Euroseas, an owner and operator of container carrier vessels and provider of seaborne transportation for containerized cargoes, announced its results for the three and nine-month periods ended September 30, 2023.
Third Quarter 2023 Financial Highlights:
- Total net revenues of $50.7 million. Net income of $32.2 million or $4.67 and $4.65 earnings per share basic and diluted, respectively. Adjusted net income1 for the period was $28.2 million or $4.08 and $4.07 per share basic and diluted.
- Adjusted EBITDA1 was $34.5 million.
- An average of 19.0 vessels were owned and operated during the third quarter of 2023 earning an average time charter equivalent rate of $30,074 per day.
- Declared a quarterly dividend of $0.50 per share for the third quarter of 2023 payable on or about December 16, 2023 to shareholders of record on December 9, 2023 as part of the Company’s common stock dividend plan.
- As previously announced, on July 6, 2023 we took delivery of M/V Terataki, an Eco EEDI Phase 3, 2,800 teu feeder containership newbuilding from Hyundai Mipo Dockyard Co., in South Korea. The vessel is equipped with a Tier III engine and other sustainability linked features including installation of AMP (alternative maritime power). The acquisition was financed with a combination of own funds and a sustainability-linked loan provided by National Bank of Greece S.A. Following its delivery, M/V Terataki commenced a thirty-six to forty months charter with Asyad Lines at a daily rate of $48,000 per day.
- On July 25, 2023 we announced new charters for our two 4,250 teu containerships, 2007-built Rena P and 2005-built Emmanuel P at $21,000 per vessel per day following a mutually agreed termination of their existing charters. The new charters commenced in August 2023, for a minimum period of twenty to a maximum period of twenty-four months, at the option of the charterer.
- As of November 9, 2023 we had repurchased 400,705 of our common stock in the open market for a total of about $8.2 million, under our share repurchase plan of up to $20 million announced in May 2022.
Nine Months 2023 Financial Highlights:
- Total net revenues of $140.3 million. Net income of $89.8 million or $12.95 and $12.90 earnings per share basic and diluted, respectively. Adjusted net income1 for the period was $78.9 million or $11.37 and $11.33 per share basic and diluted, respectively.
- Adjusted EBITDA1 was $91.1 million.
- An average of 18.0 vessels were owned and operated during the first nine months of 2023 earning an average time charter equivalent rate of $29,843 per day.
Aristides Pittas, Chairman and CEO of Euroseas commented:
“By the end of the third quarter of 2023, containership market rates were down 20-25% for the types of vessels in our fleet as compared to June 2023; and, furthermore during October and early November, they continued their decline dropping approximately another 5%. Still, present charter rates are, for the segments we operate, higher, and in several cases significantly higher, than their level during December 2019, just before the pandemic. A drop in demand, the reduction of inefficiencies in the global transportation system and a spike in vessel deliveries ordered during the boom years has caused the rate declines.
“As it is evident, one of the challenges in the market is the absorption of the containership orderbook still standing at about 26.6% of the existing fleet. This orderbook is heavily concentrated on the larger containership segments and much less so on the feeder size segments we operate. In addition, the age profile of the feeder fleet contains a percentage, about 25%, of vessels older than 20 years of age which are primary candidates for removal affected by the declined market and the operating and economic challenges imposed by the greenhouse gas regulation requirements. However, although the size of the feeder fleet could decline and provide some better supply/demand balance for the segment and, consequently, some protection to further rate pressures, the tone in the market will likely be set by the large orderbook of the intermediate and large containership sectors.
“Based on the contracted revenue backlog of more than $400 million we have developed during 2021 and 2022, we believe we are largely insulated from developments in the charter market during 2024. Additionally, we have a significant secured revenue base for 2025 having covered more than 25% of our operating days at highly profitable levels. Our liquidity is growing fast which will enable us to easily fund the equity portion of our 7 vessel strong newbuilding program, continue paying a very meaningful dividend and executing on our share repurchasing program and also leave us with ample free cash to acquire further vessels when we deem the timing appropriate.
