Euroseas an owner and operator of container carrier vessels and provider of seaborne transportation for containerized cargoes, announced its results for the three- and six-month periods ended June 30, 2023.
Second Quarter 2023 Financial Highlights:
- Total net revenues of $47.7 million. Net income of $28.9 million or $4.17 and $4.15 earnings per share basic and diluted, respectively. Adjusted net income1 for the period was $29.0 million or $4.19 and $4.17 per share basic and diluted.
- Adjusted EBITDA1 was $30.6 million.
- An average of 17.95 vessels were owned and operated during the second quarter of 2023 earning an average time charter equivalent rate of $30,151 per day.
- Declared a quarterly dividend of $0.50 per share for the second quarter of 2023 payable on or about September 16, 2023, to shareholders of record on September 9, 2023, as part of the Company’s common stock dividend plan.
- As previously announced, on July 6, 2023, the Company took delivery of its second newbuilding M/V “Terataki”, an eco 2,800 teu feeder containership from Hyundai Mipo Dockyard Co. in South Korea. The vessel is EEDI Phase 3 compliant and 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 the National Bank of Greece S.A. Following its delivery, M/V “Terataki” commenced a thirty-six- to forty-month charter with Asyad Lines.
- The original share repurchase program of $20 million approved by the Board during 2022 has been extended for another year. As of August 9, 2023, we have repurchased 396,615 shares of our common stock in open market transactions for $8.1 million.
- The Company also announced that it completed its 2022 Sustainability Report which is available at its website (http://www.euroseas.gr/company/sustainability.html).First Half 2023 Financial Highlights:
- Total net revenues of $89.6 million. Net income of $57.6 million or $8.28 and $8.25 earnings per share basic and diluted, respectively. Adjusted net income1 for the period was $50.7 million or $7.29 and $7.26 per share basic and diluted, respectively.
- Adjusted EBITDA1 was $56.6 million.1 Adjusted EBITDA, Adjusted net income and Adjusted earnings per share are not recognized measurements under US GAAP (GAAP) and should not be used in isolation or as a substitute for Euroseas financial results presented in accordance with GAAP. Refer to a subsequent section of the Press Release for the definitions and reconciliation of these measurements to the most directly comparable financial measures calculated and presented in accordance with GAAP.
• An average of 17.52 vessels were owned and operated during the first half of 2023 earning an average time charter equivalent rate of $29,714 per day.
Aristides Pittas, Chairman and CEO of Euroseas commented:
“We are very pleased with our results for the second quarter of 2023 which are one of the best results we have ever had since Euroseas became a containership focused public company in 2018. At the same time, our very high charter coverage at quite profitable rates for the remainder of the year but also for 2024 suggests that we should continue registering highly profitable quarters regardless of charter rates development.
“One-year time charter rates were up in the first half of the second quarter but up to now they have declined again by about 15% compared to their highs in mid-May. They are about 75% lower than their levels a year ago but they are still higher than their pre-pandemic levels. However, the direction they will take during the rest of 2023 and 2024 remains quite uncertain based on the projected supply and demand trends. There is good news on the economic front as it appears that the attack on inflation via interest rates increases has worked without causing a recession, at least, in the developed economies; undoubtedly, stronger economic growth is positive for containerized trade and containership demand. But there remain geopolitical uncertainties and, quite importantly, a large orderbook of containership vessels to be delivered over the next 2-3 years that the market needs to absorb. The latter seems a difficult task despite the expectation that fleet growth is to be somewhat mitigated by greenhouse gas emission regulations that will force some vessels to either reduce their speeds or stop trading.
“We believe we are well insulated from market volatility and expect to generate significant cash flow reserves that will allow us to comfortably fund the equity portion of our remaining seven newbuilding vessels, continue our dividend and share repurchase program and still have a significant war chest to pursue investment opportunities in an accretive way to our shareholders.
“Within the aforementioned concept we published our third Environmental, Social and Governance (ESG) Report. Our ESG report for 2022 presents our priorities and goals, reports on a wide range of sustainability- related Key Performance Indicators and provides extensive information about the ways in which our Company manages its impact on the environment, its people and society.”
Tasos Aslidis, Chief Financial Officer of Euroseas commented: “Within the second quarter of 2023 the container charter market has slightly improved as compared to the first quarter of the year. Still the charter rates observed in the second quarter of 2023 are significantly lower compared to the ones of the same period of 2022. Despite the significant decrease in the charter rates, our results for the second quarter of 2023 are slightly lower compared to the same period of 2022. This was due to the fact that most of our vessels are employed in time charter contracts booked before the decline of the market rates started. During the second quarter of 2023, we operated 17.95 vessels versus 16.46 vessels during the same period of last year. Our net revenues decreased to $47.7 million in the second quarter of 2023 compared to $48.5 million during the same period of last year. On a per-vessel-per-day basis, our vessels earned a 10.6% lower average charter rate in the second quarter of 2023 as compared to the same period of 2022.
