessel. A more detailed reconciliation of this adjustment is provided in our press release.

Let's now look at the numbers for the corresponding 9 month periods ended September 30, 2024 and compared to last year. For the 1st 9 months of this year, the company reported total net revenues of $159,600,000 representing a 13.7% increase over total net revenues of $140,300,000 during the 1st 9 months of 2023, again, as a result of the higher number of vessels we own and operated. To a lesser degree, in this case, offset by the lower average charter rates our vessels earned. The interest and other financing costs for the 9 months amounted to $7,100,000 again after deducting the imputed capitalized interest of $3,600,000 charged on the financing of the cost of the early payments for our new buildings for a total interest payment on our debt of $10,700,000 compared to $7,100,000 for last year again after adjusting for the included interest. This increase in this case too is due to the higher levels of debt we carried in our balance sheet.

Interest income for the period, for the 9 months of 2024 was $1,600,000 compared to $900,000 for the same period of last year. Adjusted EBITDA for the 1st 9 months of 2024 was $102,900,000 compared to $91,100,000 for the 1st 9 months of 2023, the increase due to the higher revenues we get for the periods. Basic and diluted earnings per share for the 1st 9 months of 2024 were $12.75 $12.66 respectively, calculated on 6,900,000 7,000,000 dollars basic and diluted weighted average number of shares outstanding, compared to basic and diluted earnings per share of $12.95 $12.90 for the 1st 9 months of 2023. Again, excluding the effect on the income for the 1st 9 months of 2024 of certain non cash non recurring items, the adjusted earnings per share for the 9 month period ended September 30, which have been $11.57 basic and $11.49 diluted compared to $11.37 $11.33 basic and diluted respectively for 2023, a period in which we have excluded also the sale of the vessel. Let's now turn to Slide 19 to our fleet performance.

We'll start our review by looking at our fleet utilization rates for the Q3 of 2024, 2023 and

: for

Tasos Aslidis, Chief Financial Officer, Euroseas: the equivalent 9 month period. As usual, we break down our fleet utilization rate into commercial and operational. I will not go through every number here 1 by 1, but I will only point out that our total debt reduction rate was between 99.2% 99.8% in 2024 and therefore the most part of 2023, except the beginning of last year when a vessel of ours had some more technical off hire time. On average, we own and operated 23 vessels during the Q3 of 2024, earning another 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, including management fees, G and A expenses, but excluding dry docking costs were $7,249 per vessel per day during the Q3 of 2024 compared to $7,692 per vessel per day for the same period of last year.

If we look further down in the table, we can see the cash flow breakeven rate for the Q3 of 2024, which amounted to all to $13,629 per vessel per day compared to $13,594 per vessel per day for the same period of 2023. And finally, if we look at the very last line of the table, we can see the common dividend that we paid expressed in dollars per day per vessel. So for the Q3 of this year, that amounted to $2,013 while for the same period, it amount of last year, it amounted to $2,012 per vessel per day. Weekly reviewing the 9 month figures, For the 9 month period, we owned and operated on average 21.3 vessels, 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. Our total operating expenses, again, including management fees and G and A expenses, but not direct operating costs, were $7,452 per vessel per day in the line month period of this year compared to 7,858 dollars per vessel per day for the 9 months of 2023.

Personal breakeven levels for the 1st 9 months of this year, 14,743 compared to 13,853 during the 1st 9 months of 20 23 figures after vessel per day. And our dividend for the 9 months expressed again on a per vessel per day basis, it was $2,163 for 20.24 $2,134 per vessel per day for 2023. 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. As of September 30 this year, our total debt stood at approximately 220,000,000. 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 11,000,000 and save a balloon payment of about 1,800,000.

In 2025, we anticipate loan repayments of approximately 21,000,000 and balloon payments of about 16,250,000. Furthermore, in 2026, we have no scheduled balloon payments and we expect to make loan repayments sorry, we expect to make loan repayments of $16,000,000 and have a balloon payment, I'm sorry, of about 20,000,000 dollars These figures do not include 2 additional financings, which have entered into to partly finance the 2 new buildings we're taking delivery of in early January 2025. For those two vessels, we expect to draw $26,000,000 of debt each for a total of $52,000,000 of additional debt, which will add about 4,000,000 per year of incremental repayments. As of September 30, our senior debt carried an average margin of about 2 0.13%, which we combine it with the base software rate of about 4.5%, which result in a total cost of our debt of about 6.63%. We have, however, swapped a small portion of our software exposure, about 9% for fixed rates to a lower base rate.