“In that respect we will continue our quarterly dividend of $0.50 per share and continue executing on our share repurchase program as we believe that repurchasing our stock which is trading significantly below its charter adjusted net asset value, represents a great investment opportunity.”
Tasos Aslidis, Chief Financial Officer of Euroseas commented:
“The results of the third quarter of 2023 reflect time charter rates that our vessels earned in the third quarter of 2023 at approximately the same level compared to the corresponding period of 2022. The Company operated an average of 19.0 vessels, versus 18.0 vessels during the same period last year. Our net revenues increased to $50.7 million in the third quarter of 2023 compared to $46.0 million during the same period of last year. On a per-vessel-per-day basis, our vessels earned a 2.7% lower average charter rate in the third quarter of 2023 as compared to the same period of 2022. At the same time, total daily vessel operating expenses, including management fees, general and administrative expenses but excluding drydocking costs, during the third quarter of 2023, averaged $7,692 per vessel per day, as compared to $7,180 for the same period of last year and $7,858 per vessel per day for the first nine months of 2023 as compared to $7,406 per vessel per day for the same period of 2022. The increased operating expenses in the recent periods are attributable to the higher prices for all the categories of vessel supplies paid for our vessels compared to the same period of 2022.
Adjusted EBITDA during the third quarter of 2023 was $34.5 million versus $26.2 million in the third quarter of last year, and $91.1 million versus $91.5 million for the respective nine-month periods of 2023 and 2022.
As of September 30, 2023, our outstanding debt (excluding the unamortized loan fees) was $138.4 million versus unrestricted and restricted cash of $54.4 million. As of the same date, our scheduled debt repayments over the next 12 months amounted to about $29.4 million (excluding the unamortized loan fees).”
Third Quarter 2023 Results:
For the third quarter of 2023, the Company reported total net revenues of $50.7 million representing a 10.3% increase over total net revenues of $46.0 million during the third quarter of 2022 which was mainly the result of the higher number of vessels owned and operated in the third quarter of 2023 compared to the corresponding period of 2022. The Company reported a net income for the period of $32.2 million, as compared to a net income of $25.2 million, for the third quarter of 2022. On average, 19.0 vessels were owned and operated during the third quarter of 2023 earning an average time charter equivalent rate of $30,074 per day compared to 18.0 vessels in the same period of 2022 earning on average $30,893 per day.
Vessel operating expenses for the third quarter of 2023 amounted to $11.0 million as compared to $9.7 million for the same period of 2022. The increased amount is mainly due to the higher number of vessels owned and operated in the third quarter of 2023 compared to the same period of 2022 as well as due to inflationary increases, resulting in higher prices being paid for all the categories of vessel supplies.
Depreciation expense for the third quarter of 2023 amounted to $5.9 million compared to $5.3 million for the same period of 2022 due to the increased number of vessels in the Company’s fleet and the fact that the new-building vessels delivered in April and July 2023, have a higher average daily depreciation charge as a result of their higher acquisition price compared to the remaining vessels.
In the third quarter of 2023 the Company recorded an impairment charge of $13.8 million. The impairment was booked to reduce the carrying amount of a containership (M/V “Jonathan P”) to its estimated market value, since based on the Company’s impairment test results it was determined that its carrying amount was not recoverable.
Related party management fees for the three months ended September 30, 2023 were $1.5 million compared to $1.3 million for the same period of 2022 due to the higher number of vessels in our fleet and the adjustment for inflation in the daily vessel management fee, effective from January 1, 2023, increasing it from 720 Euros to 775 Euros.
General and administrative expenses amounted to $0.9 million for the third quarter of 2023 remaining at approximately the same level compared to the third quarter of 2022.
In the third quarter of 2023 none of our vessels were drydocked. An amount of $0.1 million was accounted for drydocking expenses incurred in relation to upcoming drydockings. In the corresponding period of 2022, two of our vessels completed their special survey with drydock for a total cost of $3.7 million.