“Daily vessel operating expenses, including management fees, averaged $7,114 per vessel per day during the second quarter of 2023 as compared to $7,080 per vessel per day for the same quarter of last year, and $7,220 per vessel per day for the first half of 2023 as compared to $6,867 per vessel per day for the same period of 2022, reflecting a 0.4% and 5.1% increase, respectively, which was attributable to the higher prices for all the categories of vessel supplies paid for our vessels compared to the same period of 2022. General and administrative expenses averaged $715 per vessel per day during the second quarter of 2023 as compared to $652 per vessel per day for the same quarter of last year, and $728 per vessel per day for the first half of 2023 as compared to $667 per vessel per day for the same period of 2022. The increase is mainly due to inflation adjustments.
“Adjusted EBITDA during the second quarter of 2023 was $30.6 million versus $34.2 million in the second quarter of last year. As of June 30, 2023, our outstanding debt (excluding the unamortized loan fees) was $132.8 million versus restricted and unrestricted cash of $38.2 million. As of the same date, our scheduled bank debt repayments over the next 12 months amounted to about $45.6 million (excluding the unamortized loan fees), and we are in compliance with all our loan covenants.”
Second Quarter 2023 Results:
For the second quarter of 2023, the Company reported total net revenues of $47.7 million representing a 1.6% decrease over total net revenues of $48.5 million during the second quarter of 2022 which was a result of the decreased time charter rates our vessels earned in the second quarter of 2023 compared to the same period of 2022, partly offset by the increase in the average number of vessels owned and operated in the second quarter of 2023 compared to the same period of 2022. On average, 17.95 vessels were owned and operated during the second quarter of 2023 earning an average time charter equivalent rate of $30,151 per day compared to 16.46 vessels in the same period of 2022 earning on average $33,714 per day. The Company reported a net income for the period of $28.9 million, as compared to a net income of $30.7 million, respectively, for the same period of 2022.
Vessel operating expenses were $10.3 million in the second quarter of 2023 as compared to $9.4 million for the second quarter of 2022. The increase is due to the higher average number of vessels owned and operated in the second quarter of 2023 compared to the corresponding 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 second quarter of 2023 amounted to $5.6 million compared to $4.1 million for 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 vessel delivered in April 2023, have a higher average daily depreciation charge as a result of their higher acquisition price compared to the remaining vessels.
Related party management fees for the second quarter of 2023 were also slightly increased to $1.3 million from $1.2 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, partly offset by the favorable movement of the euro/dollar exchange rate.
General and administrative expenses amounted to $1.2 million for the second quarter of 2023, as compared to $1.0 million for the second quarter of 2022. This increase is mainly attributable to the increased cost of our stock incentive plan.
In the second quarter of 2023 none of our vessels was drydocked, with an amount of $0.4 million accounted for drydocking expenses incurred in relation to upcoming drydockings. In the corresponding period of 2022, the total cost was $0.7 million, where one of our vessels completed her intermediate survey in water, while another one was drydocked in order to pass her special survey, which was completed in the third quarter of 2022.
Interest and other financing costs for the second quarter of 2023 amounted to $1.2 million, after deducting capitalized interest of $1.2 million charged on the cost of our newbuilding program, for a total interest and other financing cost of $2.4 million, compared to $1.1 million for the same period of 2022. This increase is due to the increased amount of debt and the increase in the weighted average LIBOR / SOFR rate in the current period compared to the same period of 2022.
For the three months ended June 30, 2023, the Company recognized a $3.7 million realized gain and a $2.7 million unrealized loss for a total of $1.0 million gain on its interest rate swap contracts. For the three months ended June 30, 2022, the Company recognized a $0.06 million realized loss and a $0.03 unrealized gain for a total of $0.03 million loss on its interest rate swap contracts.
Adjusted EBITDA for the second quarter of 2023 was $30.6 million compared to $34.2 million achieved during the second quarter of 2022.
Basic and diluted earnings per share for the second quarter of 2023 was $4.17 and $4.15, calculated on 6,919,716 basic and 6,956,447 diluted weighted average number of shares outstanding, compared to basic and diluted earnings per share of $4.26 and $4.24, respectively, for the second quarter of 2022, calculated on 7,224,424 basic and 7,258,436 diluted weighted average number of shares outstanding.