So our overall cost of debt is actually lower. It's about 6.53 percent and will drop slightly farther when the 2 loans I mentioned earlier that we're going to offer our new buildings vessels are included in the calculation. I would like to draw your attention to the bottom of this slide, where we present the level and components of our projected cash flow breakeven for the next 12 months. As you can see, we expect that to be around $12,544 per vessel per day, lower by about $1,000 per day than our 2024 numbers so far, and that is mainly due to lower loan repayments. Please note that this figure does include the 2 vessels and the financing of which we expect to take delivery of in January 2025.

To sum up my part of the presentation, let's move to Slide 21 to review our balance sheet in a simplified format. 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. As of September 30, 2024, we had cash and other assets amounting to about $94,300,000 We had made advances for our newbuilding program of about $36,600,000 And we have book value for our assets standing around $450,000,000 resulting in total assets in our balance sheet of a book value of about $581,000,000 On the liability side, as I mentioned, as of September 30, we had debt that stood at $220,000,000 representing about 38% of the book value of our assets. We also had other liabilities like the fair value of below market charges acquired and yet other liabilities amounting in total to about 2.8 percent of the book value for our assets, easing the rest around $443,000,000 to be our net book value. That figure alone indicates that the book value per share of our fleet to be around $49 However, it is important to highlight that the market value for our fleet is significantly higher than its book value.

We estimate that the charter adjusted value for our fleet to be around $509,000,000 that is $140,000,000 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 a level that indicates that our stock trading recently around $42 per share represents a significant discount to our net asset value and thus we believe it offers considerable appreciation potential to our shareholders and investors. With that, I would like to turn the floor back to Aristides to continue the call.

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Thank you, Tacho. Let's now open up the floor for any questions we may have.

Conference Operator/Moderator: Thank you. We'll now be conducting a question and answer session.

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Thank

Conference Operator/Moderator: you. Our first question comes from the line of Mark Reichman with NOBLE Capital Markets. Please proceed with your question.

: Hi, Mark. Thank you. Good morning.

Tasos Aslidis, Chief Financial Officer, Euroseas: See, I had a question

: about the 2 fuel efficient container vessels that will be delivered in the Q4 of 2027. What rates would be required for those vessels to achieve breakeven? 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?

Tasos Aslidis, Chief Financial Officer, Euroseas: I think, yes,

: Mark,

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: I think that assuming a 20 year life for the vessels, you could if we had something below $20,000 per day for the whole duration, that would be profitable. But obviously, we are hoping to achieve better rates than that. We did pay the down payment 15% on each of the 2 vessels just last week. The next installments 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 debt of 60%, 65% and equity of the remaining.

: Okay. Thank you. And Uro Seas has done a great job keeping its fleet employed at profitable rates. And I was just wondering, what are your expectations for Diamantas and the Asian Express, whose time charters expire at the end of November December, respectively?

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Both of these ships, obviously, will be fixed within the next couple of weeks. We are seeing interest in the vessels at levels, I would say, between $13,000 $20,000 for a year or 1.5 years, things like that. We are still not in play ready to announce something because we are negotiating, but they will be fixed. The market is positive and is 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.

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Thanks, Mark.

Tasos Aslidis, Chief Financial Officer, Euroseas: Our next question

Conference Operator/Moderator: is from the line of Tate Sullivan with Maxim (NASDAQ:MXIM) Group. Please proceed with your question.

Tate Sullivan, Analyst, Maxim Group: Thank you. Can you expand on the decision to go into expand the newbuild effort to larger class ships with about TEUs 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?

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Absolutely. I mean, we have seen that feeder and intermediate vessels up to 6,000 TEU vessels, The order book in all those sectors is between 4% to 5%, and between 50% to 60% of the existing fleet is over 15 years old. So these newer ships are much more economical, much more environmentally friendly. They have a lot of much nicer attributes than the older ships. We are very confident that there will be the need for these type of vessels.

And we thought that we have 6, 4000, 4000 TEU vessels in our fleet, which are all between 10 15 years old. And we think that we should order a couple of replacements for them. And did you

Tate Sullivan, Analyst, Maxim Group: say this order is with a ship 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 the place?

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: The shipyard is called the new Yanxingjiang, but it is right now the best, I would say, driver shipyard in China. It's been established for quite a few years. We actually built well, EuroDry (NASDAQ:EDRY) built some Kamsarmaxes 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.

Tate Sullivan, Analyst, Maxim Group: Thank you. And then to confirm, you said the delivery of the 2 new builds in the Q1, did you say January 7 and January 8? And you've been on time for all the other ships, it seems like, or can you confirm those dates?

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Yes, I can confirm early January. In fact, the ships could have been delivered in November December, but it was our choice to ask the shipyards to go a bit slower so that when they are delivered, they are delivered with a 2025 notation rather than a 2024 notation.

Conference Operator/Moderator: Good. Thank you.

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Thank you, Bo.

