Euroseas Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 9, 2023

There are 6 speakers on the call.

Operator

You for

Speaker 1

standing by, ladies and gentlemen, and welcome to the Euroseas Conference Call on the Second Quarter 2023 Financial Results. We have with us Mr. Aristides Pides, Chairman and Chief Executive Officer and Mr. Tasos Aslidis, Chief Financial Officer of the company. At this time, all participants are in a listen only mode.

Speaker 1

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. Petis, I would like to remind everyone that in today's presentation and conference call, Euroseas will be making forward looking statements.

Speaker 1

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 to involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to Slide number 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 the floor to Mr.

Speaker 1

Petis. Please go ahead, sir.

Speaker 2

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 We discuss our financial results for the 6 month period and quarter ended June 30, 2023. Let's turn to Slide 3 of the presentation to go over our income statement highlights. We are very pleased with our results for the Q2 of 2023, which are one of the best results we have ever had since Euroseas became a container Focused public company in 2018.

Speaker 2

For the Q2 of 2023, we reported total net revenues of $47,700,000 and the net income of $28,900,000 or $4.15 per diluted share. Adjusted net income was $29,000,000 or $4.17 per diluted share. Adjusted EBITDA for the quarter was $30,600,000 Please refer to press release for a reconciliation between adjusted net loss and adjusted EBITDA. As part of the company's common stock dividend plan, our Board of Directors declared a quarterly dividend of $0.50 per common share for the Q2 of 2023, which will be payable on or above September 16 to the shareholders on record on September 9, 2023. The annualized dividend yield based on current share price is about 9%.

Speaker 2

This is the 6th consecutive quarter of the company paying meaningful dividends. We remain committed The original share repurchase As of August 9, we have repurchased $396,000 of our common stock in the open market For a total of about $8,100,000 This represents close to 6% of our total shares. Tasos will go over the financial highlights in more detail later on in the presentation. I am also pleased to announce Our 3rd annual sustainability report, which covers our 2022 environmental, social and governance progress In achieving our sustainability goal, our commitment to responsible business practices and our social footprint. New in this year's report is our materiality metrics, which includes input from all our stakeholders.

Speaker 2

The report is based as usual on the Sustainability Accounting Standards Board, Standards SASB. But additional criteria have been considered, such as the Global Reporting Initiative, GRI, and the NASDAQ ASG reporting guidelines, Plus the United Nations Sustainable Development. The ESG report is available under the Corporate Sustainability section of the company's website. Please turn to Slide 4, where we discuss our recent acquisitions, Sharpen and operational developments. As previously announced on July 6, 2023, The company took delivery of its 2nd new building vessel, motor vessel Terataki, an echo 2,800 TEU feeder container ship The vessel is EDI Phase 3 compliant And equipped with the Tier 3 engine and other sustainability linked features, including installation of AMP, alternative maritime power.

Speaker 2

The acquisition was financed with a combination of own funds and the sustainability linked loan provided by the National Bank of Greece. Following its delivery, motor vessel Terataki commenced a 36 to 40 month charter with the Siad lines At the gross rate of $48,000 per day. Continuing on the charter front, The contract for motor vessel Joanna was extended for a period of 6 to 8 months on a daily rate of $13,900 per day. We also reached a mutual agreement with ZIM to terminate the current charters for motor vessels RENA B and Emanuele B, While concurrently fixing the vessels on new charters for period of 20 to 24 months at $21,000 per vessel per day, These new charters are expected to contribute $2,000,000 to $4,000,000 in extra revenues over the same period. During the Q2 of 2023, there were no drydocks or vessels of hire.

Speaker 2

Please turn to Slide 5, where you can see our current fleet profile. Eurowsy's current fleet is comprised of 19 vessels on the water, which includes 12 seater container ships And 7 intermediate container carriers with a total carrying capacity of about 59,000 TEU And on average age of just below 16 years. Turning to Slide 6, we show how vessels under construction, which currently consists of 7, they were 9 up to very recently, of new eco feeder container ships. The 7 new buildings are expected to be delivered in 2024 and have a total carrying capacity of 16,600 TEU, 4, with a carrying capacity of 2,800 TEU each and 3, with a carrying capacity of 1800 TEU each. After the delivery of the 7 feeder containers of new buildings in 2024, Euroseas fleet will consist of 26 vessels The total carrying capacity in excess of 75,000 TEU.