In the third quarter of 2023, a gain on time charter agreements termination of $16.0 million was recognized in connection with the write-off of the outstanding balance of the attached time charter liability recognized as part of the acquisitions of two of our vessels in 2022, which was fully amortized in August 2023 due to the early termination of the respective attached time charter agreements. No such case existed in the corresponding period in 2022.
Finally, in the third quarter of 2023, we had other operating income of $0.2 million. The other operating income relates to loss of hire insurance for one of our vessels.
Interest and other financing costs for the third quarter of 2023 amounted to $1.8 million, after deducting capitalized interest of $0.9 million charged on the cost of our newbuilding program, for a total interest and other financing cost of $2.7 million, compared to $1.4 million for the same period of 2022, after deducting capitalized interest of $0.2 million charged on the cost of our newbuilding program, for a total interest and other financing cost of $1.6 million. This increase is due to the increased amount of debt and increase in the weighted average benchmark rates of our bank loans in the current period compared to the same period of 2022.
For the three months ended September 30, 2023 the Company recognized a $0.4 million gain on its interest rate swap contract, comprising $0.3 million unrealized gain from the mark-to-market valuation of our outstanding interest rate swap and a marginal realized gain. For the three months ended September 30, 2022 the Company recognized a $1.8 million gain on its interest rate swap contracts, comprising $1.8 million unrealized gain from the mark-to-market valuation of our outstanding interest rate swaps and a marginal realized gain.
Adjusted EBITDA1 for the third quarter of 2023 increased to $34.5 million compared to $26.2 million achieved during the third quarter of 2022, primarily due to the increase in revenues.
Basic and diluted earnings per share for the third quarter of 2023 were $4.67 and $4.65, respectively, calculated on 6,899,941 and 6,930,548 basic and diluted weighted average number of shares outstanding, compared to basic and diluted earnings per share of $3.50 for the third quarter of 2022, calculated on 7,199,448 basic and 7,211,204 diluted weighted average number of shares outstanding.
Excluding the effect on the income for the quarter of the unrealized gain on derivatives, the amortization of fair value of below market time charters acquired, the vessel depreciation on the portion of the consideration of vessels acquired with attached time charters allocated to below market time charters and the gain on time charter agreements termination (if any), the adjusted earnings attributable to common shareholders for the quarter ended September 30, 2023 would have been $4.08 and $4.07 per share basic and diluted, respectively, compared to adjusted earnings of $2.90 per share basic and diluted for the quarter ended September 30, 2022. Usually, security analysts do not include the above items in their published estimates of earnings per share.
Nine Months 2023 Results:
For the first nine months of 2023, the Company reported total net revenues of $140.3 million representing a 0.4% increase over total net revenues of $139.8 million during the first nine months of 2022, mainly as a result of the increased number of vessels owned and operated in the first nine months of 2023 compared to the corresponding period of 2022, partly offset by the lower average charter rates our vessels earned. The Company reported a net income for the period of $89.8 million, as compared to a net income of $85.9 million for the first nine months of 2022. On average, 18.0 vessels were owned and operated during the first nine months of 2023 earning an average time charter equivalent rate of $29,843 per day compared to 16.8 vessels in the same period of 2022 earning on average $32,814 per day.
Vessel operating expenses for the nine-month period of 2023 amounted to $31.2 million as compared to $27.5 million for the same period of 2022. The increased amount is mainly due to the higher average number of vessels owned and operated in the nine months of 2023 compared to the same period of 2022, in addition to the increased crewing costs for our vessels compared to the same period of 2022, as well as due to inflationary increases, resulting in higher prices being paid for all the categories of vessel supplies.
Depreciation expense for the first nine months of 2023 was $16.8 million compared to $13.2 million during the same period of 2022, due to the increased number of vessels in the Company’s fleet and the fact that the two new vessels acquired at the end of May and June 2022 and the new-building vessels delivered in April and July 2023, have a higher average daily depreciation charge as a result of their higher acquisition price compared to the remaining vessels.