Conference Operator/Moderator: Our next questions are from the line of Bo Fratt with Alliance Global Partners (NYSE:GLP). Please proceed with your questions.

: Good afternoon, all sweeties. Good afternoon, Tassos. 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 a 2024 new build that's up for it's open and starting in either March or May of next year?

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Correct. It's a bit too early to say for this ship what we will do, Paul, because you've seen these ships get anything from $16,000 to $24,000 a day for a couple of years. So it really will depend on the rates we see starting next year, except if we were to see something very good being offered to us before the end of the year, which makes us to fix it already. But it's really difficult to say at this point.

: Okay. And I assume it's the same thing with the 3 year intermediates that are coming up in the Q1 of next

Tasos Aslidis, Chief Financial Officer, Euroseas: year? Which ones? The 3 intermediates,

: the Antwerp, the Arena P and the Emmanuel P?

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Yes. We are in discussions trying to see if we can achieve good rates for big enough periods. And there is interest on the ships, and we might be able to announce something this side of the year. We will see.

Tasos Aslidis, Chief Financial Officer, Euroseas: Okay. So there is more. They don't come to you in Q1. I think because the optional periods are touched, very likely the charters will keep them until the outer part of the optional delivery period.

: Okay, Cosmos. And then you're seeing more what just sort of paraphrase, you're seeing more interest in the intermediates that are coming up than the feeders. It sounds like and then Todd was following up in your comment that they'll keep the option period, that would imply that the current rates in the low to mid-20s are attractive for charterers, and they would hold on to them as long as possible because the renewal rates would probably be higher. Okay. Okay.

And then if we can flip over to the deliveries in the Q1, you're financing $52,000,000 it sounds like. Are those is that and it sounds like you wind up the financing. What's the tenor of that debt? Is it 5 years? Should we assume 5 years?

Tasos Aslidis, Chief Financial Officer, Euroseas: I think it's in one case, it's 10 years because in one case, we're doing or we're in the process of arranging a sale leaseback style financing. In another case, it's about 6 years, I think.

: 6 years, okay. And it sounded like Tesla (NASDAQ:TSLA)'s at least I heard you say that it would add about $4,000,000 to amortization looking at $25,000,000 beyond and that includes the lease pay down too? Yes. Okay, great. And then relative to what you're spending, the new delivery payments upon delivery, what that $52,000,000 will that finance all that or will that create a little bit of extra cash?

Or can you give me, I guess, a short way of saying, what's the newbuild delivery payments that are due in the Q1 of 'twenty five?

Tasos Aslidis, Chief Financial Officer, Euroseas: I don't think we have I think we that would pretty much finance the remaining amount for the new builds.

: Okay. And then could we just go over the decision build versus buying? If you could just sort of talk about what you whether you assessed what was out there as far as secondhand tonnage? You have a chart in the presentation with 10 year old assets that are, I think, pretty attractive relative to newbuild prices. It depends on your outlook for rates.

But can you just talk about you assess buying something in the 2nd hand market versus committing to

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: a new build? We are always looking at second hand opportunities. But recently, prices for 2nd hand vessels have risen substantially. But of course, charter 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 at this in the secondhand market at this stage. And of course, the new vessels, they come with many more eco characteristics than the older vessels. So they are significantly better vessels and more fit for the future and the immediate future. So that's the reason we are buying new builds. Also, we don't think that new building prices can drop significantly from where they are because the cost of building ships has increased.

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. So they will not be inclined to take business at a discount.

Therefore, we feel that newbuilding prices will not get much better. And the future for these ships seems extremely attractive.

: Great. Thank you, Aristides. Can you just to clarify, do you buy these out of are these resales or are these new orders?

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: No, no. These are orders that we are placing ourselves.

: Okay, great. So it doesn't the the quarter book goes up just slightly. And then I think I heard that you paid a 15% deposit in the Q4, this quarter, dollars 18,000,000 And I thought I heard that you didn't have any progress payments in 2025, but you'll have progress payments in 'twenty six. Can you do you have handy the amount of progress payments that are due in 'twenty six? And then also, if you wouldn't mind, what will be due in 27?

Tasos Aslidis, Chief Financial Officer, Euroseas: Yes. I'll be happy to provide you with our schedule. I think usually we start making a second payment is kind of when the steel cutting starts, when they actually start building the ship. That would be something that happens late in 2026.

: Late in 'twenty 6 or late in 'twenty 5, Katus? Late in

Tasos Aslidis, Chief Financial Officer, Euroseas: 'twenty six because it takes about less than a year to actually build the ship. The ships are to be delivered in Q4 'twenty seven or sometime late in 'twenty six, we should have the next payment due.

: Okay. But nothing we won't have any progress payments in 2025?

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: No, that's correct.