Speaker 2

Let's now turn to Slide 7 for a graphic view of our vessel's employment schedule. As you may see, we have very strong charter coverage throughout the next 2 years With about 93% of our fleet being fixed for 2023 and almost 64% for 2024, This very high charter coverage at quite profitable rates for the remainder of the year, but also for 2024, Suggest that we should continue registering highly profitable quarters regardless of charter rate development. Let's now turn to Slide 9 to review how the 6 to 12 month time charter rates have developed over the last 10 years. 1 year time charter rates were up during the first half of the second quarter, but have declined again by about 15% Compared to their highs in May and are about 75% lower than their levels a year ago. However, they are still significantly higher than their pre pandemic levels.

Speaker 2

As of August 4, The 6 to 12 month time charter rate for the 2,500 TEU containership stood at $14,750 per day, Which is higher than the 10 year median rate of $9,250 per day, but lower than the 10 year average rate Around $18,000 per day. Comparatively, the rate for that 4,400 TEU container ship stood at $2,000 Today, which is much higher than the 10 year median rate of $10,750 per day, But still lower than the 10 year average rate of around 25, which of course was influenced by the Stratospherically high rates that we had in 2021 and 2022. Moving on to Slide 10, We go over some further market highlights. During the Q2 of 2023, 1 year time charter rates, as previously said, Slightly improved, but sales have markedly decreased by about 15%. The average rates during the Q2 of 2023 were up by 19% compared to the previous quarter, As shown in the table.

Speaker 2

By and large, there was a resilience in the market during the second quarter And even some upward momentum in the first half of the quarter. In view of this, rates across the SAI sectors have experienced some support I'm meeting apparent uptick in line at tonnage demand in tandem with the short term lack of charter vessel availability. Only lately are we seeing further correction. The average second half price index increased by about 1 2nd hand prices remained high nevertheless. The new building price index increased by about 3% in the 2nd quarter Compared to the previous quarter.

Speaker 2

Newbuilding prices generally remained high amid cost inflation and extended yard forward cover. The idle containers fleet as of July 2017 stood at about 1.1% of the fleet. The idle fleet peaked in February 2023 at 0.8000000 TEU, which has been trending downward ever since. Recycling activity edged higher during the Q2, with 39 vessels accounting 74,000 TEUs having been scrapped. Demolition remains fairly subdued amid some short term improvements in freight and charter Which meant that some vessels circulated for recycling were instead sold for further trading.

Speaker 2

Recycling is anticipated to continue for the remainder of 2023 2024. Clapping prices have also incrementally softened during the Q2 to about $5.60 per light weight ton, Which still is about 40% above the 2019 average. Overall, the containership Fleet has grown by approximately 4.2% year to date without accounting for idle vessels of activation. Please turn to Slide 11. With its latest update in July 2023, the IMF's latest Forecast is modestly higher than its previous prior predictions in April 2023, however, still weaker by historical standards.

Speaker 2

Global growth is projected to fall from an estimated 3.5% in 2022 to 3% in both 2023 and 2024 From previous predictions of 2.8% for 2023 and 3% in 2024. Much slowdown in global activity is therefore anticipated in the second half of twenty twenty three and first half of twenty twenty four. With a look for a gradual stabilization in the second half of twenty twenty four, the latter supported by rate cuts in many areas around the world And the expectation that inflation would continue to fall. China's reopening appears to be uneven and volatile, Even stalled, some might say, renewed softness in the housing market, growing concerns of local government financial risks And an uncertain external environment for the export sector weigh on the economy's near term growth plan. Daimler's growth forecast of 5.2% in 2023 and 4.5% in 2024 Remains unchanged, while growth in other emerging and developing countries is projected to defy the overall Global economic slowdown.

Speaker 2

There is slow demand from India, which delivered the biggest upside surprise so far this year, We reached high GDP growth in Q1 that far exceeded expectations. This was driven by strong government CapEx And services exports. Despite the general global slowdown, the U. S. Economy is forecast moderately grow by 1.8%, which compared to the previous IMF growth forecast of 1.6%, Seems to suggest that the U.

Speaker 2

S. Can potentially avoid recession concerns in the second half of twenty twenty three. However, the IMF seems to have lowered a little bit its growth projections for the U. S. In 2024 to just 1% On its previous 1.1 percent growth forecast.