Excluding the effect on the income of the unrealized loss / (gain) on derivatives, the amortization of below market time charters acquired and the vessel depreciation charged on portion of the consideration of vessels acquired with attached time charters allocated to below market time charters, the adjusted earnings attributable to common shareholders for the quarter ended June 30, 2023 would have been $4.19 per share basic and
$4.17 diluted, respectively, compared to adjusted earnings of $4.10 and $4.08 per share basic and diluted for the quarter ended June 30, 2022. Usually, security analysts do not include the above items in their published estimates of earnings per share.
First Half 2023 Results:
For the first half of 2023, the Company reported total net revenues of $89.6 million representing a 4.5% decrease over total net revenues of $93.9 million during the first half of 2022. On average, the Company owned and operated 17.52 vessels during the first half of 2023, earning an average time charter equivalent rate of $29,714 per day. For the same period of 2022 the Company owned and operated 16.23 vessels that earned on average $33,843 per day. The Company reported a net income for the period of $57.6 million, as compared to a net income of $60.7 million, for the first half of 2022.
Vessel operating expenses for the first half of 2023 amounted to $20.1 million as compared to $17.8 million for the same period of 2022. The increase is due to the higher average number of vessels owned and operated in the first half of 2023 compared to the corresponding 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 half of 2023 was $10.9 million compared to $7.8 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 vessel delivered in April 2024 have a higher average daily depreciation charge as a result of their higher acquisition price compared to the remaining vessels.
Related party management fees for the first half of 2023 increased to $2.8 million from $2.3 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 $2.3 million for the first half of 2023, as compared to $2.0 million for the same period of 2022. This increase is mainly attributable to the increased cost of our stock incentive plan.
In the first half 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 $0.4 million accounted for drydocking expenses incurred in relation to upcoming drydockings. In the same period of 2022, three of our vessels completed their intermediate survey in water, one of our vessels completed her special survey with drydock and another entered into a drydock in order to complete her special survey; the latter was completed within the third quarter of 2022. The total cost of the drydockings for the first half of 2022 was $2.5 million.
Finally, during the first half of 2023 and 2022, we had other operating income of $1.4 million and other operating expenses of $0.35 million, respectively. The operating income for the first half of 2023 relates to loss of hire insurance for two of our vessels, while the operating expense for the first half of 2022 relates to the settlement of accounts with charterers. The results of the Company for the first half of 2023 include a $5.2 million gain on sale of M/V “Akinada Bridge” that was completed in January 2023.
Interest and other financing costs for the first half of 2023 amounted to $2.1 million, after deducting capitalized interest of $2.3 million charged on the cost of our newbuilding program, for a total interest and other financing cost of $4.4 million, compared to $2.1 million for the same period of 2022. This increase is due to the increased amount of debt and the increase in the weighted average LIBOR / SOFR rate of our bank loans in the current period compared to the same period of 2022. For the six months ended June 30, 2023 the Company recognized a $4.0 million realized gain and a $3.3 million unrealized loss for a total of $0.7 million gain on its interest rate swap contracts. For the six months ended June 30, 2022 the Company recognized a $0.1 million realized loss and a $2.4 million unrealized gain for a total of $2.3 million gain on its interest rate swap contracts.
Adjusted EBITDA for the first half of 2023 was $56.6 million compared to $65.3 million achieved during the first half of 2022.
Basic and diluted earnings per share attributable to common shareholders for the first half of 2023 was $8.28 calculated on 6,958,748 basic and $8.25, calculated on 6,985,422 diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $8.40 and $8.36 respectively, for the first half of 2022, calculated on 7,223,189 basic and 7,256,434 diluted weighted average number of shares outstanding.
Excluding the effect on the income for the first half of the year of the unrealized loss / (gain) on derivatives, the amortization of below market time charters acquired, the vessel depreciation charged on portion of the consideration of vessels acquired with attached time charters allocated to below market time charters and the gain on sale of a vessel (if any), the adjusted earnings per share attributable to common shareholders for the six-month period ended June 30, 2023 would have been $7.29 and $7.26, basic and diluted, respectively, compared to adjusted earnings per share of $7.81 basic and $7.77 diluted 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.
Share Repurchase Program:
The Board of Directors approved the extension of the $20 million share repurchase program, originally approved last year, for another year. To date, about $8.1 million has been used to repurchase 396,615 shares of the Company. The Board will review again the program after a period of 12 months or when the original $20 million are used. As previously stated, share repurchases will be made from time to time for cash in open market transactions at prevailing market prices or in privately negotiated transactions. The timing of purchases and amount under the program will be determined by management based upon market conditions and other factors. The program does not require the Company to purchase any specific number of shares or amount and may be suspended or reinstated at any time at the Company’s discretion and without notice.