For the nine months of 2023, the Company recorded an impairment charge of $13.8 million. The impairment was booked to reduce the carrying amount of a containership (M/V “Jonathan P”) to its estimated market value, since based on the Company’s impairment test results it was determined that its carrying amount was not recoverable.
Related party management fees for the nine months ended September 30, 2023 were $4.2 million compared to $3.6 million for the same period of 2022 as a result of the higher number of vessels in our fleet, and the adjustment for inflation in the daily vessel management fee, effective from January 1, 2023, increasing it from 720 Euros to 775 Euros.
General and administrative expenses amounted to $3.2 million for the nine-month period ended September 30, 2023, as compared to $2.9 million for the same period of 2022. This increase is mainly attributable to the increased cost of our stock incentive plan.
In the first nine months of 2023 one of our vessels completed her special survey with drydock for a total cost of approximately $0.6 million, with an amount of $0.5 million accounted for drydocking expenses incurred in relation to upcoming drydockings. Drydocking expenses amounted to $6.2 million for the first nine months of 2022 (three vessels completed their intermediate survey in water, three vessels passed their special survey with drydock and another one started its drydock in September 2022 and completed her special survey in the fourth quarter of 2022).
In the first nine months of 2023, a gain on time charter agreements termination of $16.0 million was recognized in connection with the write-off of the outstanding balance of the attached time charter liability recognized as part of the acquisitions of two of our vessels in 2022, which was fully amortized in August 2023 due to the early termination of the respective attached time charter agreements. No such case existed in the corresponding period in 2022.
The results of the Company for the nine months of 2023 include a $5.2 million gain on sale of M/V “Akinada Bridge” that was completed in January 2023.
Finally, during the nine month periods of 2023 and 2022, we had other operating income of $1.6 million and other operating expenses of $0.35 million, respectively. The operating expense for the nine month period of 2022 relates to the settlement of accounts with charterers, while the operating income for the nine months of 2023 relates to loss of hire insurance for two of our vessels.
Interest and other financing costs for the first nine months of 2023 amounted to $3.9 million, after deducting capitalized interest of $3.2 million charged on the cost of our newbuilding program, for a total interest and other financing cost of $7.1 million, compared to $3.5 million for the same period of 2022, after deducting capitalized interest of $0.2 million charged on the cost of our newbuilding program, for a total interest and other financing cost of $3.7 million. This increase is due to the increased amount of debt and the increase in the weighted average benchmark rates of our bank loans in the current period compared to the same period of 2022. For the nine months ended September 30, 2023 the Company recognized a $1.1 million gain on its interest rate swap contracts. For the nine months ended September 30, 2022 the Company recognized a $4.1 million gain on its interest rate swap contracts.
Adjusted EBITDA1 for the first nine months of 2023 was $91.1 million compared to $91.5 million for the first nine months of 2022.
Basic and diluted earnings per share for the first nine months of 2023 were $12.95 and $12.90, respectively, calculated on 6,938,930 and 6,964,967 basic and diluted weighted average number of shares outstanding, compared to basic and diluted earnings per share of $11.91 and $11.86 for the first nine months of 2022, respectively, calculated on 7,215,189 and 7,240,848 basic and diluted weighted average number of shares outstanding.
Excluding the effect on the income for the first nine months of 2023 of the unrealized (gain) / loss on derivatives, the amortization of fair value of below market time charters acquired, the vessel depreciation on the portion of the consideration of vessels acquired with attached time charters allocated to below market time charters, the gain on time charter agreements termination (if any) and the gain on sale of vessel (if any), the adjusted earnings per share for the nine-month period ended September 30, 2023 would have been $11.37 and $11.33 basic and diluted, respectively, compared to adjusted earnings of $10.71 and $10.67 per share basic and diluted, respectively, for the same period in 2022. As mentioned above, usually, security analysts do not include the above items in their published estimates of earnings per share.