Speaker 2

On the other side of the world, literally, the Russian economy It's faring better than expected with a revised estimate of 1.5% growth for 2023, Up from 0.7% in the previous quarter, despite the effect of the sanctions with Western Financial Markets There are many export markets for Russian companies and commodities closed. According to the latest Clarksons estimates, container trade will continue to We experienced subdued demand for the remainder of the year due to the challenging market conditions with trade growth expected at just 1%. For 2024, demand is expected to return to a positive trade growth level of about 3.4%. Please turn to Slide 12, where you can see the total fleet age profile and containership order book. The containership fleet is relatively young, with most vessels under 15 years old and only 10% of the fleet over 20 years old.

Speaker 2

The largest percentage of which lies within feeder vessels, suggesting high potential recycling for this type of ships. This is the size in which we mostly operate. The order book as a percentage of total fleet Starts at 28.3 percent as of August 2023. Clarksons expects new deliveries of about 9.4% of the current fleet be delivered within this year, 10.6% next year and 6.4% in 2025, With the majority of the deliveries scheduled to start from the second half of twenty twenty three to the first half of twenty twenty five. Turning on Slide 13, we also go over the fleet dates, profile and order book for ships in the 1,000 TEU to 3,000 TEU range.

Speaker 2

As these sizes are the backbone of our operations are the primary focus of our newbuilding program. The order book here stands at just 11% as of August 2023. According to Clarksons, new deliveries within this Year are estimated at 9.4%, 5.6% in 2024 and 1.2% in 2025. Additionally, 50% of the fleet, half the fleet is over 15 years old. Clearly, the dynamics are very favorable for this sector of the market, as we can expect a decline of the size of the fleet in the next few years.

Speaker 2

Let's move to Slide 14, where we discuss our outlook summary for the container ship market. Daily higher rates for all size vessels have declined since last year's highs following a pronounced correction in the second half of twenty twenty There are numerous signs that the previously sealed containers in charter market is now being affected by the decreasing demand for wholesome freight. Additionally, there has been a noticeable accumulation of available tonnage in smaller feeder sizes, Leading to a larger decline in charter rates for these vessels. Although the container freight index initially rebounded in April 2023, recently freight rates softened again and further declines are anticipated as record deliveries 22. Returning to the pre COVID 10 year average.

Speaker 2

On data volumes fell by 2% year on Yes, but still remain at above pre pandemic levels. For the remainder of 2023, There are still considerable challenges ahead. General downward pressure is Expected to remerge as supply growth accelerates and an increasing number of charter vessels are redelivered. On the other hand, however, fleet growth could be somewhat mitigated by environmental regulations that will force some vessels to either reduce their speeds For stop trading, but it remains to be seen how economic developments will develop, especially starting from 2024. This, we believe, will essentially determine future shipping volumes and overall demand and thus the evolution of charter rates.

Speaker 2

The energy transition continues to gain traction and will play an important role in the evolution of the vessels of the future, But also on the trading patterns within the industry. While it's evident that the shift is taking place, The long term outlook is intricate and uncertain. The direction, speed and metrics of the transition Yet to be fully determined. One thing though that is becoming obvious is that the spread Between charter rates achieved by ECO vessels over conventional ones is expected to further increase. Also, the smaller sized vessels from 1,000 TEU to 6000 TEU are expected to recover faster from any downturn Due to the healthier supply situation, as we said, many over 8 ships that will be scrapped and lower order book.

Speaker 2

Without doubt though, cascading of larger vessels, trades currently served by this size group fleet could be mitigated to an extent any differences. Let's move to Slide 15. The left chart shows the evolution of 1 year time charter rate Containers with a capacity of 2,500 TEU since 2010. While year time charter rates a far below the early 2022 peak that are above historical levels. As previously mentioned, the current 1 year time charter stands at $14,750 per day, which is a much higher and profitable level than the historical median.