: Okay. And so is it roughly, I was estimating 5 progress payments to 10% and 50% payment upon delivery. Clearly, it was wrong on the deposit level, it's 15%. But can you give me the rest of the sort of timeline for how the payments are spread out and what's due upon delivery?

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: It's 15% advanced payments, then it's 3 installments of 10%, percent and the remaining is paid upon delivery. So starting from Q4 'twenty six, you can say the next payment and then put in another 3%, 10% another 2%, 10% in the first half of next year and the repayment at the beginning of Q4 of 2027.

: Okay. That's really so 45% upon delivery. That's really helpful. And then, Tassos, can you just go you drydock that Joanna in the Q3, more in the Q4.

Tasos Aslidis, Chief Financial Officer, Euroseas: Can you just give us

: an upcoming schedule on drydocks that you plan for? Yes. Okay. Upcoming schedule on drydock that you plan for 'twenty five? I think there is very little that you're due in 2025.

Let me just

Tasos Aslidis, Chief Financial Officer, Euroseas: see if I can pull it up quickly. Thank

: you.

Tasos Aslidis, Chief Financial Officer, Euroseas: So we have, I think, a couple of vessels. We have definitely one vessel in the Q3 and we have some a bunch of in water surveys. So there isn't really we have as I see here on a draft schedule I have in front of me, we have 1 drydock and a bunch of in waters. I can give you a more detailed schedule offline if you want.

: Okay. Is that in the year, Kasos or for 25?

Tasos Aslidis, Chief Financial Officer, Euroseas: The guide off that I see, we have it in Q3 of 2025. The in waters are various quarters.

: Okay, great. And then I know I have one other question that has just slipped my mind. I apologize. Okay. So if you look at the Genent Express, it's a 97 built.

It sounds like you have interest. But is that a potential sale candidate along with the Diamant SP?

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: We can always sell for the right price, an old ship or a new 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 Eurobulkar managers that they can handle elder ships. 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.

: Okay. But at some point in time, probably over the next 2 years, those are sale candidates or retirement candidates.

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Of course, of course. If the market corrects and their drydock becomes due, it might not make sense to pass another drydock. So that's really when you when we sell a ship.

: Okay. And then, Tesla, so you talked about the forward looking OpEx and breakeven 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?

Tasos Aslidis, Chief Financial Officer, Euroseas: Nothing, not worth 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. Certain certain insurance costs, although not vessel related like DNO Insurance fluctuates and lately has been trading down, for example. But I mean, these things could change.

Conference Operator/Moderator: Our next questions are from the line of Clement Mullens with Value Investors Edge.

Clement Mullens, Analyst, Value Investors Edge: Hi, good afternoon. Most has already been covered, but I wanted to follow-up on the recent newbuild 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?

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: We are very comfortable waiting until closer to delivery. If, however, we are offered 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.

Clement Mullens, Analyst, Value Investors Edge: Makes sense. Yes, that's helpful. And after recent contract additions, you have solid earnings visibility throughout 2025 and even into 2026. Could you talk a bit about how you think about your dividend? Is there any appetite to potentially raise it going forward?

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Yes. We will we discuss dividends regularly in our board meetings, And we will have a discussion on that again during our next Board meeting when we look at the final results of the year. 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. 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.

Clement Mullens, Analyst, Value Investors Edge: Makes sense. Yes. Thanks for the color. That's all for me. Thank you for taking my questions.

Tasos Aslidis, Chief Financial Officer, Euroseas: Thank you.

Conference Operator/Moderator: Thank you. Thank you. Our next question is a follow-up from Mark Reichman with Noble Capital Markets.

: I think you may have just answered it, but with the rate environment remaining positive, so should Euroseas cash flow outlook. So I was just going to ask Tassos if he could maybe discuss the capital allocation priorities for 2025, that like you mentioned that balancing between investing in the business, paying out dividends, funding buybacks, etcetera?

Tasos Aslidis, Chief Financial Officer, Euroseas: I think I think this answered that question. I think we always look at all of these components of our distribution and capital allocation policy, and we try to provide, as Aristides said, a good yield for our dividend. Of course, chartering more ships at attractive rates would be positive in deciding to look more positively at growing the dividend. But it's decision to be taken at the next Board meeting. And I'll refer to whether it is described earlier.

: Thank you very much.

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Thank you, guys.

: Thank you. At this time, I will

Conference Operator/Moderator: pass the floor back to Mr. Aristides Pitas for closing remarks.

Aristides Pitas, Chairman and Chief Executive Officer, Euroseas: Thank you, everybody, for listening in, and we'll be together with you in 3 months' time to discuss how this very good year for UroSeas ended up finally.

Tasos Aslidis, Chief Financial Officer, Euroseas: Thank you. Thanks, everybody.

Conference Operator/Moderator: 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.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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