Speaker 2

At the same time, the right hand chart shows the historical range for newbuilding and 10 year old container ships With a capacity of 2,500 TEU. As charter rates across the container market have remained relatively buoyant in the past several months, Values in the secondhand market have been equally resilient and stubbornly high. We believe that we are well protected against market volatility with our high contracted revenue coverage Throughout 2023 2024 at very healthy rates. Our liquidity buildup Will allow us to comfortably take delivery of the remaining 7 newbuilding vessels, whilst keeping leverage low at around 60%. It will also allow us to continue paying a significant dividend and executing on our stock repurchase program As our price continues to hover at levels below 50% of NAV.

Speaker 2

At the same time, We will continue to evaluate investment opportunities with low risk that will incrementally increase our earnings and growth potential. And with that, I will pass the floor to our CFO, Tasos Aslidis, to go over our financial highlights in further detail. Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen.

Operator

Over the next four slides, will give you an overview of our financial highlights for the Q2 and first half of twenty twenty three and compare them to the same periods of last year. With that, let's turn to Slide 17. For the Q2 of 2023, The company reported total net revenues of $47,700,000 representing a 1.6% decrease Total net revenues were $48,500,000 during the Q2 of last year, and that decrease was the result of The lower time charter rates of our vessels churned in the Q2 of 2023 as compared to the same period of last year, partly offset By being case in the average number of vessels we own and operated in the Q2 of this year. The company reported a net income for the period of $28,900,000 as compared to net income of $30,700,000 for the same period of 2022. Interest and other financing costs for the Q2 of 2023 amounted to $1,200,000 which is the result of $2,400,000 of interest and finance costs Paid for our loans, partly offset by $1,200,000 of imputed interest income As we self financed the construction of our new buildings before the delivery, compared to $1,100,000 for the same period of last year, during which we had no included interest income.

Operator

This increase of the interest paid for our loans It's due to the increased amount of debt that we gain and the increase in the weighted coverage of LIBOR and soft rates that we paid in the current period as compared to the same period of last year. Additionally, it should be noted In the Q2 of 2023, we had interest income of about $265,000 compared to almost 0 interest during the same period of 2022. Adjusted EBITDA for the Q2 of 2023 was $30,600,000 compared to $34,200,000 achieved during the same period in the Q2 of 2022. Basic and diluted earnings per share for the Q2 of this year was $4.17 And $4.15 respectively, calculated on about $6,900,000 basic and about $7,000,000 diluted Weighted average number of shares outstanding compared to basic and diluted earnings per share of 4 $0.26 $4.24 for last year, respectively. Excluding the effect on the income of the unrealized loss on derivatives, the amortization of below market time charters acquired And the vessel depreciation on the portion of the consideration of vessels acquired with below market charters Allocated to the below market charters, the adjusted earnings for the Q2 of 2023 would have been $4.19 per share basic and $4.17 diluted compared to adjusted earnings For $4.10 $4.08 basic and diluted respectively for the same quarter of last year, Making for the quarter similar adjustments.

Operator

Usually, security analysts do not include the above items in their public statements That's why we are making these adjustments. Let's now look at the numbers for the corresponding 6 month periods Ended June 30, 2023, in this year and compared to last year. For the first half of this year, the company reported total net revenues of 89,600,000 representing a 4.5% decrease over total net revenues of 93,900,000 during the same period of 2022. The company reported a net income for the period of $57,600,000 as compared to net income of $60,700,000 for the first half of last year. Interest and other financing costs for the first half of twenty twenty three amounted to $2,100,000 which is the result of $4,400,000 of interest refinance costs paid for our loans outstanding, offset by $2,300,000 of computed interest Income, as I mentioned, as we self financed the construction of our new buildings before they deliver, Compared to $2,100,000 interest financing costs paid during the same period of last year, during which, again, we did not have any included Interest income.

Operator

Again, this year, over the 6 month period, we had an interest Income of about $500,000 compared to almost 0 interest during the same period of last year. Adjusted EBITDA for the first half of twenty twenty three was $56,600,000 compared to $5,300,000 achieved during the first half of last year. Basic and diluted earnings per share For the first half of twenty twenty three, it was $8.28 $8.25 respectively, Calculated on about $7,000,000 weighted average number of social spending, and that compares to basic and diluted earnings per share of 8 $8.46 respectively for the same period of last year. Making similar adjustments to our net income for the first half, as I described earlier that we did for the Q2, the adjusted earnings per share for the 6 month period End of June 30, 2023, would have been $7.29 $7.26 basic and diluted, respectively, Compared to adjusted earnings of $7.81 basic and $7.07 diluted for the same period in the first half of twenty twenty two. Let's now move to Slide 18 To review our fleet performance, we start our review by looking at our fleet utilization rates For the Q2 of 20232022, as usual, our fleet utilization rate is broken down into commercial and operational components.

Operator

During the Q2 of 2023, Our commercial utilization rate was 100%, while our utilization rate our operational utilization rate was 99.8% Compared to 100% commercial and 99.7% operational for the Q2 of last year. On others, 17.95 vessels were owned and operated during the Q2 of this year, Earnings and average time charter equivalent rate of $30,133 per day Compared to 16.46 vessels that we own and operated in the Q2 of last year, earnings on average $33,714 per vessel per day. Our vessel daily and operating expenses, including management fees, averaged $7,113 Per vessel per day for the Q2 of this year compared to $7,080 per vessel per day during the same period of 2022. G and A expenses amounted to $7.15 $6.52 So vessels per day, respectively, for the 2 periods. If we move further down on this statement, We can see the cash flow breakeven rate for the Q2 of this year, which also takes into account drydocking expenses, interest costs and loan repayments.

Operator

Thus, for the Q2 of 2023, our cash flow Cash flow breakeven rate was $13,837 per vessel per day compared to $13,005.62 per vessel per day during the Q2 of 2022. Finally, in the last line of the table, You can see the common dividend pay expressed in dollars per day per vessel. In the Q2 of 2023, we paid the equivalent $2,217 per vessel per day in dividends compared to $2,414 for the same period of last year. Let us now go over the same figures for the 6 month period of 2023 and compare them to the same period of last year. During the first half of twenty twenty three, Our commercial utilization rate was 99.1% and our operational 98.7% Compared to 99.8 percent Commercial and 99.6 percent Operational for the same period of last year.

Operator

On average, we owned and operated 17.52 vessels during the first half of this year, Earnings an average time charter equivalent rate of $29,705 per day, While for the same period of 2022, the company owned and operated 16.23 vessels, earning an average of $33,843 per day. Our vessel operating expenses, Again, including management fees were $7,215 per vessel per day in the first half of this year compared to $6,867 per vessel per day for the same period of last year. G and A expense for the two periods amounted to $7.27 $6.67 respectively. Again, looking at the bottom of this table, we can see the cash flow breakeven rate for the Q1 of 2023, which takes into account, as I mentioned, direct Interest costs and loan repayments, and that averaged $13,993 per vessel per day In the first half

Speaker 2

of this

Operator

year, and that compares to $13,805 per vessel per day For the same period of last year. Okay. Final line, we saw the dividend paid, expressed in dollars per day. During the first half of this year, that amount was $2,194 per vessel per day And that compares to $1207 for last year, the difference being due to the fact that we started paying dividends In the Q2 of last year. Let's move on and go to Slide 19 to review our debt profile and our forward cash flow breakeven levels.

Operator

Our total debt as of June 30, 2023, stood at about 132,800,000,000 On the top of the slide, you can see a snapshot of our current debt repayment profile over the next several years. We have already made $27,500,000 of loan repayments in 2023. And in the remaining part of the year, We are to make another $14,800,000 of loan repayments as well as we are due to pay balloons amounting to 27,000,000 The latter, we are in the course of refinance. For 2024 2025, our loan repayment dropped To about $31,000,000 $35,000,000 respectively, including balloon payments, which we should be able to finance to refinance The average margin of our current debt stands at about 2.54% And assuming the soft rate of about 5.36 percent, our senior our cost of our senior debt Amounts to about 7.9%. That figure would drop to 7.60% if we account For the portion of our debt for which the underlying software rate has been hedged.

Operator

I should state that we plan to partly finance our remaining new buildings with debt. Thus, over 2024, I would expect us to assume an additional about $165,000,000 of debt to cover about 60% of the price of the newbuild investments. I would like to draw your attention to the bottom of the slide now, where we present the level and components of our expected cash breakeven level for the next 12 months. We expect to have over the next 12 months an EBITDA breakeven level of about $8,851 per vessel per day And in total, including interest and loan and payments, a total cash flow breakeven level of about $14,006.82 per vessel per day. Let's sum up our presentation by moving to Slide 20 To present some highlights from our balance.

Operator

As of June 30, 2023, our assets included cash And other current assets amounting to about $51,200,000 We also our assets included Advances that we paid for our newbuilding programs, spending is about $93,800,000 And finally, They include the book value for our vessels, which was 224,300,000 resulting in a total book value from our assets of around 394,100,000 On the liability side, our debt as of June 30, 2023, as I previously mentioned, stood at $132,800,000 representing about 33.7 percent of the book value of our assets. The fair value for below market charters acquired It's about $27,300,000 accounting for another about 7% of our assets and other liabilities of about 10,000,000 account for another 2.5 percent of the total book value for our assets. However, it should be noted here that the charter adjusted Market value for our fleet is much higher than its book value. Based on our own analysis and using Market transactions, charter adapted value for our fleet and newbuilding concerts. We estimate The value of our fleet charter adopted again to be approximately $369,600,000 which translates We have net asset value for our company of about $372,000,000 or about $53 percent.

Operator

Recently, our shares have been trading around $20 per share, thus Having a gap to our net asset value and that gap representing a good appreciation potential for our shareholders and investors. With that, I would like to turn the floor back to Aristides to continue the call.

Speaker 2

Thank you, Darshos. Let me open up the floor for any questions we may have.

Speaker 1

Thank you. We will now be conducting a question and answer session.

Speaker 3

Thank you.

Speaker 1

Our first question is from Tate Sullivan with Maxim Group. Please proceed with your question. Hello, good day.

Speaker 3

On Slide 13, You showed 9 a little more than 9% fleet growth this year for TEU vessels less than 3,000. Is that indicating what you indicate year to date that roughly half of the vessels have entered the fleet so far this year with another half? And do you have been numbers of new ships entering the fleet this year.

Speaker 2

Yes. Half of the vessels that were supposed to a little bit less than half than the vessels that were supposed to enter the fleet this year have actually entered already, Yes.

Speaker 3

And then have you observed in terms in parts of apartment? Yes, please.

Speaker 2

Sorry, I didn't get you.

Speaker 3

What have you observed in terms of chartering activity for those new builds entering the market in terms of securing contracts and the length of time securing contracts ahead of delivery?

Speaker 2

There were quite a few ships that were quite large that had already secured employment. Even smaller ships had already secured employment, for example, Our TeraTaki that was delivered in July, we had secured the employment since last year, And it was obviously at very high rates. A similar vessel that opened up that was delivered To somebody else and was not chartered, was able to be fixed at around $25,000 Today for the year. So the ships that are being delivered are being fixed Today, but slightly but at lower rates than what was achievable last year.

Speaker 3

Okay. And I think for the previous announcement, you announced it July 25 for the New contracts for the Raina P and Emmanuel P, and I think you mentioned that was with ZYN. Can you mention a part of how the negotiations went for that? I mean, When I first read the headline, I was expecting lower contracts for your for yourself, but you did extend them for longer terms at higher rates than the previous contract. So can you give more of the situation behind those contract negotiations if you can?

Speaker 2

So I have to be very Clear to you, so that we don't give any wrong impression. We had no obligation To cancel the charters that we had with Zimin, there was no such request. We were told that if we wanted Vessels free. We could take them and charter them elsewhere. We looked In the market, we saw that we can get something a little bit better than what and for longer than what we had in our ZIM charters.

Speaker 2

And very amicably, we agreed with the team that we would cancel the charter with them and we would fix With OOCL, that's what we did. So everything was done very amicably and without any Distress.

Speaker 3

Great example. Do you think that kind of example will occur In the containership market for the rest of the year? I mean, is there continue to be counterparty risk with longer term contracts? And how do you manage that?

Speaker 2

I think that the main counterparties All very credible operators of ships. So they will stick To the charters and will perform. I don't expect us to see non performances. Everything that will be done, if there is some rearrangement because some lines want To reduce or others want to increase the number of ships under chartered, Everything will be done amicably and commercially and without dispute.

Speaker 3

Okay. Well, great example on the contract with those contracts with OCL. Thank you.

Speaker 2

Thank you very much, Steve.

Speaker 1

Our next question is coming from the line of Christopher Skate with Arctic Securities. Please proceed with your questions.

Operator

Hello. How are you?

Speaker 2

Hi, Christopher.

Speaker 4

Congrats on a great quarter. I was just wondering if you can share some details on how you are progressing on the 7 year builds, Both in terms of employment, but also on the financing side, I mean, How much is now remaining CapEx? And how much do you expect to fund

Speaker 2

On the employment side, we haven't arranged anything yet. We are in contact With various charters, but I think it's too early to fix the ships yet. So we will see closer to the delivery dates how we fix them. On the financial side, At ASUS, can brief you a little bit more. We have arranged or pretty close to arranging the financing On the 1st shift that we The 1st shift.

Speaker 2

On the 1st shift that will be delivered in 2024. And in discussions with other financiers regarding the rest, I feel very comfortable about it, but Tassos, you can add figures.

Operator

Chris, we have about $280,000,000 of vessel payments to make. The value of the vessels that were delivered about $280,000,000 We have made about $60,000,000 advance payments against that Through equity? We have the equity already built in our numbers that we'd be able to cover With our own cash flow generation, as I mentioned earlier, we expect to assume incremental debt of around 165 $1,000,000 give or take to finance the vessels. So $165,000,000 debt, about $60,000,000 we made, And we are going to put another $60,000,000 of equity to cover another $40,000,000 of equity to cover the payments.

Speaker 4

So it's $160,000 remaining $40,000 cash on hand? 1st quarter. Okay. Great. So With that, I mean, it's quite a comfortable cash level and You will definitely build a lot of cash over the coming quarters.

Speaker 4

And you mentioned in your Presentation on results that you are building a significant war chest

Speaker 2

So I'm just

Speaker 4

wondering, can you elaborate a bit what you mean about that? And are we starting to See any opportunities out there in the market on secondhand transactions that might be interesting? Sure, Rodel.

Speaker 2

As I said in the presentation, our cash flow buildup is sufficient To easily finance the new building program that we have, it is sufficient for us to continue paying dividends In the foreseeable future that are significant, that are close to the 10% yield. And of course, to continue acting on our stock repurchase plan. But in addition to all that, The liquidity we are building and we currently have, I think, about $50,000,000 It's sufficient to also look at potentially new acquisitions. At this stage, we would not buy something speculatively. We would only invest If we can find a deal that is backed by a charter, that will bring the residual value of the vessel at the end of the charter At extremely low levels.

Speaker 2

So that is the strategy and we feel comfortable about It's implementation.

Speaker 4

Great. Great. Thank you. That's it for me.

Speaker 2

Thanks, Chris. Thank you.

Speaker 1

The next question is from the line of Clement Mullens with Value Investors Edge. Please proceed with your question.

Speaker 5

Good morning. Thank you for taking my questions. I wanted to start by asking about the ABN Express. Could you provide an update on how the arbitration against the previous charter is going?

Speaker 2

Yes. As we said in our previous call, in the previous quarter, we have That we will recover nothing from that arbitration. And unfortunately, it probably seems That we are moving along that line right now. The charterer Has disappeared. He is we think he is winding down the business.

Speaker 2

We can't find him. We can't locate the assets, but we still we continue trying to do that. So hopefully, we'll find something. But as we said, our projections It suggests that this will be a loss that we will have that we have incurred already. So If there is any surprise, it will be it can only be a positive surprise because we've planned for the worse.

Speaker 2

Thank you. You've pursued

Speaker 5

a very balanced approach to capital allocation by ordering new builds, distributing dividends and repurchasing shares. Despite that, the market is still valuing the company at a significant discount to NAV. So share repurchases continue to make a lot of sense. Are tender offers something the Board has or would consider? Or do you prefer to stick with share repurchase in the open market?

Speaker 2

I think that said purchasing in the open market is the way that we want to continue. It is a tentative offer that usually has to be made at a higher price, and we think that By implementing gradually the strategy with the stock repurchases, we are doing it more economically.

Speaker 5

Makes sense. That's all for me. Thank you for taking my questions and congratulations for the quarter.

Speaker 2

Thank you very much. Bye.

Speaker 1

Thank you. At this time, we've reached the end of our question and answer session. I'll turn the call over to Aristides Pides for closing remarks.

Speaker 2

Thank you all for participating in this call and we will be back with you in 3 months' Time hopefully with good results again.

Operator

Thanks everybody.

Powered by Quartr
Earnings Conference Call
Euroseas Q2 2023
00:00 / 00:00